1. Introduction Oil & Natural Gas Corporation Ltd. "ONGC" or "corporation" proposes to develop b sq. km.

of Parbatpur area in Jharia coal field in Jharkhand for commercial production of Coal Bed Methane (CBM). Coal Bed Methane is essentially methane gas trapped in coal reserves due to the pressure of overlying rock formations and organic debris. To release the gas, the pressure has to be reduced. This is done by dewatering the coal beds. Initially, the CBM wells - produce only water. Subsequently, water production declines and the gas production rises. Coal Bed Methane is being commercially exploited and used around the world for the last one and a half decades. The leading country in its commercial exploitation is USA having estimated CBM reserves of 750 trillion cu. ff. The present CBM production is over 1200 billion cu. ff. per year. Australia and China are also producing CBM in commercial quantities. India is estimated to have CBM reserves of 30 trillion cu. ft. ONGC has been working in Jharia coal field since 1992 for CBM exploration. The first breakthrough came in 1997 when ONGC was successful in flowing CBM from one of the R&D wells. The Jharia block was awarded to ONGC-CIL consortium on a nomination basis by the Government in 2002. The CBM reserves in the area are estimated at 8 BCM (0.28 trillion cu. ff.). The company proposes to drill 14 wells from 6 pads for the commercial production of CBM. Based on a recovery factor of 49.1%, it is assumed that the wells would produce 3.93 BCM of gas during the lifetime of the project. The company proposes to use Horizontal Multilateral In-seam Drilling technology, which is known to improve the recovery of the gas manifolds. The project cost is estimated at Rs. 528 crores to be funded completely by internal accruals. The financial analysis establishes that the project is commercially viable with an IRR of 12.35%. The IRR is likely to go up with the improvement in recovery factor and benefits derived out of carbon credits. As methane is a Greenhouse Gas, the production of the gas for commercial consumption will make the project eligible for carbon credits. The total CBM gas produced by ONGC would be sold to Steel Authority of India (SAIL) for use in their Bokaro plant. The project cost includes the cost of setting up pipeline network and compressor for transportation of CBM gas to the premises of SAIL. The Coal Bed Methane extraction project by ONGC is the first of its kind in the country. The success of the project may inspire more projects for commercial exploitation of CBM in the country. 2. COAL BED METHANE - AN INTRODUCTION Coal is the most abundant nonrenewable energy source in the world, Coal beds are a major source of an odorless, colorless natural gas called methane. Methane build-up in coal mines has caused many mine explosions, killing thousands of miners worldwide. However, recent technology developed in the US has allowed the gas to be tapped and sold in commercial quantities. Coal. is a carbon-rich material that has been formed by the chemical and thermal alteration of organic debris. During this process called coalification, a series of by-products are generated, including water and methane. The amount of methane produced during coaliflcation generally exceeds the capacity of coal to hold the gas. On an average, about 140 m3 of methane is generated per ton of coal. The excess

gas migrates into the surrounding rock strata and into the traditional sand reservoirs that may overlie 1he, more deeply buried coals. The amount of methane in a coal bed depends on the age, moisture content, quality and depth of the coal deposit. In general, the higher the energy value of the coal and the deeper the coal bed beneath the surface, resulting in more pressure from overlying rock formations, the more methane the deposit holds. Coal stores six to seven times more gas than the equivalent rock volume of a conventional gas reservoir. The knowledge of methane occurring with coal beds is as old as the mining itself. However, being highly explosive, it is treated more as a hazard than a resource. High capacity fans are used to dilute the gas during mining and the mixture is released into the atmosphere. Thus, the resource is not only lost, being a greenhouse gas, it contributes to the global warming. Coal mining is reported to be contributing about 9% of the total methane emissions. 2.1 Estimation of Coal Bed Methane The estimation of availability of CBM is a complex, time-consuming, and capital-intensive process. For example, the number of drill holes needed for exploring CBM is 10 items more than that needed for natural gas. The time and cost involved in pumping out the associated water from CBM drill holes are also high. The quantum of gas is dependent on many parameters and some of them are highly variable. The estimation of CBM reserves is based upon gas content (mainly methane) of the coal seam, which is generated and stored in adsorbed state during coalification process, The reserves, apart from gas content, also depend upon the thickness and aerial extent of the coal formation (i.e. coal volume) and its density. Like conventional reservoirs, in place CBM reserves can be estimated by volumetric method, but with a different formula, which is as follows. Gas in Place (GIP) = A'h'p'Gc Where A = aerial extent of coal formation H = average thickness of coal formation Gc = average Gas content, and p = Density of coal 2.2 Extraction of Coal Bed Methane Methane locked in coal beds is usually not as expensive to develop as natural gas found in other geologic formations b6cause modified water well drilling rigs can be used in place of specialized oil and gas drilling rigs. Wells are cased with pipe and cemented. Cased wells tend to deter, though not always prevent, gas from seeping into nearby rock beds and underground water formations called aquifers. Fractures that run through coal beds are usually filled with water. The deeper the coal bed, the less water is present, but the more saline (or salty) it becomes. Water pressure holds methane in the coal bed. To release the gas, its partial pressure is reduced by removing water from the coal beds. Once the pressure is lowered, the gas and water move through the coal bed and up the wells. At first, coalbed methane wells produce mostly water, but over time, the am-punt of water declines and gas production rises as the bed is dewatered. Water removal may continue for several years. The water is usually discharged on the surface or injected into aquifers. Drill rigs are brought to well sites by trucks, and access roads must be constructed. Electric or gas "powered motors are used

