Reliance in CBM pipeline talks with GAIL

Vol 15, PW 9 (03 Nov 11) Midstream & Downstream

Mukesh Ambani-controlled Reliance is talking to GAIL about laying a pipeline to evacuate future gas supplies from its 495-sq km Sohagpur East and 500-sq km Sohagpur West CBM blocks in Madhya Pradesh.

PETROWATCH learns GAIL and Reliance met in October to discuss the Sohagpur pipeline and might meet again this month (November). “Reliance hasn’t finalised the length, diameter or capacity of the (proposed) pipeline,” says a source.

“It’s still at the conceptual stage.” Reliance, he adds, is confident about beginning commercial production of up to 3.5m cm/d of CBM from both Sohagpur blocks by the end of 2013, sustainable over a 12-year period.

Under the development plan approved by the DGH in 2007, Reliance was meant to begin first commercial gas production from Sohagpur by 2009 but this was delayed. Reliance now ambitiously wants to drill nearly 240 production wells at both blocks over five years.

Understandably, GAIL is wary about marketing CBM from the blocks until Reliance has drilled enough wells to meet its production targets. “Only if the DGH certifies that Reliance’s production is sustainable will we sign agreements with gas customers and connect them with pipelines,” adds GAIL.

When contacted, a senior Reliance source confirms the talks with GAIL about marketing and evacuating Sohagpur CBM. But he adds Reliance is concerned about the government’s proposed CBM ‘utilisation and pricing’ policy, finalised by the oil ministry this July but as yet not approved by India’s cabinet.

“We want to carry out a ‘price discovery’ exercise to fix a CBM price,” says Reliance. “But the government’s CBM policy doesn’t allow this.

” Under the new policy, CBM operators producing over 500,000 cm/d must sell it to a government-prepared list of customers.