ONGC Plans Major Development of Coal-Bed Methane Production

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Researched by Industrial Info Resources (Sugar Land, Texas)--Oil & Natural Gas Corporation (BOM:500312) (ONGC) (Dehradun, Uttarakhand) has announced that it will start producing coal-bed methane (CBM) in December from Parbatpur in the Jharia block in Bokaro, Jharkhand. ONGC expects to produce 5,000 cubic meters of gas per day from the site during the project's initial pilot stage. It plans to increase production to 50,000 cubic meters per day in the next eight months and up to 400,000 cubic meters per day by 2011. The firm estimates production to be sustained for more than 10 years.

ONGC began exploring the site in Jharkhand in 1997-98 and has spent $75 million in the venture since then. The project is expected to cost $375 million by 2011 when the firm would commence full-scale production of CBM at the site. ONGC has dug a high-tech multilateral well to explore the site and is hoping to find reserves of 240 million cubic meters in the well. Production in the pilot phase will address the energy requirements of Jharkhand.

ONGC is also planning to start exploration activities at other sites in Bokaro. It has set aside an investment of $130 million to dig 14 horizontal wells to develop the Jharia block. ONGC holds a 90% stake in the Jharia block, and Coal India Limited (CIL) (Kolkata, West Bengal) holds the remaining 10% stake in the form of participatory interest in coal blocks awarded on a nomination basis. ONGC is also drilling and testing pilot wells in the North Karanpura and Bokaro blocks. It has completed initial exploration activities in the two blocks and has established the presence of CBM reserves in Bokaro.

India is the world's third largest producer of coal with estimated reserves of 460 billion tons, of which 25% is found in the eastern state of Orissa. The country ranks 10th in the world in terms of CBM resources with an estimated 4.6 trillion cubic meters of CBM reserves. The country's Directorate General of Hydrocarbons has given its consent to the drilling of more than 100 CBM production wells over the next four years at a cumulative investment of $150 million. In the face of limited availability of oil and natural gas, CBM comes as a viable nonconventional option and is luring industry majors into exploring CBM reserves.

Great Eastern Energy Corporation Limited (LON:GEEC) (Gurgaon, Haryana), India's first private-sector player to take up CBM exploration, is exploring and developing production wells in the Raniganj coalfields of West Bengal. It commenced CBM production in July 2007 from a block with estimated reserves of 54 billion cubic meters. The firm plans to drill 300 production wells for CBM exploration at an investment of nearly $1 billion. Reliance Natural Resources Limited (BOM:532709) (Mumbai), a part of the Reliance-Anil Dhirubhai Ambani Group, owns four CBM blocks in India jointly with Geopetrol (Monaco). Shell (NYSE:RDS.A) (The Hague, The Netherlands) recently entered into an agreement with Arrow Energy Limited (ASX:AOE) (Brisbane, Queensland) for joint CBM extraction in India, Indonesia, China, Australia and Vietnam. Arrow Energy owns three CBM blocks in India -- two in Chhattisgarh and one in Jharkhand -- with estimated resource potential of 331 billion cubic meters.

India requires nearly 180 million cubic meters per day of gas, of which only 90 million cubic meters per day is sourced locally. One-third of India's liquefied natural gas (LNG) imports are procured from the spot market, and the rest is obtained through long-term contracts. Japan's import of more than 9 million tons per year of spot LNG last year has resulted in a global shortage of spot LNG cargoes. The supply constraint and soaring prices have had a combined adverse effect on India's gas supply security. However, while CBM supplies are expected to augment other domestic gas supplies in the country, they are not likely to offset India's imminent need for significant gas imports from Qatar, Iran and other nations.

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