Electrosteel Castings Ltd (ECL) has entered into a joint venture agreement with Brisbane-registered Dart Energy Ltd for exploration, development, production and sale of coal bed methane (CBM) from ECL's captive coal mine at Parbatpur in the Jharia Basin of Jharkhand.

The venture will extract methane from the 8.8-sq km mining lease area of ECL. Dart will operate the methane development and extraction exercise and will have 30 per cent stake in the JV. ECL will hold the balance 70 per cent of equity in the JV.

ASX-listed Dart said in a filing that ECL will fund the costs of gas extraction and share the economic benefits in proportion to their respective participating interests.

ECL has agreed to an initial appraisal programme of two core holes and six pilot wells in 2011, to be followed by a well development programme that is expected to include over 30 wells in the following years.

Given the high gas contents and coal thicknesses, a vertical well completion technology has been planned by Dart.

Dart's capital contribution has been estimated around $2 million in 2011 and a further $10 million to cover subsequent development expenditure. Dart expected to achieve an annual field production of around three billion cubic feet (BCF) when all wells would be ready for extraction.

Dart anticipated first gas from the pilot wells later this year.

Under the agreement, any produced gas can be sold immediately. Dart said given the potential, first gas sales could happen as early as January 2012.

Dart and ECL are already in advanced discussions with domestic compressed natural gas players for gas off-take contracts. ECL has the option to acquire produced gas for use at ECL upcoming steel plant in Bokaro district of Jharkhand.

Estimates suggested that the methane resources, available in Parbatpur mine area, are commercially exploitable.

Sewell report

Dart had commissioned an independent evaluator – Sewell and Associates Inc of the Netherlands for assessment of the gas resources in the ECL mining area. According to Sewell's evaluation report, the best estimate gas-in-place (gross) suggested that the area contains 168 BCF. The gross contingent resources (2C) were found to be 62 BCF. The best of gross prospective resources was 50 BCF.

Geological studies on the Parbatpur mine have identified 18 coal seams in the Barakar Formation, named after Barakar River, with a cumulative thickness of over 80 metres at depths between 200 and 1,100 metres. The Parbatpur coal seams have high gas content and gas saturation close to 100 per cent, requiring extraction of the CBM ahead of mining for regulatory and mine safety purposes.

ECL on Monday said that it intends to make the venture self-sustaining. It also said that the venture would also exploit carbon credits.

( >jayanta_mallick@thehindu.co.in )

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