KOLKATA (miningweekly.com) – Indian oil and gas exploration and production (E&P) major ONGC will invest an additional $400-million in two coal-bed methane (CBM) blocks to allow for production to start next year.

An official involved in the project said ONGC had decided to increase its capital expenditure on the Bokaro and North Karanpura CBM blocks at the behest of the government, which was keen for the State-owned and managed E&P company to begin production in 2016 to dispel the gloom hovering over the sector.

ONGC planned to drill 80 wells over the next three years but would start with an initial 40 wells to deliver an initial output of 0.5 million metric standard cubic metres a day (mmscmd) of CBM next year. Full output of 1.58 mmscmd would be achieved within the next three years, the official noted.

OGNC held an 80% stake in the North Karanpura block, with Coal India Limited (CIL) holding the balance; however, ONGC had sought government approval to disinvest its 80% stake in the block in favour of a third partner, with the latter expected to bring in technology and best practices that would enhance production efficiencies.

According to the official, achieving higher efficiency parameters than envisaged in the original development plan would hold the key to the financial viability of the project against the backdrop of falling oil and gas prices and an unfavourable exchange rate of the rupee against the dollar.

The start of CBM production by ONGC would be significant in light of, as reported by Mining Weekly Online, the India government’s concern over a spate of CBM blocks being relinquished by developers following a slump in gas prices and the absence of a pricing regime specific to CBM.

As many as 17 of the 33 CBM blocks awarded by government had been relinquished by developers. Even ONGC, which had bagged the Jahria block, was considering relinquishing that block on the grounds that the topography and urban development in the region would not permit optimal development of the block.