Tata Power joins Arrow to attack Deep Industries

Vol 13, PW 13 (03 Dec 09) Exploration & Production
     

Tata Power has joined Arrow Energy and Great Eastern Energy in attacking Deep Industries, which controversially emerged best bidder in seven of 10 coal bed methane blocks offered in the CBM-IV licensing round.

PETROWATCH learns Tata Power vice president business development Rahul Shah wrote to oil secretary RS Pandey on November 4 urging the ministry to reconsider its â€کprovisional’ award of the Mannargudi, Satpura and Sohagpur CBM blocks to Deep. Shah’s letter is similar to one sent to joint secretary exploration DN Narasimha Raju by Great Eastern chief Prashant Modi on October 12.

“We have written a protest letter to the ministry,â€‌ confirms a source in Shah’s office. “Our letter is not against Deep.

It is against the Bid Evaluation Criteria followed by the government.â€‌ Shah listed three reasons why the provisional award to Deep should be revoked.

First, he believes an independent evaluation team should scrutinise whether Deep really can develop the Godavari and Singrauli CBM blocks it won in a previous round (CBM-III). Second, Shah alleges that the approximately $6.6m investment committed by Deep for its drilling programme is well below industry estimates, which put the cost of drilling at nearly $26.2m.

Shah says all other commitments by Deep should also be realistic and in line with industry estimates. Third, Shah notes that the 90% Production Linked Payment (PLP) that Deep offered to the government for gas production over 2m cm/d is impractical.

“It is reasonable to assume that any developer will not find it commercially viable to produce 2m cm/d CBM,â€‌ writes Shah, “and the only way out will be to produce less than 500,000 cm/d to 700,000 cm/d. This would result not only in a huge loss to the exchequer but also in the under-utilisation of the country’s natural resources.

â€‌ Shah concludes by urging that the DGH should stringently evaluate all bids and ensure that CBM blocks are awarded to â€کserious players’.