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Coal Mine Methane (CMM): Exploring Commercial Tapping, Shri Dilip Kumar Jena Consultant and Knowledge Manager, Mining, PricewaterhouseCoopers (PwC)

Growing Global Energy Demand

Energy is one of the key inputs for economic development. World energy consumption has increased at a CAGR of 2.1 percent in the past decade with the expected consumption of more than 128 Quadrillion kilocalories in the year 2010. Due to global economic recession, there was a decline in consumption in 2009, but as the world economy is recovering, the consumption level is expected to increase in the future. World energy demand is predominantly met by oil but over the last decade oil's share is on a decline.

Global Energy Outlook

Source: International Energy Outlook

Presently, the conventional sources contribute around 86 percent of the global energy mix and are expected to reduce to 83 percent in 2030. The contribution from renewable is expected to increase to 11 percent from the existing 8 percent.

It is also important for developing countries, like India and China, to utilize their conventional sources of energy judiciously in order to ensure sustainable development with due regards to environmental pollution. In such situations, investments in less explored energy sources like, in-situ gasification of deep seated coal seams, extraction of Coal Bed Methane and CMM may prove to be useful. These sources of energy are clean and may help in reducing GHG emissions.

Energy Hungry India

India is facing many challenges in meeting its energy needs, and needs to ensure sustainable development of the existing resources. To meet the human development goals and eradication of poverty in the next 25 years, India needs to sustain 8 percent to 10 percent economic growth rate. It also needs to increase its primary energy supplies by three to four times and its energy generation and supply capacity by five to six times.

Total installed capacity for power generation including all the captive power plants is around 1,64,000 MW and it must increase to 8,00,000 MW by the end of 2031-32, and to make it possible, India would require an increase in coal production capacity from the present level to over 2 billion tonnes/annum based on the domestic quality of coal.

India's energy is predominantly dependent on coal (accounting for more than 50 percent of the primary energy mix), followed by oil.

India's Primary Energy Mix in 2010

India's Estimated Primary Energy Mix in 2030

With domestic production not being able to keep pace with the increasing demand, coal demand-supply deficit in India has been consistently increasing. India's coal demand is presently about 550 million tonnes per annum, out of which 9-12 percent is imported. The Working Group for Coal and Lignite for formulation of XI Plan has assessed a coal demand of 713 million tonnes by the end of 2011-12, whereas the indigenous availability would be about 630 million tonnes per annum. Therefore, there is likely to be a gap of 83 million tonnes, which will be required to be met through imports. According to the CIL estimates, it will have a deficit of about 303 million tonnes by 2016-17 to meet its commitments.

In order to bridge the demand-supply gap, India cannot rely completely on imports. There is a need to increase the domestic productivity by the key coal suppliers by the use of improved and more efficient technologies.

The Integrated Energy Policy also emphasises on meeting the energy needs at least cost but through safe, clean, technically efficient, economically viable and environmentally sustainable manner. These requirements push the coal companies to invest in new safety technologies, clean coal technologies, innovative mining technologies and at the same time, be responsive to the needs of society and environment protection.

CMM utilization has multiple advantages namely, GHG emission reductions and increased coal recovery due to improved safety in mines (due to lesser methane concentration in mines). CMM is used in power generation, vehicle fuels and cooking gas. The high concentration gas may also be used for LPG production. CMM projects also have an additional revenue source through Certified Emission Reductions (CER) trade. Coal mining and CMM generation are related activities and the possible production technologies are discussed in the next section.

Coal Production and CMM

Presently, around 17 percent of coal production is from underground coal mines in India. Stripping ratio is a major determinant for choosing between opencast and underground mines in India. A significant proportion of Indian coal reserves are below the depth of 300 meters, which is generally observed to be the limit of opencast mining for coal. Beyond 300 meters underground mining may be feasible. It is essential to continuously ventilate the mine to keep the concentration level of inflammable gases low for safe working environment in underground mining. The ventilated air majorly consists of methane from the freshly exposed coal faces. CMM technology focuses on capturing and utilisation of methane from the underground mines for its commercial utilisation. Different ways of capturing CMM are:

  1. Mine Pillar Methane (MPM): In this method, methane is captured from the standing pillars of a developing or developed coal mine. Horizontal perforated pipes are drilled inside the coal pillars and a negative pressure is applied inside the pipe, which leads to the MPM to move towards the perforated pipe from where it is sucked to a storage tank placed at the surface.
  2. Ventilating Air Methane (VAM): Methane is captured at the mine exhausts. The exhaust air from the mine is first sent to methane trapping and collecting arrangement and then the rest of the air is discharged to the atmosphere. This method may be employed along with the MPM method.
  3. Abandoned Mine Methane (AMM): Methane is captured from the abandoned mines. Mines which are declared abandoned before mining/exhausting all the coal as per initial production plans due to high methane build-up or other reasons may be opened up scientifically for AMM. This method of capturing methane can either be started by installing an exhaust fan at shaft mouth or by drilling and installing suction pipes to the developed mine galleries.

