The Petroleum and Natural Gas Ministry is likely to take a decision on the pricing of coal bed methane (CBM) gas, being planned to produce by Reliance Industries Ltd. (RIL) and Essar Oil, by the end of next month.
“The Ministry does not have to approach the Empowered Group of Ministers on the CBM pricing as the Production Sharing Contract for these are different from the ones for conventional oil and gas fields,'' a senior Petroleum Ministry official said.
Unlike KG-D6 fields, there is no issue of cost recovery involved in CBM blocks as the government gets a fixed royalty, which the operators bid at the time of allotment of blocks. In conventional fields, all cost incurred is first recovered by the operator and the revenues are then shared with the government in a fixed proportion.
While Essar Oil has proposed to sell gas from its Raniganj block in West Bengal at $4.20 per million metric British thermal unit, RIL has sought government nod for selling CBM from its Sohagpur block at a price close to $13 per mmBtu. RIL has priced CBM at 12.67 per cent of JCC, or Japan Customs-Cleared Crude, plus $0.26 per mmBtu from end-2014.
The pricing formula that RIL has proposed for CBM is different from the one at which natural gas from the company's eastern offshore KG-D6 block is priced at. KG-D6 gas at cap crude oil price of $60 a barrel translates into a sale price of $4.205 per mmBtu. Meanwhile, the official made it clear that ONGC Videsh Ltd. (OVL) and GAIL India combine had not bid for Cove Energy and were instead looking at the preferential bilateral deal with Maputo. The last date of bidding was already over and OVL and GAIL had not bid at all. Cove, which owns 8.5 per cent stake in a huge gas discovery off the coast of Mozambique, put itself up for sale in January and has received several takeover approaches.
