12th – 13th November, 2013,

Ranchi (Jharkhand), India

Coal Bed Methane –

Monetization Challenges in India

International workshop on:

Development of coal based nonconventional energy resources in India

• Essar Group

• Essar CBM assets

• Raniganj CBM

• Raniganj CBM success Factors

• Essar CBM IV Blocks

• CBM Technology – Challenges

• Raniganj Well behaviour

• Production challenges

• CBM Monetization challenges – India

• Conclusion

Agenda

CBM:CBM Resources c. 13 TCF

Essar Group

Essar CBM expertise

Area: 1128 sq. km

Area: TL 557, IB 209

km2

Area: 339 sq. km

Area: 206 sq. kmArea: 500 sq. km

Mehsana CBM R&D

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� More than 10,000 sq. km of CBM acreage

� More than 13 TCF of resources/reserves

� Ideally placed on the learning curve of

CBM

� Showcase success in Raniganj E CBM

block where already more than 10,000

cu.m of gas is being produced and sold to

a few local customers

� More than 170 wells already drilled in

the Raniganj field and another 300 wells

are planned in the next 2 years

� A strong experienced multi-disciplinary

team of techno-commercial domain

� Technology tie ups with leading

companies including ones experienced in

CMM in US/China

Essar advantageEssar footprint

Raniganj CBM Success tracks

Field overview

Reserves/ Resources

� OGIP for the block is 4.3 Tcf .Recoverable reserve is

854 Bcf.

� Recent study in progress has shown a much higher

recoverable gas in the block.

Current status

� Exploration Phase I & II successfully completed.

Fairway is delineated for the block.

� The Block is in Development/Phase III since May’12.

� As on date, 174 wells have been drilled & 115

completed.

� 94 wells are flowing on a given day

� Presently block producing ~ 1,00000 SCMD.

Key milestones

� Approval of >600 wells exist for the block. Immediate

plan is to drill & complete 365 well and to reach

plateau production

� GGS -1 operational , GGS II & III under commissioning.

� Durgapur Industrial region is connected through Essar

pipeline network. Customers are tied-up and gas sales

commenced in Aug’10

Air Drilling Rig For CBM

PC Pumps running at test

wells

Separators installed at test

wells

CSR: Plantation at test well CSR: Plantation at test well

sitesite

Essar Gas sales customer end-

point at Graphite India Ltd.

Hydrofrac Unit

Completed GGS at site

Raniganj CBM Success tracks..pictorial

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Essar’s other four CBM Blocks

RAJMAHAL CBM

SOHAGPUR CBM

TALCHIR CBM IB VALLEY CBM

EOL = ESSAR OIL LTD.

IB Valley CBM

Talchir CBM

Status:

�All the blocks awaiting award

of the Petroleum Exploration

Licence (PEL) from respective

state governments

�Meanwhile Environmental

clearances being pursued

1. Coal Thickness

•Multiple Coal Sequence

2. Gas Content and Gas saturation

• Quite variable

3. Permeability

• Very critical & stress sensitive

4. Dewatering capability

• Isolation from pervasive aquifers

CBM Technology - Reservoir challenges

CBM – Land Availability Issues

• Unconventional resources require huge land access.

• The CBM IV blocks are also often in the vicinity of

national/reserve forests where several constraints are

there.

Raniganj CBM Block

Talcher CBM Block

Source: SPE 103514

CBM Technology - Well design issues

Minimizing Land Footprints by Pad Drilling

Evolving Development PhilosophyEvolving Development Philosophy

CBM Technology - Completion method

Open-hole (Barefoot)e.g. Powder River (USA)

Under-reamede.g. Powder River (USA)

Surat Basin (Australia)

Cavitatione.g. San Juan (USA)

Fracture Stimulatione.g. Raniganj Block (India)

Production behaviour of a CBM well

Well BWell A

Water level (m)

Daily Gas (m3/d)

Pump Running Hrs

RPM

Daily Water (m3)

V1

D1

Dewatering a CBM Well – Reservoir interferences

Water

Gas

Handling of Producing water/RO – Facility

Reverse Osmosis Equipment

High torque

Low torque

GG/DG issue

Problem Actions taken

High Torque

� Sand cleaning procedure standardized.

