The petroleum ministry has asked state-run oil explorer ONGC to scrap a tender meant to sell stake in four coal bed methane (CBM) blocks, a few clauses of which were changed subsequent to the tender issue.
The oil ministry now wants the company to invite fresh international competitive bids, ministry officials said. The ministry has asked ONGC to receive bids from companies that have experience in CBM projects not only in India but also abroad.
ONGC wants to sell around 30% of its stake in four CBM blocks located at Raniganj, Bokaro, Jharia and Karanpura. On the earlier tender, the company received bids from Great Eastern Energy Corporation (GEECL), Essar Oil, a consortium of Jindal and Deep Industries, and Dart Energy for the four blocks.
ONGC has so far spent around R500 crore on the four blocks. The company has been facing difficulties related to lack of pipeline infrastructure for transportation of CBM gas. Investors are reluctant to enter into CBM exploration and production in the absence of pipeline network as they cannot flare the scarce gas once production starts.
Investment into CBM now looks less attractive as tax free profits for seven years is available only on blocks auctioned under the fourth round of CBM block licensing. Blocks to be auctioned in the future will not qualify for this incentive. According to oil ministry, production of CBM gas in the country is estimated to reach 4 million cubic meters a day (mmscmd) by the year 2016-17 against the current level of production of 0.23 mmscmd.