Extraction Technology Concentration Usage Existing Projects
MPM - High concentration Methane > 80% LNG
  • LNG-Silesia's from Krupinski coal mine - Poland
  • Abandoned mine methane to liquefied natural gas assessment ("Zory" Coal Mine - Poland)
MPM and AAM - Medium concentration 30%-80% Methane Power Generation, Industrial boilers, generation, vehicle fuel, LNG
  • Oaky Creek Collieries (Australia) generates 13 MW of power
  • China plans to drain 5 billion m3 of CMM and utilise 60% by 2010
MPM and AAM - Low concentration 1< Methane < 30% Generally not used in power generation or transportation due to explosive range of methane, Can be used innovatively
  • Sihe mine project generating 120 MW from CMM using technology of GE, Caterpillar
VAM - Ventilation air methane Methane <1%
  • Plant generating 6 MW of electricity at a coal mine in Australia

CMM Potential in India

Coal mine methane in India is majorly concentrated in five coal fields:

Coalfield Area of the coalfield (sq. km) Gas content (m3/t) Coal reserves likely to be available for CMM (billion tonnes) Prognosticated CMM resource (BCM) Prognosticated CMM resource (BCM/ sq. km)
Raniganj 1550 5-7 8.2 40 0.026
Jharia 450 7-26 7.4 50 0.112
East Bokaro 237 10-22 3.0 30 0.126
West Bokaro 207 6-10 1.6 10 0.048
South Karanpura 194 5-10 3.7 20 0.103
Total 23.9 150

Source: CMPDIL - Methane to Markets initiative

Jharia and East Bokaro coalfields have comparatively high density reserves when compared to others. CMM potential in Jharia region has already been demonstrated by a pilot plant in Moonidih mines. Jharia coalfields have many developed and abandoned mines, which can be installed with CMM extraction and capture technologies. Indian CMM resources have a potential to support around 1000 megawatts[1] of power projects, apart from earning carbon credits.

Though, there is a huge potential for CMM utilization projects in India but there has been a little or almost no investments in such projects in India. This can be attributed to many factors, including lack of policy support and absence of fiscal incentives. China and other countries have been successful in developing CMM projects in recent past due to favourable policies for CMM. Some of these projects in China have helped them in increasing the productivity of underground and opencast mines, which lead to existing coal production of two billion tonnes per annum. India should also implement conducive policies for the development of CMM utilization projects in Jharkhand and West Bengal.

Present Policies for CMM development in India

The Constitution allocates the subject of mineral development and regulation to state governments (entry number 23, State list (List II) of Seventh Schedule) subject to the law of Parliament (entry number 54, Union List (list I) of Seventh Schedule). The role of Central Government is limited by the boundaries set by such law, which in this case is MMDR Act, 1957.

As mandated by MMDR 1957, the Central Government has framed rules for regulating mineral related issues in respect of all minerals, other than atomic minerals and minor minerals. The State Governments have framed the rules for minor minerals.

The power for framing rules and regulation for coal lies with central government. Ministry of Coal (MoC) is the administrative agency for coal sector development and regulation in India. Similarly, Ministry of Petroleum and Natural Gas (MoP&G) administers the development of oil and natural gas in India. In 1997, Government of India recognized Coal Bed Methane (CBM) as natural gas and formulated a CBM Policy for the commercial exploitation of CBM under the purview of MoP&G.

However, as per the Memorandum of Understanding (MoU) between MoP&G and MoC, recovery of CBM, including those from post mining operations in the existing coal mining areas, are to be under the purview of coal producing companies. Hence, CMM comes under the administrative control of MoC.

A MoU between the Govt. of India (Ministry of Coal) and the United States Environmental Protection Agency (USEPA) was signed on November 16, 2006 in Washington DC to establish CMM clearinghouse in India. The CMM clearing house is a non-profit, non-governmental organisation, established under the aegis of Methane to Markets (M2M) Partnership Program, with an aim to facilitate commercial development of CMM. The clearinghouse has been established on November 17, 2008 at Central Mine Planning & Design Institute Ltd. (CMPDI), Ranchi. The main activities of clearinghouse are:

  1. To study and develop solutions for overcoming barriers for project development and facilitate investment in coal mine methane extraction and utilization projects; and
  2. To develop partnerships with government agencies, commercial enterprises, and scientific and public organisations of India operating in the areas of environmental protection, coal mining and other energy industry segments.

