CBM miners may get to extract coal too

They can do so by paying a fee, but must sell the mined fuel back to govt at a discount

Stepping up the gas on coal production, the government proposes to allow companies exploring coal bed methane (CBM) to simultaneously mine coal from the same block. Permission may be given to both existing and new operators of CBM blocks to undertake coal mining in the same fields.

As of now, CBM blocks, characteristically much larger than coal blocks, cannot be mined for coal until the gas venture is completed and the field surrendered to the government after the 35-year lease. This has reduced the area for coal mining for a long duration, increasing pressure on coal companies facing stagnant production.

Once the new policy is finalised, existing CBM operators may be allowed to mine coal on paying a certain fee (reserve price) decided by the coal ministry. If the block holder is not interested in coal, it could be offered to other companies, but the first right of refusal will stay with the CBM block holder. Coal will be mined only in abandoned areas within CBN blocks and only if they are not in close proximity to other areas where exploratory exercise is going on to discover gas.

The new policy will enable CBM operators to either mine coal themselves or hire the services of a mining entity to extract the mineral from areas abandoned if they fail to strike gas. As CBM fields are typically large in size, simultaneous coal mining is possible.

?Oil and coal ministries are currently in discussions to evolve the right regulations for starting simultaneous extraction of coal and gas from CBM blocks. There are issues of jurisdiction as CBM blocks are awarded by the oil ministry while coal block allocations are done by the coal ministry,? said a coal ministry official. ?We expect resolution of all issues soon as even the Prime Minister?s Office (PMO) is also taking keen interest on the issue,? the official added.

For future CBM blocks, the winning bidder will have permission to extract both gas and coal. However, the extra mining right will come with a rider. CBM operators will not be able to sell the coal they extract at market prices. The coal produced must be sold to a state-owned entity at a discount over the notified price.

?For future block allocation, the government should come out with a transparent policy while taking the industry into confidence and keeping the safety and environmental hazards in mind, and should choose only one operator to extract coal after the extraction of CBM,? said Prashant Modi, president and chief operating officer of GEECL, a major player involved in developing production wells for CBM. The changes are being considered as the Planning Commission has estimated that the country’s coal demand is likely to touch 1,000 million tonnes (MT) by 2016-17, much higher than the estimated supply of 750 million. As per annual plan for 2012-13, against the demand of 512 million tones, supply is estimated at 404.7 million tonnes, leaving a gap of 107 million tonnes, envisaged to be met through imports.

In 2010-11, the coal shortfall was 132.8 million tonnes while in 2009-10, it was 90.5 million tonnes. The government has taken various measures to scale up the production, including expediting both environment and forestry clearances.While the gas situation from Reliance’s most prolific KG D6 continues to decline from its peak of 61 million metric standard cubic metre a day (mmscmd), and way behind its targetted 80 mmscmd, the pricing of CBM has also hit a road block. The Directorate General of Hydrocarbons estimates that India has around 4.6 trillion cubic meters of CBM reserves.