Union Cabinet approves Policy for Early Monetization of Coal Bed Methane Gas Marketing

The Cabinet Committee on Economic Affairs, presided by Prime Minister Narendra Modi, on 15 March 2017 gave green signal to marketing and pricing freedom to the Coal Bed Methane (CBM) Contractors to sell the CBM at Arm's Length Price in the domestic market.

As per the policy, the Contractor, while discovering the market price for Arms Length Sales, has to ensure a fully transparent and competitive process for sale of CBM. While doing so, the Contractor must also take care of the fact that the best possible price is realized for the gas without any restrictive commercial practices.

Key highlights

• As per the policy, CBM contractors have been permitted to sell the CBM to its any affiliate, in the event contractor cannot identify any buyer.

• Royalty and other dues to the Government shall be payable on the basis of Petroleum Planning & Analysis Cell (PPAC) notified prices or selling prices, whichever is higher.

• The policy is expected to incentivize the CBM operation in India to boost gas production.

• The policy also aims at generating economic activities, which in turn will be beneficial for creating more employment opportunities in CBM operations and related activities.

What is Coal Bed Methane?

• Coal Bed Methane is a form of natural gas extracted from coal beds.

• It is an important source of energy in United States, Canada, Australia, and other countries.

• The term CBD refers to methane adsorbed into the solid matrix of the coal.

• CBD is distinct from typical sandstone or other conventional gas reservoir, as the methane is stored within the coal by a process called adsorption.

• It contains very little heavier hydrocarbons such as propane or butane, and no natural-gas condensate.