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Coal bed methane gas pricing issue hangs in limbo

According to reports, the pricing of gas produced from coal bed methane (CBM) blocks by explorers such as Essar Oil and Reliance Industries Ltd continues to hang in limbo.

The Ministry is in a fix, as there is a great deal of variation in the prices submitted by the producers.

According to Essar Oil, the discovered price for gas flowing from its CBM block in West Bengal is $4.2/mmBtu (well head). Reliance Industries has arrived at a price of about $13/mmBtu.

Though both have followed the same mechanism to arrive at the price there is a huge differential in the end prices, sources said.

“The Petroleum Ministry is in the process of preparing a note for the Committee of Secretaries (CoS) that would look into the issue,” said a senior Government official.

In September 2011, Essar Oil submitted a proposal for pricing of gas produced from blocks – SP (West)-CBM-2001/1 and SP (East) – CBM-2001/1. In February Reliance submitted its request for pricing of CBM gas from its block in Madhya Pradesh.

“DGH examined the prices. There are several issues that need to be clarified. Also, there is no clarity about the price discovery process. The clarifications were received a few days ago,” the official said.

Great Eastern Energy Corporation Ltd (GEECL) is the only explorer that is commercially selling gas produced from a CBM block.

The Petroleum Ministry has approved a minimum well-head price for GEECL at $6.79/mmBtu. However, the delivery cost would differ from one customer to another depending on transportation and other charges.

The rights to decide on the pricing of gas produced from CBM blocks is with the Petroleum Ministry. However, the Ministry is said to have referred this decision to the Empowered Group of Ministers (eGoM), say industry experts.

Currently, the eGoM takes the call for gas price produced from blocks auctioned under New Exploration and Licensing Programme (NELP).

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