CBM potential new growth area in India for British Gas

Vol 11, PW 23 (03 Apr 08) Exploration & Production

Operators in India expect an enthusiastic response to the next CBM round – if and when it is announced – following a decision by British Gas to acquire a 20% stake in Queensland Gas Company (QGC), a leading Australian producer of coal seam gas.

“This would be a new area for British Gas in India,â€‌ we hear. “If BG shows interest others will follow, but only if the government radically alters the bidding process.

â€‌ On February 3, QGC announced that BG had acquired 20% of Australian CBM explorer QGC for $415m in cash with an option to acquire a further 10%. “QGC and BG Group have entered into an agreement to evaluate coal seam gas opportunities in India where BG already has established upstream and downstream business interests,â€‌ announced QGC in a statement.

“This provides QGC with a platform for significant medium to long-term growth.â€‌ Till date, BG has no CBM experience or assets but that will change with QGC.

“This year BG seriously began considering CBM in India as a business opportunity,â€‌ confirms a BG spokesman in Delhi. “But CBM is not an overnight business.

The market for CBM gas in India is very different to natural gas.â€‌ Any success in securing a CBM block would mean a significant diversion from BG’s core activity in India - restricted to retail gas marketing through its Gujarat Gas subsidiary and as joint operator of the Panna, Mukta and Tapti fields.

“In India the power sector is excluded as a market for CBM gas,â€‌ adds BG. “You can’t compete with coal in the areas of eastern India where CBM is produced.

Your market will be among cement, metallurgy, LPG fractionators and fertiliser factories.â€‌ Existing CBM operators in India are watching BG’s plans closely.

“We expect the next CBM round to be very competitive,â€‌ says one. “There will be more international players coming in.

But the attraction will disappear very fast if the government doesn’t change the bidding process to discourage wild bids on profit sharing.â€‌