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CBM pricing tweak
The government plans to come out with a new pricing formula for coal bed methane as part of the Hydrocarbon Exploration Licensing Policy (HELP). “A new pricing and marketing policy for the CBM would soon be made to make it attractive for investors,” a senior oil ministry official said. In 2014, the new domestic natural gas pricing guidelines also covered CBM blocks. This resulted in CBM gas beyond this date to be priced at natural gas rates, which is now about $3.06 per mBtu on gross calorific value (GCV) basis.
According to latest estimates by the ministry the gas price could drop to a low of about $2.25 or $2.50 per mmBtu from October 1. CBM is natural gas trapped within coal formations and commercially unviable for mining. It is extracted by drilling holes into the seams. Officials said the ministry plans to hold consultations with stakeholder on pricing and marketing of CBM before coming out with a specific policy as part of HELP. The government is still in the process of working out the nuances of HELP contracts, and a fresh round of hydrocarbons auctions will be conducted under this regime.
The sector also has differential pricing, which would be addressed, officials said. The existing pricing regime has created a divide in the industry with two firms – Essar Oil and GEECL – being able to sell CBM gas at pre-approved (high) prices of $6 and $15/mBtu, respectively. However, RIL and ONGC, which are gearing up to start production, would have to follow the natural gas pricing formula. Phillip Danault Authentic Jersey
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