Govt to penalise cos defaulting in coal bed methane exploration

MUMBAI: The government is planning to be strict with companies that do not adhere to the minimum work programme (MWP) agreed during the search for coal bed methane (CBM). The measure is likely to be implemented for companies that make huge promises in order to win the blocks and subsequently fail to fulfil them.

The promises are in the form of targets of exploration work such as seismic surveys and drilling exploratory wells, clubbed under the heading of the MWP.

The new rules are expected to define penalties for companies that have won licences to prospect for CBM. The government was compelled to come out with the rules after companies started seeking extensions of terms after failing to complete their scheduled work.

“The government has received various proposals for extension of the exploration programme, citing numerous reasons. The non-completion of committed work programme within the scheduled period as specified in the respective contracts has several effects on the entire exploration process. The new policy will address these issues and set out rules for grant of extensions,” a senior petroleum ministry official said.

The rules will act as a deterrent for operators seeking unnecessary extensions and holding on to the acreage without any (or limited) exploration activities. The policy envisages a system of progressive penalty by way of increasing bank guarantee amount against the duration of extension sought and recognising companies who have established commercial viability.

It also enables the government to seek 50-75% of bank guarantee for the unfinished MWP for extension from six to 18 months. The government has signed 26 CBM contracts under three rounds of coal bed methane. The blocks are under various stages of production and the first commercial production is likely to start by the end of this year.

The gas resource base in the country from CBM extraction is estimated at 50 trillion cubic feet (TCF) of the total gas resource base of around 450 TCF. The reserves established as on April 2006 from hydrocarbon resources is 94 TCF and 6 TCF from CBM gas resources.