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New extension policy for coal bed methane contracts

NEW DELHI: The Central Government, in line with the policy of extension under the New Exploration Licensing Policy (NELP), has framed an extension policy for considering proposals seeking extension in exploration phases under Coal Bed Methane (CBM) contracts. An investment of Rs. 1,000 crore was expected during the XI Plan, according to Government estimates.

Official sources informed that this new policy for extension of exploration phases would apply to CBM contracts either pending with the Government or that could be received in future.

The extension in phases under CBM contracts in terms of these policy guidelines would be considered within the validity of the exploration period.

Sources said the broad objective of the extension policy was to maintain the integrity of the bidding process and the spirit of the contract to explore and produce CBM gas early; to grant reasonable extension of time so as to enable contractors to complete the Minimum Work Programme (MWP) or the additional exploration work programme; not to delay the execution of development plan or production or the life cycle of the entire project and payment of royalty, taxes and contractual payments.

Sources said the policy would also act as deterrent for seeking unnecessary extension or holding on acreage without doing any or little exploration activities or activity at slow pace.

The policy envisages a system of penalty by way of submission of bank guarantee and pre-estimated agreed liquidated damages in lieu of unfinished or additional work programme.

Sources said the Steering Committee or the Government could consider giving up to six months of extension on merit in terms of the provisions of the respective contracts.

The Union Government has till date signed 26 CBM blocks under three rounds of CBM held so far covering an area of 13,000 sq. km. Production of CBM is expected to be 2.6 billion cubic metre during XI Plan.

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