to power the pumps and compressor stations. Pipelines are also built to gather the gas from each well and transport it to customers in distant markets. Coal Bed Methane can be extracted from coal beds in several ways, Conventional Drilling A well is drilled as shown in the picture. Fluid is forced down through the well to fracture the coal, which releases methane gas. As the well is vertically drilled in the coal seam, lesser area is exposed to and therefore, the recovery of methane gas is lower. Horizontal Drilling In case of horizontal drilling, the motor behind the drill is twisted to drill horizontally into a coal seam, which is fractured to produce methane. The advantage is that the well is drilled within the seam and therefore the recovery of methane is many times better compared to conventional drilling. When drilling is done in such a manner that there is one main lateral (well) and a number of sub laterals (like main vein and side veins on a leaf), then it is called multilateral horizontal drilling. Due to this type of drilling, much larger surface area of the coal is exposed, which results into rapid de-pressurization by faster de- watering and hence rapid and high gas production, 2.3 Advantages of Coal Bed Methane The extraction of Coal Bed Methane offers many advantages. a) Cheaper Fuel The cost comparison among different types of fuels viz. coal, tar, furnace oil and coal gas being used in the nearby industries indicates that the CBM can be marketed at a cheaper price than furnace oil and gas. If compared only on the basis of calorific value, CBM may be higher in cost than coal. However, if the cost of disposal and handling of huge solid waste generated in case of coal based industries and other environmental aspects are considered, CBM will be a cheaper option. b) Reduction in Green House Effect The gas produced during the mining is released into the atmosphere after diluting it, which leads to green house effect. It is estimated that methane so released contributes to about 9% of global warming. In case of CBM extraction, the gas is captured for commercial use before the mining of the coal begins, therefore, the emission of gas during mining is reduced. c) Improving the mine safety by degassing the mines The extraction of CBM prior to mining will improve the mine safety as methane gas has caused a number of accidents in mines in past. Apart from above, the government will be benefiting by promoting extraction of CBM as it will open a new revenue stream in the form of Royalty Payments, Production Linked Payments, taxes

etc. The development of a new energy resource can -help speeding up economic activities leading to better economic growth of the country, particularly as our domestic energy options are limited. 2.4 Coal Bed Methane Potential - Worldwide Interest Coal Bed Methane (CBM), a source of clean energy, is being commercially exploited and used around the World for the last one and a half decades. The leading country in its commercial exploitation is U.S.A., having total proved coal reserves of 246 billion tonnes (1998) and an estimated CBM reserve of 750 Trillion cu-.ft. CBM development was started in U.S.A. in early 80s when production of CBM was 10 billion cu: ft. (1984) and by 1990 the production had reached a level of 194 billion cu.ft. Subsequent to the enactment of CBM legislation by some states, the CBM development got further accelerated and by 1997 its production had reached a level of 1130 billion cu. ff. The present CBM production is over 1200 billion cu.ft. per year. Drilling is concentrated in two areas, Alabama's Black warrior, where the coal seams-'are particularly gas-rich; and New Mexico's San Juan basin, which is fled into the natural gas grid. Australia is likely to be the next producer of commercial quantities of methane. The pilot projects in Queensland and New South Wales are already well advanced. The drawback in such a huge but sparsely populated territory is finding a market for the gas. China, the world's largest coal producer, is sitting on more than 700 TCF of coal bed methane. The country already has a fairly widespread system of methane drainage and capture, to keep its gassy mines safe enough to work in. But though 60% of drained methane is utilized, most of it is too dilute to be used in anything other than local power plants or factory sites. Interest around the world is quickening, and world coal bed methane output is on the fast track. India is among the top ten countries in coal resources, having an estimated coal reserve of 160 million metric tons, with an estimated methane resource of 850 BCM (30 TCF). The Indian coal is mainly confined to the Permian Gondwana basins and the terfiaries. Tertiary coals are widespread in Assam, Meghalaya, Arunachal Pradesh, Tamil Nadu, Rajasthan and Gujarat. Tertiary coals are generally found to be lignitic to sub-bituminous in rank and are generally considered to be unsuitable for coalbed methane target, However, tertiary coals in petroliferous basins of Cambay, Upper Assam and Assam Arakan may be prospective due to reported higher gas content, which is probably stored in the coal after generation from deeper-lying hydrocarbon source beds or may be of biogenic origin. Methane emission studies from working mines of India reported most of the degree three gassy mines (> 10 cubic m/ton), are confined in the four Damodar Valley coal fields, viz. Raniganj, Jharia, Bokaro and North Karanpura in 3ihar and West Bengal. In these areas, the thickest bituminous coals are extensively developed in the Barakar measures and in Raniganj measures of Lower and Upper Permian age, respectively, The Barakar coal seams are superior to Raniganj coal seams as coalbed methane targets. 3. HARNESSING THE CBM POTENTIAL - INDIAN SCENARIO Coal Bed Methane is environment friendly clean fuel with properties similar to Natural Gas. The commercial production of CBM is proven technology an& CBM is now considered as a major source of gas supplementing the production of hydrocarbon gas from petroleum sources. USA is the leader in CBM production in the world. The total CBM production of USA (135 MMSCMD) is almost twice the total Natural Gas production of India. The successful commercial recovery of CBM in USA has been followed up by several major coal producing countries including Australia, Canada, People Republic of China and India.

