Coal India signs pact worth Rs 1,880 cr for commercial extraction of coal bed methane

State-owned Coal India Limited on Monday said that its arm Bharat Coking Coal has signed a contract worth Rs 1,880 crore with Prabha Energy for commercial extraction of coal bed methane.

Coal bed methane (CBM) is an unconventional form of natural gas found in coal deposits or coal seams.

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"Bharat Coking Coal Limited (BCCL) on Monday, signed a first of its kind revenue sharing contract worth tentatively Rs 1,880 crore for commercial extraction of coal bed methane with CBM developer Prabha Energy Private Limited, selected through a global bidding process," Coal India (CIL) said in a statement.

CBM would be extracted from Jharia Block I under leasehold area of BCCL.

While BCCL would be putting up close to Rs 370 crore towards the cost of the land, the rest will be met by the CBM developer.

CIL has assigned CMPDI, its Ranchi-based consultancy arm, as the principal implementing agency to oversee the project.

CIL Chairman Pramod Agrawal and company's Director (Technical) Binay Dayal, were virtually present during the inking of the contract.

"This is an important development and with this CIL would be stepping into a new era of CBM extraction on its own in its leasehold area," CIL said.

Spread over an area of approximately 27 sq km, Jharia CBM Block-I has resource of around 25 billion cubic metres (BCM). Average production capacity is pegged at 1.3 million metric standard cubic metres per day once the commercial operation kick starts.

The project is scheduled in three phases. The first phase of exploration is of two year duration from the signing of the contract followed by the pilot phase of three years. Thereafter the production phase is for 30 years.

With the vast experience that the CBM developer has, CIL is hopeful that the first two phases would be completed earlier than scheduled and production commences sooner than planned.

CBM extraction is a part of CIL's diversification portfolio under clean coal initiatives.

Harnessing CBM has dual advantages. Methane has energy potential, and the captured gas can be put into use for many commercial uses. The commissioning of gas pipeline in eastern India under URJA Ganga project is in the works by GAIL. CBM produced may be used for city gas distribution or through pipeline for potential users.

Also, methane is a potent green house gas with global warming potential greater than 25-28 times compared to Co2 and is a cause of concern for the safety of mines and environment. Removing fugitive methane gas from UG coal mines and using it in profitable and practical ways can enhance safety, mine productivity, increase revenues and reduce GHG emissions.

CIL accounts for over 80 per cent of domestic coal output.