“The Coal Ministry and Petroleum Ministry have agreed in principle to the company’s coalbed methane (CBM) exploration and extraction plan,” said Coal India Ltd.’s (CIL) chairman, S. Narsing Rao. “At least 20% of the coal reserves of India, estimated at 60 billion metric tons (mt), are under CIL’s command and we presume a substantial volume of CBM deposits will be in these areas. We would like to explore and extract this gas ourselves.”

CIL has already invited foreign and domestic companies to assess CBM reserves in its leasehold coal blocks in the country.

“Carving out more blocks in the greenfield areas for commercial development of CBM is to be taken up on a priority basis to augment energy supply in the country. For reliable assessment of CBM resources for the carving out of CBM blocks in greenfield areas, proving of coal reserves is a prerequisite,” the company stated in a notice seeking consultants.

CIL has lease-holding rights over 81 mining areas spread over eight states in India, which is estimated to have CBM reserves of 3.5 Tcf to 4 Tcf.

Current rules and regulations prohibit mining companies from extracting CBM during mining, but CIL has identified CBM extraction from its mines as a key area in its growth strategy.

The extraction of methane ahead of coal mining from seams will allow CIL to cut costs on safety measures and reduce the release of methane into the atmosphere, as well as boost revenues. Many of its leaseholds are gaseous and unsafe mines, where mining of coal is possible only after the extraction of CBM.

It is estimated that the extraction of CBM from these mines would help unlock very significant quantities of coal reserves in areas of Jharkhand, West Bengal.

The coal miner has already short-listed five blocks in Jharkhand state with estimated coal methane reserves of about 1 Tcf to offer to companies for exploration in the first stage. They are: Munidih (282 Bcf), Kathara (282 Bcf), Asnapani (212 Bcf), Putki Buliwari (247 Bcf) and Mohuda (14 Bcf). These five assets are considered to be gaseous and unsafe mines at present.

The gas extraction plan would help CIL unlock nearly 100 MMmt of medium grade coking coal, and about 1 Tcf of methane.

The plan is for CIL to invite private companies to invest in the extraction of CBM from its mines, and allow them to sell the methane on the open market. CIL, in return, would get a share of the profits from the sale of gas.

The coal miner’s proposal follows an approval of CIL’s plan to extract CBM by an inter-ministerial committee. A new policy to allow CIL to produce CBM from its coal mines will be announced soon after Indian Cabinet approval, according to India’s Petroleum and Natural Gas Minister, Veerappa Moily.

The committee, comprising representatives from petroleum, coal and finance ministries, recommended that CIL should be permitted to exploit its CBM resources on a nomination basis, and allowed it to invite bids from private players for the development of its methane assets in line with the existing CBM policy.

The present policy envisages that the federal petroleum and natural gas ministry is the nodal authority for the exploration and development of CBM blocks. The ministry awards CBM blocks and approves development plans for any CBM fields, as well as the price for the extracted methane.

The interministerial committee further stated that the entry of CIL into the CBM sector was crucial to tap the established methane reserves of 8.92 Tcf that lie in the country, considering its strength in mining coal and funding the capital-intensive projects. CIL operates 467 coal mines, of which 273 are underground, 164 opencast and 30 mixed mines through its eight subsidiaries across the country, except southern India.

CIL reported a cash reserve of more than US $11 billion (Rs 582.02 billion) on March 31, 2012. The participation of big companies such as CIL would go a long way towards helping India achieve its target of producing 141 MMcf/d by the end of its 12th Five-year Plan (which ends March 31, 2017), from the current level of 8.5 MMcf/d.

The CBM sector is not entirely new for CIL. It holds a 10% stake in the Jharia CBM Block and 16% in the Raniganj Block, both operated by ONGC Ltd., with an option to increase its stake in Jharia to 26% after the discovery of reserves.

The coal miner’s subsidiary, Central Mine Planning & Design Institute Ltd., has helped ONGC to prepare a field development plan for the Parbatpur section of the Jharia CBM Block with an estimated outlay of $243.8 million (Rs 12.9 billion). ONGC is now preparing a development plan for the entire Jharia Block.

ONGC-CIL is also carrying out tests on an exploratory well in the Raniganj Block to assess the presence of methane reserves. The Jharia and Raniganj blocks are estimated to have methane reserves of about 2.1 Tcf and 1.5 Tcf, respectively.

India has the fifth largest coal reserves in the world, with total reserves of more than 220 billion mt and estimated total CBM resources of 92 Tcf, but methane production is currently insignificant.

The current level of CBM production stands at a meagre 8.5 MMcf/d after four rounds of licensing and the award of 33 blocks in 2001. The Directorate General of Hydrocarbons (DGH) has approved development plans for five blocks but only Raniganj (South), operated by Great Eastern Energy Corp. Ltd., has started CBM production. The development of four other blocks – Sohagpur (East), Sohagpur (West), Raniganj (East) and Bokaro – have been deferred due to problems like delays in environmental clearance and difficulty in land acquisition.

Ravi Prasad, Special to E&P