India is endowed with rich deposits of coal and lignite in different sedimentary basins of varying dimensions. The bulk of the coal resources of around 250 billion tonnes is contained in older basins. Large lignite deposits also occur in younger basins of Gujarat, Rajasthan (Western India) and Tamilnadu Southern India). These coal and lignite deposits contain varying amount of CBM depending upon the rank of coal, depth of burial and geo- tectonic settings of the basins. The CBM resources as per Directorate General of Hydrocarbon (DGH), Ministry of Petroleum & Natural Gas (MOP&NG) are tabulated here under: S.No.State Coalfield/Block Area of delineated block (Sq. KM) Prognosticated CBM Resource as per DGH In trillion In billion cubic cubic feet meter 1.030 29.17 1.850 52.38 1.000 3.88 2.407 1.590 2.181 6.178 3.030 28.82 10.87 68.16 45.02 61.75 174.93 85.79

1.

West Bengal a. North Ranigang 232 b. Easgtern 500 Raniganj c. Birbhum 250 Sub Total 982 a. Jharia 69.20 b. East & West 93.37 Bokaro c. North Karanpura 340.54 503.11 a. Sohagpur b. Sohagpur c. Satpura Sub Total 495 500 500 1495 2400-3218 2980.11 3798.11 Jharkhand

2.

Sub Total 3. Madhya Pradesh

1.000 4.030 11 to 19.4 25.088 33.488

28.32 114.11 317 to 549.39 710.39-948.73

4.

Gujarat a. Cambay Basin Grand Total

3.1 The CBM Policy In 1997, GoI recognized CBM as natural gas and formulated a CBM Policy for the commercial exploitation of CBM. The CBM Policy provided attractive fiscal and contract term, which were formulated following a process of consultation and were based on prevailing international fiscal regimes. The main features of the CBM Policy are as under:

a. Blocks would be awarded through open international competitive bidding. b. Contractors would be required to pay license/lease fee and charges including surface c.
rentals, land acquisition charges etc. as per P&NG rules or as required under any other provisions. The contractor shall pay fixed ad valorem royalty and biddable Production Level Payments (PLP) on a sliding scale based on the monthly average of dagy production with increased RLP being payable on incremental production with base rate of 1096. Thus, while no PLP would be payable on an average natural gas production of upto 1 Million

