Only three bids for ONGC's coal-bed methane blocks

Last Updated: Mon, Jan 14, 2013 04:55 hrs

Only three companies have bid again for buying stake in Oil and Natural Gas Corporation (ONGC)'s four coal-bed methane (CBM) blocks.

These are UK-listed Great Eastern Energy Corporation (GEECL), Brisbane-based Dart Energy and a consortium of Jindal Steel and Deep Industries. Essar Energy, which had bid last time, has abstained, according to sources at ONGC.

ONGC plans to farm out 35-45 per cent stake in each of the four CBM blocks - in Jharia and Bokaro in Jharkhand and North Karanpura and South Karanpura in Raniganj, West Bengal. CBM is natural gas trapped within coal formations and commercially unviable for mining. It is extracted by drilling holes into the seams.

ONGC wants to move out of the CBM business and focus on conventional oil and gas exploration and production. Forced by the ministry of petroleum and natural gas last July, the company decided to cancel its earlier bid for farming out the blocks and invited fresh bids from international players, too, in November.

ONGC has been finding it tough to resolve land acquisition problems and the cycle speed of rigs. It wanted to bring a joint operator. So far, ONGC has spent about Rs 510 crore on the four blocks, which the winning bidder might have to pay in proportion to the stake.

"International bidders have stayed away. In addition to the hassles while operating in India, for many companies exploring of CBM is not an attractive proposition," said a senior official from one of the bidding companies.

Sources said Essar Energy did not bid as the management is no longer interested in ONGC's blocks. "ONGC would be selling stake in one block to two players. One, it is a minority farmout. Two, no one wants to deal with three to four partners and their different ideologies. This would have kept Essar away," said a senior official from one of the bidding companies.

Essar Energy declined to comment. Its chief executive officer had recently told Business Standard the company, with its five CBM blocks, an acreage of 2,700 sq km and prospective resources of about 10 trillion cubic feet of gas, plans to focus on coal seam gas and generate cash flows from there.

ONGC, India's biggest exploration and production company, is the operator in the Raniganj north block, with 74 per cent stake, while Coal India (CIL) holds the remaining stake. At Jharia, it holds 90 per cent stake, while CIL holds 10 per cent. At Bokaro and north Karanpura, too, it is the operator, with 80 per cent. In these blocks, Indian Oil Corporation holds the remaining stakes.

According to ONGC estimates, the Jharia block holds 85 billion cubic metres of gas reserves. North Karanpura holds 62 bn cu metres, Bokaro holds 45 bn and Raniganj North holds 43 bn cubic metres.

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