15-04-2017

Reliance to Start Coal-Bed Gas Sales in May as Prices Freed

Coal

Billionaire Mukesh Ambani-owned Reliance Industries Ltd. will start selling coal-bed methane from its central India block next month after the government allowed producers freedom to set prices, people with knowledge of the matter said.

The company will begin with daily sales volumes of 400,000 cubic meters of gas from coal seams in Sohagpur block in Madhya Pradesh state and gradually increase the volumes, said the people, who asked not to be identified citing company rules. Reliance has sought bids from potential buyers to be submitted by April 24, they said.

With this, Reliance becomes the third supplier of gas produced from coal seams after Great Eastern Energy Corp. and Essar Oil Ltd. India’s federal government last month gave marketing and pricing freedom to producers of coal-bed methane to sell the fuel within the country as it seeks to attract investments to boost production. The country seeks to increase the share of natural gas in its energy mix to 15 percent by 2020 from 6.5 percent now.

Reliance has appointed Crisil Risk and Infrastructure Solutions Ltd., a unit of Crisil Ltd., to decide on the selling price for the gas based on bids from potential buyers. Reliance will supply gas to the winning bidders for a two-month period beginning May 1, the people said.

Great Eastern Energy Corp., the first to start coal-bed methane production in India, sold the fuel at an average price of $10.05 a unit during April-Dec. 2016.

Reliance commenced commercial production from March 24 and expect sales to third party customers from May, a company spokesman said in an emailed statement. It will take 15 to 18 months for the block to reach full production, the spokesman said.
Test Production

Reliance’s production from the block comes after about 15 years of winning the rights. Reliance commenced test production during April-June 2016, according to its website.

In January, the Mumbai-based company said it was nearing completion of the first phase of its coal-bed methane project and was testing a pipeline built to push the gas into the national grid. The Shadol-Phulpur pipeline allows Reliance to sell the gas from the block to customers along its 312 kilometer (194 mile) route and to those on GAIL India Ltd.’s Hazira-Vijaipur-Jagdishpur pipeline, the people said.

India has coal-bed methane resources of 9.9 trillion cubic feet, according to the oil ministry’s Petroleum Planning & Analysis Cell.

Source: Bloomberg

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