KOLKATA (miningweekly.com) - India’s oil exploration and production (E&P) major ONGC and Steel Authority of India Limited (SAIL) were planning a collaboration to explore coalbed methane (CBM) gas in captive coal blocks allocated to the steel producer.

According to an ONGC official, SAIL was seeking to increase CBM use to reduce energy costs as it was already sourcing CBM from ONGC’s coal block in the eastern Indian province of Jharkhand, although coal blocks allocated to the steel producers for captive consumption, where CBM projects could be undertaken, were yet to be identified.

SAIL had already started development of two coking coal blocks - Tasra and Sitanalla - and had finalised the appointment of a mine developer and operator for the Tasra block.

In the first phase, the steel producer planned production of four-million tonnes a year from the Tasra block, estimated to have a reserve of 117-million tonnes, entailing an investment of about $370-million. The neighbouring Sitanalla block had an estimated reserves of about 45-million tonnes.

The Tasra and Sitanalla reserves were originally owned by Coal India Limited (CIL), but were subsequently taken over by the Indian Iron and Steel Company Limited (IISCO), Burnpur in the east Indian province of West Bengal. The two coking coal reserves were part of the legacy received by SAIL when the company took over the near defunct IISCO in 2006.

In the last week of December, the Indian Cabinet approved extraction of CBM by CIL from coal blocks held by it, thereby ending confusion on whether the development of coal gas resources would be under the purview of the Coal Ministry or the Petroleum and Gas Ministry.

This would be followed up over the next few weeks with a policy for development of CBM by private and government-owned companies, apart from CIL, for the development of coal gas resources in blocks allocated to various user industries in steel and power for captive consumption, a government official said.

However, this was expected to face opposition from sections of the Coal Ministry even though the Petroleum and Gas Ministry favoured development of CBM from captive coal blocks. According to the Coal Ministry, captive coal blocks had been allocated to user industries through a nomination process and not through auction, for the specific purpose of mining coal for captive use and licence to explore for CBM would go beyond the terms of allocation for the block.