� Flush by unit – under mobilization.

� Motor under procurement (50HP and

above)

Low Torque/

No water flow at

surface

� One rig using Power Tong & 5 rigs will be

procuring power Tong within 2 months.

� NTT repair kits available by early Sept’13

GG/DG tripping

� Installing harmonic filter to reduce

harmonic distortion in progress.

� Gas taping modified is in progress.

Water Treatment /

disposal

� Increase RO water handling capacity from

700m3/day to 1400 m3/day.

� Replacement of HDPE liner of the pit.

NTT failure

Strator, sand, trajectory

Fuel contamination

Production challenges & remedial measures

Pump

CBM wells – comparative cost analysis

Marked difference observed in drilling and completion costs for vertical and horizontal wells

Source: RISC Analysis, Geof Barker, 5th annual CBM & Unconventional Gas June 2012

Worldwide CBM Well Costs

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India CBM – Monetization challenges

CBM Block-Geology & Geography:�Multiple seam scenario with different reservoir properties

�Only CBM I blocks have made good progress . In other block not much data generated so far.

�No gas evacuation infrastructure in place.

�Blocks often located in close proximity of existing built-ups, forests, etc. which makes operations very difficult.

Technical Expertise and Equipments:�Severe lack of CBM skilled manpower in the country.

�Lack of medium sized equipment's suitable for CBM (as compared to the bigger O&G counterparts)

�New and more appropriate technologies (Horizontal laterals, etc) are based all based out of India and

demands very high price. very high priced

Geopolitics:�Unconventional resources (CBM / Shale Gas) requires huge land resources (wells and surface facilities) and

land acquisition is a challenge.

�Many blocks are located in areas of militant activities jeopardizing operations.

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India CBM – Monetization challenges

Regulatory and Govt.:�Inordinate delays in obtaining of PEL and ML from respective state governments

�Delay in Environmental and Forest Clearances due to blocks.

�A single window approval process would be welcome.

�It has always been suggested to offer those blocks with a conditional pre-approved status.

�Speedy resolution of GoI of Abandoned Mine & Coal Mine Methane sector in mining leaseholds

�Final Policy on ‘Simultaneous Exploration of O&G and CBM in same vertical space’ still awaited .

Gas Pricing & Fiscal incentives:�Industry welcomes the long required decision by the GoI to implement a free gas price in the long run starting

with current slabbing up the price to USD 8.4/mmbtu.

�Faster process of gas price approval and freedom to market gas to operator instead of fixing industry sector

specific mandates.

�Provision of cost recovery also in case of CBM.

Additional potential from Mine Methane drainage

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Vertical Pre-Mining Wells

�Recovering high quality gas from the coal seam and the surrounding strata before mining operations

begin.

�Pre-mine drainage ensures that the recovered methane will not be contaminated with ventilation air

from mine working areas. 50 to over 70 percent methane

Gob Wells

�Gob wells are drilled from the surface to a point 10 to 50 feet above the target seam prior to mining.

�Initially, gob wells produce nearly pure methane.

� Essar has played a pioneering role in developing CBM in India and has a potential to

produce about 6-7 MMSCMD in the Damodar Valley coalfield alone.

� Its understanding of unconventional technology and its adequate implementation has

led to its success and its favorable economics.

� Thus CBM Monetization Challenge comprise application of best and adequate

technology and its availability. CBM plays, thus are highly capital intensive initially.

� GoI should allow simultaneous O&G and CBM from same block (e.g. Essar’s Mehsana

– Cambay block). Also fast decision on Mine Methane drainage would also securitize

the Energy security.

� Similarly Shale Gas policy is long awaited from the GoI.

Conclusion