Coal bed methane extraction: New hitch for ONGC plan

State-run Oil and Natural Gas Corporation's (ONGC's) foray into coal bed methane (CBM) exploration could get a bit longer. Brisbane-listed Dart Energy has surrendered its stake in the former's CBM bocks.

In June 2013, ONGC had offered a 10 to 25 per cent stake in four of its CBM blocks to Dart. Owing to the tough conditions of doing business in India, Dart said it had decided to exit the country, surrendering its interests in the blocks, said an official from the company.

"In line with the group's re-focused strategy, it is seeking opportunities to farm-out and/or sell or exit all of its activities in India. In addition, the group had in theprevious financial years submitted relinquishment requests in respect of three other licences which continued to be reviewed by the Indian government," Dart said in its annual report.

ONGC did not reply to an email questionnaire sent last week. CBM is natural gas trapped within coal formations, extracted by drilling holes into the seams. ONGC, however, in its 2013-14 annual report, says: "The development plans for all the four blocks have been submitted and approved by the steering committees. Nearly 400 wells and 2,000 hydro-fracturing jobs would be carried out in the coming four-five years, as per timelines of the CBM contract. In view of the mammoth and time-bound task, ONGC has decided to farm-in experienced partners to execute field operations, the process for acquisition of which is in an advanced stage."

ONGC has started selling incidentally produced CBM gas from existing wells at Parbatpur of the Jharia block at an approved price of $5.1 per million British thermal units (mBtu). Cumulative gas sale as on end-March was 11.41 million standard cubic metres.

Commercial CBM production in the ONGC blocks is yet to start. Dart was said to have got 25 per cent interest in the Jharia, North Karanpura and Bokaro blocks in Jharkhand. It also won a 10 per cent stake in the Raniganj block in West Bengal. In the latter, London-listed Great Eastern Energy Corp is Dart's partner, with 25 per cent interest.

ONGC had last year decided to farm out stakes in its four CBM blocks, as it wanted to expedite production. It had faced land acquisition and rig availability issues that have delayed production. It has so far spent Rs 510 crore on the four blocks and had in 2012 offered to give out up to 35 per cent stake in these, hrough a tender. However, the ministry of petroleum and natural gas had asked the company to scrap the tender, as only three players had bid.

ONGC invited fresh international bids in November 2012, to finalise the farm-out arrangement. ONGC is the operator in the Raniganj North block with a 74 per cent stake; government-run Coal India Ltd (CIL) holds the rest.

At Jharia, it holds a 90 per cent stake, while CIL has 10 per cent. At Bokaro and North Karanpura, it is the operator with 80 per cent each. The remaining stake in the two blocks are held by state-owned Indian Oil Corp.

According to ONGC estimates, the Jharia block holds 85 billion cubic metres (bcm) of in-place gas reserves. North Karanpura holds 62 bcm, Bokaro 45 bcm and Raniganj North 43 bcm. Of these, the company has established 76 bcm of in-place reserves.