RIL to begin CBM gas production in 2015-16

Reliance Industries Ltd (RIL) plans to start production of natural gas from coal seams, called coal-bed methane (CBM), in Madhya Pradesh from 2015-16.

In a presentation to analysts post Q3 earnings announcement, RIL said first gas from its Sohagpur CBM blocks in Madhya Pradesh is "targeted by FY16."

It plans to produce 3.5 million standard cubic meters per day of gas from the two Sohagpur blocks.

RIL holds 3 CBM blocks -- Sohagpur (East) and Sohagpur (West) in Madhya Pradesh and Sonhat in Chattisgarh. RIL has drilled over 40 crore holes on the 500 square kilometre Sohagpur West and 495 sq km Sohagpur East blocks and tested for gas content.

The process for acquiring land for well sites, market assessment & infrastructure for evacuation and transportation of gas has commenced.

"Phase-1 development envisages drilling and completion of 229 wells and installation of 2 gas gathering stations (GGS)," RIL said in the presentation, adding that land acquisition and engineering for surface facilities of the Phase-1 project was in progress.

RIL, through its subsidiary Reliance Gas Pipelines Ltd, will lay a 312-kilometre pipeline to transport coal gas (CBM) produced from Shahdol in Madhya Pradesh to Phulpur near Allahabad in Uttar Pradesh.

The pipeline will have a capacity to transport 4.3 million standard cubic metres per day (mmscmd) of gas, including 0.875 mmscmd capacity that will be available for any third party for open access on non-discriminatory basis.

The pipeline will travel from Shahdol to JaysingNagar- Beohari- Gurh and culminate at Phulpur.

At Phulpur, the pipeline may be hooked into state-owned gas utility GAIL India Ltd's main Hazira-Vijaypur-Jagdishpur trunk gas pipeline. Connection with HVJ would enable gas to flow to any consumer.

In the presentation, RIL said the "gas pricing guidelines (issued earlier this month) covering CBM gas (have been) notified by Ministry of Petroleum and Natural Gas."

According to the guidelines, all forms of natural gas -- conventional as well as non conventional forms -- like shale gas and CBM, will from April 1, 2014 be priced at an average of international gas hub rates and cost of importing liquefied natural gas (LNG).

Price of gas, when this formula is implemented, will almost double to $8.2-8.4 per million British thermal unit from the current $8.4.

The notification of the gas pricing guidelines "creates an enabling environment for investments in the hydrocarbon sector," RIL said.

It said the widening demand-supply gap necessitates investments. "As per International Energy Agency (IEA), India needs $176 billion of upstream investments over 2012-2035," it added.

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