The government is planning to allow companies exploring coal bed methane (CBM) to simultaneously mine coal from the same block. Currently, CBM blocks, characteristically much larger than coal blocks, are out of bounds for coal mining until the CBM venture is completed. This has reduced the area available for coal mining, causing further pressure on coal companies hit by stagnant production.
Operators of CBM blocks auctioned by the petroleum ministry are now barred from coal mining, which falls in the domain of the coal ministry.
India?s coal output is set to fall by at least 15% below the 670 million tonne a year target originally set for the five years ending next March, while natural gas output this year would be below the 52 billion cubic metre achieved last fiscal. Reliance Industries? KG basin gas production this fiscal is expected to be 35% short of the targetted 80 million metric standard cubic metre a day.
As energy sources dwindle, the government wants to maximise the supply of natural resources by allowing simultaneous exploration of coal and CBM, an unconventional source for energy.
Large segments of coal-bearing areas are not under production as CBM operators? contracts grant them exclusive rights over all the resources up to a certain depth. ?Therefore, different companies cannot undertake coal mining and CBM operations together within the same vertical horizon,? said an official of the Directorate General of Hydrocarbons, the upstream oil and gas regulator. Experts said that CBM production would enhance the safety of mining activities and is a standard practice in developed economies like the US.
Kalpana Jain, senior director, Deloitte, said coal mining does not need the kind of sophisticated technology that CBM production needs, and hence may not pose any difficulties for a CBM operator. ?The CBM licence holder could be given a right of first refusal for mining rights, which could pave the way for a mining company?s entry if needed,? said Jain. CBM operators could also form joint ventures with mining companies.
A senior coal ministry official said that the CBM policy could be tweaked to allow operators to mine coal after gas production either by themselves or by roping in a partner with expertise.
However, the extra mining right will come with a rider. CBM operators will not be able to sell the coal they extract at global prices. Their coal output will have to be sold to a state owned entity at a notified price.