Fertiliser companies wait anxiously for first CBM

Vol 10, PW 7 (27 Jul 06) Midstream & Downstream

Most fertiliser companies in India would love to switch to Coal Bed Methane, driven by the conviction that it is cheaper than R-LNG and the expensive liquid fuels they are forced to use now.

But first commercial CBM supplies are unlikely to be available in India before January 2008, forcing fertiliser companies to use R-LNG till then. We expect Reliance and Great Eastern Energy to begin first commercial supplies of CBM by January 2008, an oil ministry official tells PETROWATCH.

We dont have anything in writing from them but they have told the DGH that they will start production in 2008. DGH officials confirm that first commercial CBM production could begin even earlier, by late next year in 2007.

Out of sixteen CBM blocks awarded till now, says a source. Five blocks have completed Phase-I exploration.

Out of those five, three blocks are in Phase-II: one with Great Eastern Energy and two with Reliance. Great Eastern and Reliance hope to complete Phase-II of their exploration programme by next year, paving the way for Phase-III and the drilling of development wells that will produce commercial supplies of CBM.

Soon Reliance and Great Eastern will start submitting their development plans. ONGC is also hopeful that commercial CBM production from its blocks at Jharia can also begin by January 2008.

State-owned KRIBHCO and IFFCO, two fertiliser majors, are enthusiastic about using CBM. We will be happy to buy gas from any source provided it is sold at a favourable price," says KRIBHCO.

"But we have not heard from any one, no one has approached us yet." By contrast IFFCO has in place a MoU with Reliance for the supply of CBM from its Sohagpur blocks in Madhya Pradesh to IFFCOs fertiliser plant at Phulpur in Uttar Pradesh. But confusion over the governments pipeline policy and lack of clarity over who will pay for the pipeline to transport the gas from Sohagpur to Phulpur has cast a shadow over the MoU.

IFFCO currently buys 2.7m cm/d R-LNG from GAIL. It costs us around $5 per mmbtu, reveals a source.

But its still cheaper than naphtha.

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