First round of coal auctions to see bids for joint CBM exploration

The upcoming first round of coal block auctions could see companies being asked to bid simultaneously for coal bed methane (CBM) exploration.

According to government officials, the Petroleum & Natural Gas Ministry is preparing a draft note seeking approval from the Cabinet Committee on Economic Affairs to grant right of exploration and exploitation of CBM to successful bidders in the upcoming coal block auctions.

Approval has also been sought for Ministry of Coal to invite bids for exploration and auction of CBM from the blocks it puts up for auction and make it mandatory for companies to bid for both resources together.

Simultaneous extraction of coal and CBM is possible in a safe manner only if it is done by the same contractor. It has also been proposed by the Ministry for Petroleum and Natural Gas that the contractor should be allowed to sell CBM gas at $5.05 per mmBtu, as per the New Domestic Gas Pricing Guidelines 2014.

However, the contractor will be liable to pay the royalty and Production Level Payment which would help in higher revenues for the Central and State Government.

It is also likely that an empowered committee will be constituted under the Secretary, Petroleum and Natural Gas to consider and address common contractual issues of the CBM contracts that are already awarded and CBM operations by coal companies.

India does not have a policy regime for simultaneous extraction of CBM and coal. But, it does have a CBM policy.

Since 2001, 33 CBM blocks have been allotted in four rounds of global bidding and out of this only one has started production.

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