Reliance Indstries to start production of coal bed methane in April

Private explorer Reliance Industries (RIL) is targeting to start production of coal bed methane (CBM) from its Sohagpur (West) block in Madhya Pradesh during April-June FY17. This would mark the entry of the Mukesh Ambani firm into drilling gas from coal seams, a business that is still lagging behind in the country.

“RIL plans to put on stream the first set of wells between April 8 and April 14,” sources privy to the development told FE. Unlike conventional natural gas, CBM production is tricky and would take about six to eight weeks for the fuel to hit the customer, the source added.

The initial gas output would be less than 1 million standard cubic metres of gas per day (mmscmd). The peak output, which may be achieved after 18-24 months of commencing production, is envisaged at 2.5-3 mmscmd. The Ambani firm bagged the block in the first round of the CBM auctioning in 2001.

Though two other firms producing CBM — Essar Oil and GEECL — have a pre-approved price for their gas, the Ambani firm would have to follow the natural gas pricing formula put in place by the government in October 2014.

This means RIL would have to sell CBM at $3.2-$3.5/mBtu, compared with more than $5-6/mBtu enjoyed by Essar Oil and GEECL. The existing natural gas price of $3.8/mBtu would further reduce by nearly 15% to about $3-$3.2/mBtu, as the commodity price has been on a downward trend globally. Earlier reports suggested that RIL came up with gas pricing hovering around $12-13/mBtu, while carrying out the price discovery for its CBM blocks.

After the first set of wells are switched on, the explorer would test the compressors. After this, gas would be flown into 302-km pipeline from Shahdol in Madhya Pradesh to Phulpur in Uttar Pradesh. Customers are likely to receive the gas starting May.

The gross in-place CBM potentials of RIL’s Sohagpur (East) block is 1.69 trillion cubic feet (47.7 billion cubic metres) while it is 1.96 trillion cubic feet (55.5 billion cubic metres) for the Sohagpur (West) acreage. The blocks are located in tribal districts of Shahdol and Anuppur in Madhya Pradesh.

RIL plans to put on stream nearly 107 wells in the first phase. Unlike the conventional natural gas fields, in a CBM acreage, a large number of wells are required to be drilled simultaneously, and the life cycle of these wells are shorter.

The explorers are of the view that the absence of gas infrastructure and gas markets make the CBM projects more challenging. The blocks are situated in West Bengal, Jharkhand and Madhya Pradesh.

Till now, nearly $1.18 billion of investments have been made for CBM projects in India. Currently, GEECL’s Raniganj (South), while Raniganj (East) held by Essar Oil are the only two blocks under production.

India offered 33 CBM blocks. However, 17 of them, or 50% of the blocks, have been relinquished.