The Ministry of Petroleum and Natural Gas has clarified to a Parliamentary committee that only Coal India is allowed to exploit coal bed methane (CBM) from its existing coal blocks.

Private companies such as Essar and Hindalco, operating coal blocks, will have to seek fresh permission under the Hydrocarbon Exploration Licensing Policy (HELP) to be able to produce CBM. The government is still in the process of working out the nuances of HELP contracts, and a fresh round of hydrocarbons auctions — convention as well as unconventional — will be conducted under this regime.

The operators, who are conducting exploration and extraction under the existing contracts have been seeking clarification from the government on whether they can explore other resources as well. “We have not heard anything as yet,” a private player said.

To resolve the issue, the Standing Committee on Petroleum and Natural Gas suggested that the government should come out with a comprehensive policy for CBM.

“The Committee feels that the policy pronounced in 1997 has not been able to achieve its objective of production of CBM to the promised potential in the country…In the Committee’s view, the new policy should address the current lacuna in coordination among different agencies as well as issues such a simultaneous mining of coal and CBM, evacuation of CBM, use of CBM from existing coal mines, pricing of CBM…,” stated the report from the committee titled ‘Production of Coal Bed Methane’ tabled in the Lok Sabha on Thursday.

Further, the Committee also recommended that the government should formulate a simple procedure to grant coal block operators the right to extract CBM under HELP, if the coal block operator desires the same.

Pricing issue

The issue of pricing of CBM was also taken up by the Committee. It recommended that the Ministry of Petroleum and Natural Gas should formulate a separate pricing and marketing mechanism for CBM keeping in mind the various variables in CBM operations.

The committee had asked the Ministry why Great Eastern Energy Corporation Ltd (GEECL) and Essar are selling CBM at different rates.

In its reply, the Ministry said that the original CBM contracts had the provision that prices will be approved by the government separately for each block.

In 2014, the new domestic natural gas pricing guidelines also covered CBM blocks. However, since CBM contracts are revenue sharing contracts, the Ministry informed the Committee that it has held stakeholder consultations on pricing and marketing of CBM.