KOLKATA (miningweekly.com) – Reconciling the conflicting stances of the Coal and Petroleum and Natural Gas Ministries, India’s federal government will amend hydrocarbon policy to permit simultaneous exploitation of coal bed methane (CBM), shale gas, coal and other hydrocarbons from a single block.

A senior official in the Coal Ministry said that the policy amendments, currently under way, would be placed before the Cabinet Committee for Economic Affairs for approval. Once approved, investors would be permitted to exploit all energy resources from a single block.

The Coal Ministry believed that the exploitation of CBM should be the sole domain of Coal India Limited (CIL) to ensure orderly and speedier development of CBM resources, while the Petroleum and Natural Gas Ministry had been gunning for companies to be permitted entry into exploitation of CBM to ensure a higher inflow of investments into the sector, the official added.

In the case of oil and gas blocks allocated to companies under the New Exploration Licensing Policy (NELP), successful bidders were permitted to explore and extract specific hydrocarbons – oil, gas or CBM – but in most cases, new hydrocarbon resources like shale gas and CBM remained unexplored or under-exploited with most companies finding oil and gas extraction viable.

The official did not provide a timeline for the policy amendment, noting that the two Ministries would have to resolve some details.

The Coal Ministry would have to decide whether “dual licensing” for coal and CBM extraction would be granted to coal blocks already allocated through the first two auction rounds completed this year, or if it would only apply to future blocks up for auction. Currently, only CIL was entitled to have dual licences.

The Coal Ministry was wary of granting CBM extraction licences retrospectively as the reserve price set for the bidders had not factored in potential CBM resource in the blocks and payments were based only on potential extractable coal resources.

Similarly, in case of oil and gas blocks auctioned under NELP, the government would have to determine how development expenses for CBM could be kept separate from existing operations at the same oil and gas blocks.

This was significant since under the nine rounds of auction under NELP so far, contractual agreements between the government and investors were based on a production sharing contract (PSC) under which investors could recover expenditure before sharing profits. In the case of an amended policy, the government would have to devise a mechanism to keep expenditures on existing oil and gas exploration separate from fresh expenditures on CBM.

New contractual agreements might need to be developed for CBM if the government moved from PSC to revenue sharing contracts, as had been recommended by several government-appointed committees to deal with so-called “expenditure padding” by investors, to delay profit sharing with government.

Under the nine NELP auction rounds, the government had signed PSCs for 254 oil and gas exploration blocks, with 210 discoveries and 30 blocks currently in production. In the case of CBM, 33 blocks had been awarded with only one in production.