Coal-Bed Methane: Newest Avenue for India
Akash Gupta
(Under the guidance and mentor-ship of Dr.Sanjay Kumar Kar, HOD,
Department of Management Studies)
First Year MBA Student
Rajiv Gandhi Institute of Petroleum Technology, Jais, Amethi, U. P.

Coal Bed Methane (CBM) can be readily converted into diesel, petrol or ethanol, recoverable CBM has the ability to be stored in canisters or be used as a domestic fuel. Having the potential to hold the demand of fossil fuels, coal bed methane market is anticipated to show robust growth during the forecast timeframe. Increasing adoption of unconventional energy sources owing to the need of clean energy will prove to be a boon for CBM. Coal bed methane market has the potential to offer an alternative to the conventional energy sources and can assist in reducing the greenhouse emissions which can in-turn open new avenues for its business growth.

Globally each and every country is searching for the solution/ replacement of rapidly depleting Conventional Resources. There are several alternate resources like Coal-Bed Methane, Shale gas, Gas hydrates, Nuclear energy and Renewable sources. CBM can be considered as one the most feasible resource as of now, being a clean energy source.

Coal-bed methane (CBM) is a form of natural gas that is trapped in the carbon structure of coal seams. That is, the methane is absorbed to the surface of the coal. It is an unconventional resource, as the methane contained in the coal does not migrate to other rock strata. Since conventional gas is not attached (adsorbed) onto the rock formation, extraction is as simple as drilling into the rock formation and, with the assistance of pumping systems, extracting the gas out of the reservoir pores and into the pipeline. The gas is considered to be sweet, meaning it has minimal to no additional gases or chemicals thereby reducing any health and safety issues associated with its production. This is different from sour gas which contains Hydrogen Sulfide (H2S). Because CBM has relatively little additional gases or chemicals within its composition it requires little to no refining. In other words, from the moment that CBM is first extracted from the coal seams it is ready to heat/cool your home. CBM is a clean gas having heating value of approximately 8500 kcal/kg compared to 9000 kcal/kg of natural gas.[1]



The Government of India has received over whelming responses from prospective producers with several big players star ting operations on exploration and development of CBM in India and set to become the fourth after US, Australia and China in terms of exploration and production of coal bed methane. At the instance of the Directorate General of Hydrocarbons (DGH), a nodal agency constituted by the Union Govt. for formulation of strategy for CBM search and production, the first series of information and data packages in respect of certain selected coalfields like Raniganj, Jharia, East-Bokaro, West-Bokaro, Sohagpur, North-Karanpura and Birbhum were prepared during 1997-98 in two phases by GSI on basis of the geological investigations carried out by the Department over years. In order to harness CBM potential in the country, the Government of India formulated CBM Policy in 1997, wherein CBM being Natural Gas is explored and exploited under the provisions of Oil Fields (Regulation and Development) Act 1948 (ORD Act 1948) and Petroleum & Natural Gas Rules 1959 (P & NG Rules 1959) administered by Ministry of Petroleum & Natural Gas (MoP & NG).[2]

The CBM development in India gained momentum with the announcement of Coal Bed Methane (CBM) policy in 1997 which laid the foundation of commercial exploitation of CBM in India. Total of Four Round of the bidding process have been taken place in the year of 2001, 2003, 2005 & 2008 resulting in award of 33 CBM Blocks covering 16,613 sq. km.

Domestic production of CBM is only 1.07 MMSCMD in 2015-16 and expected to increase to 5.77 MMSCMD by 2017-18.[3]

According to the Minister of State for Petroleum and Natural Gas, Dharmendra Pradhan; Natural gas from coal bed methane is likely to contribute to five per cent of national gas production by 2017. Currently, Great Eastern Energy Corporation and Essar OIl are the only two CBM-gas producing blocks in the country, both from separate reserves in Raniganj, West Bengal. Reliance Industries has reportedly begun test production from its two blocks in Madhya Pradesh. However, pricing is crucial to encouraging more production, as the government has reduced the price for domestic gas from USD 4.24 per million British thermal unit (mmBtu) last year to USD 3.06 mmBtu this April, in line with falling gas prices globally.On account of growing drilling activities mainly in coal rich countries, such as China, India, Indonesia and Australia - is expected to be the fastest growing CBM market at an estimated CAGR of 14.9% from 2014 - 2020. The region is currently seeing GDP growth rates due to growing disposable income of consumers is growing at rapid pace. Growing GDP is leading to growing demand for energy in the region.

The growth of Asia Pacific energy is mainly driven by China, India and Indonesia. Along with being a large demand center, Asia Pacific is also emerging as a large supply center for unconventional gas resources including CBM. China, India and Indonesia contains huge amount of unproven reserves for CBM, which in turn has been attracting companies to invest in the region.

To the latest Central govt. of India on March, 2017, had approved the pricing and marketing freedom for CBM and also to sell the fuel affiliates. There are several uses for the Coal-Bed Methane that includes:[4]
  • Power Generation
  • Auto Fuel in form of CNG
  • Feed Stock for fer tilizer
  • Fuel for Industrial use
  • Fuel for Methanol Production
The three highlighted factors that could be understood for CBM include- the Sustainability of Production, Domestic Gas Price, as well as the development of midstream infrastructure.

Sustainability is the main challenge for any energy source likewise for CBM, its geological make-up and formations presents highly variable production capacities and for that if two wells are drilled in the close proximity could show different and increased productivity. Indian coal is considered of relatively low grade and due to that its porosity and permeability can be a challenge to production.

Domestic gas pricing, a major factor because initially CBM producers were exempted from the provision of the domestic price cap and companies, such as Essar, were reportedly charging between USD 5.10 – 22.80/million BTU. CBM is required to be priced in line with the conventional gas, which is at a rate of USD 4.20/million BTU.

But the biggest constraint is the mid-stream infrastructure. India's Petroleum and Natural Gas Regulatory Board (PNGRB) has projected a doubling of transmission and distribution infrastructure by 2017, from 337 million m3/day, to 721 million m3/day, this is to support the increase in domestic production.

Thus, it could be deduced that India do possess the opportunity in terms of CBM for meeting the gas demands, which is cleaner, but also have several constraints for its development as being the young industry relatively to other flourished ones. India should work towards harnessing of the unusual and unconventional sources like CBM to get benefited from them.[1]

References:
1. www.worldcoal.com
2. www.pib.nic.in
3. www.unece.org
4. www.cmpdi.co.in