Livemint: India's oil ministry plans to review CBM pricing

Faced with radically different pricing proposals submitted by two operators of large coal bed methane (CBM) blocks, the oil ministry is taking a closer look at pricing.

The two operators are Essar Oil Ltd, which operates a CBM block in Raniganj in West Bengal, and Reliance Industries Ltd (RIL), which has its block in Sohagpur in Madhya Pradesh.

Essar has submitted a pricing proposal of $4.2 (around Rs. 222 today) per million British thermal units (mmBtu) to the government, while RIL proposed a formula linked to the international crude price, under which the price works out to around $15 per mmBtu.

Essar has the largest CBM acreage in India, with about 10 trillion cubic ft of gas across five blocks. Peak production from its Raniganj block is estimated at 3.5 million standard cu. metres per day (mscmd) by 2014-15.

RIL is expected to produce 3.5 mscmd from its Sohagpur block by 2014 as well.

The government is caught in a bind as it is trying to make domestic gas (a commodity currently in short supply) available to consumers—especially in the power and fertilizer sectors—at a reasonable price. But approving a lower-than-potential price will deprive it of revenue to be shared with it by firms from the sale of gas derived from coal. MORE