The Hindu Business Line : ONGC postpones coal bed methane production

Break-even point
While pricing issues are expected to be finalised by the proposed regulatory authority, according to initial estimates the company is expecting to break even at $3.05 per million metric British thermal unit (mmbtu) at the production point.

Kolkata , March 9

The delay in awarding contracts for integrated exploration and development of coal bed methane (CBM) in six blocks in Jharkhand and West Bengal has taken its toll on ONGC's targeted CBM production schedule.

According to company officials, ONGC is now expecting commercial production of CBM to begin at least three months behind schedule in July 2007.

The nomination block of Jharia in Jharkhand will be the first to come on production.

Production capacity

The company has projected a daily production capacity of three lakh cubic metres from Jharia.

ONGC holds the block in joint venture with Coal India Ltd in 74:26 equity ratio.

It has run pilot production in Jharia and has drawn up a Rs 500-crore plan for development.

Pricing issue

While pricing issues are expected to be finalised by the proposed regulatory authority, according to initial estimates the company is expecting to break even at $3.05 per million metric British thermal unit (mmbtu) at the production point.

Since this will be the first ever flow of gas in the Eastern region, the company is expecting to fetch prices in excess of $4.6 per mmbtu for its CBM production.

Though SAIL had expressed interest in lifting the entire production from Jharia block for use in its Bokaro Steel Plant, consensus is yet to be reached on the pricing issue.

Tender bids

With the tender being floated in June 2005, ONGC had received only tender bids for the contract concerned.

Following the rejection of the bid from the consortium of Grades Energy Services Inc, Essar Oil and Essar Construction on technical grounds, the consortium of Mineral Exploration Corporation Ltd, Shivani Oil and Gas Exploration Services Ltd and Express Drilling Services has emerged as the sole bidder for the job.

"The rates offered by the bidder were higher than our expectation. As this would impact our pay back period, we are currently negotiating the contract price with the bidder. Hopefully the contract will be awarded within a month," the official said.

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