Coal India's bid to extract gas turns into turf battle

Coal India Ltd's plan to first extract nearly 25 billion cubic metres of coal bed methane (CBM) gas in order to rapidly mine over 100 million tonnes of medium grade coking coal in Jharkhand has turned into a turf battle of sorts between two key Ministries — Coal and Natural Gas — intent on controlling how this important resource should be used commercially.

The differences first came to the fore soon after CIL invited bids in April this year from companies willing to invest huge sums to extract the gas from five “extremely gassy” mines licensed to the coal operator. The gas, once pumped out by the private players, was to be sold at market rates, from which a share would accrue to CIL as well.

Ministry's objections

According to sources, while CIL's bid received tacit approval from the Coal Ministry, the Ministry of Petroleum and Natural Gas (MoPNG) insisted that the Coal Ministry should seek the Union Cabinet's nod before CIL went ahead and awarded such contracts.

Again, at a recent meeting on the issue between the two Ministries, MoPNG officials clarified that, according to the guidelines laid out under the CBM Policy of 1997 it was their Ministry that controlled how CBM resources should be commercially utilised. . Naturally, they argued, CIL should not award the contracts without requisite “price approval” from the upstream oil and gas regulator (Directorate-General of Hydrocarbons, which is under the administrative control of the ministry). “It was suggested that the Coal Ministry seek Cabinet approval on the issue,” a source told Business Line .

The Ministry of Coal, on the other hand, pointed out at the meeting that, according to the Mining Act, there was no room for a second “licensee” in a particular mining leasehold area. Moreover, as per the agreement reached between the two Ministries in 1997 and the subsequent amendments to the same, the CBM policy was not applicable in existing mining leasehold areas. The Ministry, in fact, has yet to submit any proposal that requires the cabinet committee's consideration, the sources said.

CIL bullish

Though the bids for extracting CBM were originally scheduled to be closed in June, the last date for the same was extended twice to August 17. CIL, the sources said, is bullish about the success of the project. “We are hopeful that the complications (regarding the issue) will be resolved soon, and we can start evaluating the bids in August,” a senior CIL official said.

Mining hurdle

Although coal bed methane (or coal seam methane) is a source of energy, it impacts safe mining operations. In fact, underground mining in the five identified CIL-operated mines — Munidih (8 bcm of CBM), Kathara (8 bcm), Asnapani (6 bcm), Putki Buliwari (7 bcm) and Mohuda (0.4 bcm) — has been considered unsafe by the designated authority concerned.

Since CBM is high in methane content, release of this greenhouse gas comes with its own pitfalls. One way to reduce the environmental impact is to extract the gas within an accelerated time-frame (preferably within 3-4 years). However, considering the high investments that are required — which is typically much more than what is needed for normal CBM extraction — for such degasification (the industry term for the process), the viability of any project would depend on subsequent commercial utilisation of the gas.

Incidentally, India faces an acute shortage of both coking coal and natural gas. While the country is a major importer of liquefied natural gas (which is converted to its natural state and used to fuel the power and fertiliser industries as well as vehicles and home kitchens) , the steel sector is almost entirely dependent on imports for its coking coal supplies.

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