Though, with the assistance of clearinghouse, India has successfully completed a demonstration project[2] but it has not been able to attract significant investments into the large scale commercial tapping of the CMM utilisation. China, Germany, Poland, USA and Australia are champions in CMM utilisation projects, with China being the leader. A comparative analysis between the Chinese and the Indian policies for CMM capture and utilisation are presented in the table below:

Activities China India
CMM Drainage/ Capture Coal mine methane must be drained first, prior to coal mining No such policy
Coal mines must implement CMM measurement and monitoring activities Though concentration of methane is measured but volume measurement is not done generally
Coal production activity is not allowed without a CMM drainage system CMM is generally not drained from pillars but Ventilated out.
Coal mine drainage systems with a gas concentration with 30% methane or higher are prohibited from emitting the methane No such policy on CMM Drainage system
CMM Distribution Price of gas that is not distributed via city pipeline networks can be determined freely through negotiations No such policy
Price of gas distributed via city pipeline networks and operations under government control should be determined according to its heating value No such policy
Power Generation Electricity generated by CBM/CMM power plants should be given priority by grid operators who should purchase surplus electricity at a subsidised price, as specified in the Trial Management Method for Electricity Prices and Sharing Expenses for Electricity Generated with Renewable Energy No such policy
CBM/CMM power plant owners are also exempted from market price competition and do not undertake any responsibilities for grid stability. No such policy

Apart from policy risks, there are other concerns for the development of CMM utilisation project. For CMM development, it is important to engage government coal companies as they are default owners of CMM in India. Various risks in CMM development are discussed hereof.

Risks in CMM development and Role of Coal Companies

The risks and roles of government companies in the development of CMM in India are presented in the table below:

Risks Possible Effects Possible Mitigation Measures Possible Assistance from Coal India Limited
Policy Risk Non-clear policies for CMM drainage and utilisation may result in decreased investment Government needs to frame policies for CMM capture and utilisation. Till the clear policy is devised, CIL may take initiative for attracting investments from private players.
Regulatory Approval Risks Delay in approvals may significantly affect the project commencement as well as project returns Single window clearance may be developed. CIL may take up approvals from MoEF and other authorities which could be maintained by the private players.
Geotechnical Risks Estimated resource may not be correct Resource estimation techniques shall be standardised. In case of wrong resource estimation, the investor shall be allowed to recover the loss or make alternate arrangement of Natural Gas for the plant. CIL may help in estimation of resources.
Technological Risks Related to CMM Capture and Utilisation CMM capture technology may not be available in the country Government may provide relaxation in duties for import of technology for CMM capture. Tax incentives should be provided for such projects. CIL may assist private player in getting clearances for import of the technology on a priority basis.
Business Structure Risks Loss of business Government may promote PPP for CMM capture and utilisation. CIL may enter into those business models with private player, which promote profitable investments.
Commodity Pricing Risks The tariff of generated electricity may be high due to the cost of fuel Government shall allow the coal mining companies to get CMM at low prices. CIL may supply CMM to private players at nominal prices.
Financial Closure Risks The finances for the project may not be raised easily Government shall allow the government owned banks to lend loans to private players at lower interest rates as a priority sector. CIL may also contribute to the equity of the CMM project.

Based on the risk appetite, a suitable risk sharing principle should be developed for CMM utilisation projects in India. The possible way forwards are discussed below:

Possible Risk Sharing Models for CMM Projects

Role of government companies is significant in CMM development. Government companies may contribute to CMM development by identifying suitable blocks for private participation. In initial stages they can provide land, water and electricity to the private companies. If CMM project turns to be a successful project then government companies would have the benefits like lesser emission, increased safety in mines, electricity or gas from CMM utilisation project, Carbon Credits and access to CMM technologies. Similarly, private companies would invest in commercial development of CMM projects.

Different business models may be arrived by production/revenue sharing principles where investment in capital and operation are being made by Private companies.

Parties Investments Revenues Regulatory Approvals
Capital Operation From Gas From Power
Private Player (PP)
Coal India Limited

A typical 5 MW Power project running on CMM would require following:

Parameters Values Contributing party
Capital Investments USD 7-8 Million ~ INR 35-40 Crore Private Player
Coal reserve requirement (assuming Gassy mines of second degree with gas emissions of 5 m3 per tonne of coal) 1.35 million tonnes per annum ~ 27-30 million tonnes of coal for 20 years Assuming 50% recovery of methane, the reserve size for 20 years would increase to 54-60 million tonnes of coal Coal India Limited

Conclusion

For meeting the growing energy needs of the country, it is important to increase the production of coal within India in a sustainable manner. The coal production can be augmented by draining methane through different CMM technologies. However, the success of CMM development in India depends on Government initiatives to bring in policy changes, including fiscal benefits for attracting private investments.

PPP-based development can be strongly supported to ensure faster development and better risk sharing. The suggested mechanisms can be explored to increase private participation in these projects.

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[1] On a conservative side, around 2.5 million cubic meters of CMM is required for generating 1 megawatt of power for a year. With same conversion ratio, with 50 percent of recovery in Jharia, East Bokaro and South Karnpura area, the methane could support plants for generating 1000 megawatt for 25 years.

[2] in Moonidih and Sudamdih mines of BCCL for CMM capture and utilisation, including power generation for 1 MW

(Author can be reached at dilipkumar.jena@in.pwc.com. The views and observations expressed in the above article represents the personal and independent views of the author and should not be construed as representative of the views of the firm)