Standard Cubic Metre Per Day (MMSCMD), thereafter PLP would be biddable on every incremental production of 0.5 MMSCMD. d. Contractor and sub-contractors will be exempted from payment of customs duty on import of goods and materials required for exploration and exploitation of CBM. e. Contractor will be required to pay a commercial discovery bonus of US $ 0.3 million or its equivalent amount in Indian Rupees on the declaration of commercial discovery. f. The contractor would be required to pay corporate income tax as per the Income Tax Act. g. Seven year tax holiday from the date of commencement of commercial production. h. Contractor will be provided flscdl stability during the entire period of contracts. i. The contract will be subject to the laws of India. j. Arbitration shall be governed as per the Indian Arbitration and Conciliation Act, 1996. k. A model contract will be prepared and made available to the companies. l. The contract duration will be divided into four phases as follows: Phase - I : 3 years and will be for exploration Phase - II : 5 years pilot assessment for commercially Phase -III : 5 years development phase. Phase - IV : 25 years production phase m) The companies will have a walk-out option at the end of Phase-I and Phase-II. After the approval of CBM policy and signing of the MOU between Ministry of Petroleum & Natural Gas and Ministry of Coal, steps were taken to implement the CBM policy with a view to offering CBM blocks for exploration and production. 3.2 Government Initiatives DGH carved out several potential CBM blocks after giving due consideration for future coal mining programme by closely interacting with the Ministry of Coal and coal mining agencies. In May 2001, Government of India has awarded 16 CBM blocks for exploration and production of Coal Bed Methane in different coal fields of India through competitive bidding process. During the last three years, more than 50 Boreholes, 15 Test Wells and 3 Pilot Wells have been drilled in the awarded blocks. The commercial production of CBM from few of these awarded blocks may start by 2006-07. These blocks may yield a peak production of about 23 MMSCMD of CBM in the country. Total CBM resources in the 16 awarded blocks are estimated to be 820 BCM and the expected total production from these blocks is estimated around 23 MMSCMD. 3.3 Industry Analysis - Natural Gas Natural Gas currently accounts for 9% of the commercial energy consumption in the country. The total proven reserves of natural gas in India at the end of 2003-04 was about 923 billion cubic metres (BCM) in comparison to 854 BCM at the end of 2002-03. Most domestic natural gas reserves are concentrated in the offshore gas fields at Mumbai High. Offshore gas reserves are also located.'-in Gujarat, Andhra Pradesh (Krishna-Godavari basin), Tamil Nadu (Cauvery basin) and Rajasthan. Onshore reserves are located in Gujarat ind the north-eastern states of Assam, Nagaland, Arunachal Pradesh and Tripura.

The total gas production in India was about 31,962 MCM in 2003-04 compared with 3,851 MCM in 1981- 82. At this production level, India's reserves are likely to last for around 26-27 years; that is significantly longer than the 22-23 years estimated for oil reserves. The entire natural gas production is consumed internally. However, increasing demand mainly from the power sector and fertilizer sector made imports necessary. LNG imports to India began from 2004. It imported 1.8 mtpa (if LNG in 2004. Currently, the total LNG re- gasification capacity of India is 7.5 mtpa. Proposed plans to increase this capacity to 25 mtpa are in the initial stages. The existing 5 mtpa Dahej terminal of Petronet in Gujarat has a long- term LNG supply contract with Qatar's Rasgas. Shell, on the other hand, is buying Spot LNG cargo to feed its 2.5 mtpa terminal of Hazira, Gujarat. Currently, India is in negofiations with Iran (Iran-Pakistan-India) for gas imports through pipelines. It is also exploring the possibility to source gas from Turkmenistan by extending the planned Turkmenistan-Afghanistan-Pakistan) pipeline to its borders. As per the current projections, the gap between demand and supply is expected to increase in the years to come with the sustained growth in economy and in spite of greater emphasis on development of natural gas. Natural gas: Demand supply forecast (mmscmd) 200304 E Demand 93.64 Supply 84.66 Surplus/(deficit)-8.98 200405 E 99.54 93.74 -5.80 2005-06 2006-07 2007-08 2008-09 2009-10 P P P P P Base case 119.80 135.64 143.52 155.86 184.55 104.16 110.43 120.16 135.22 169.23 -15.64 -25.21 -23.36 -20.63 -15.32 2009-10 P Optimistic 193.93 169.23 -24.70

In the context of widening demand-supply gap in natural gas, CBM, a new source of energy in the country, is expected to contribute significantly to the domestic supply. It is estimated that the blocks awarded by GoI would be producing CBM commercially by 2007 yielding 23 MMSCMD of gas production and bridge the gap partially as shown in the following graph. 3.4 Pricing of Natural Gas In India, the price of natural gas has been regulated for a very long time and has remained at low levels, competing favorably with almost all fuels in all the consuming sectors of power; fertilizer and petrochemicals. The prices of domestic natural gas were fixed as' per the recommendations of the Shankar Committee and have remained frozen at Rs 2,850 per tcm (around $1.6 per MMBTU) for over 4 years. The delivered price of this translates to around $2.7 per million British thermal units (MMBTU). The joint venture (JV) gas (from fields like Panna Mukta and Tapti) was also sold at the same levels and the difference between the producer price and the APM (administered price mechanism) price was borne by Oil and Natural Gas Corporation (ONGC). Although the price of APM gas was at IRS 2,850 per tcm, the delivered price of domestic gas sold by private players such as Niko and GSPC was at the much higher level of $4 per MMBTU. The R-WG delivered price of $4.5 per MMBTU is serving as a cap in most cases. The methods of price fixation have also been different. The APM gas and gas from Panna Mukta and Tapti (PMT) are indexed to a basket of fuel oils. On the other hand, GSPC sells gas indexed to a fixed price, while the gas sold by Niko is linked to crude oil prices. Hence, customers of natural gas have been paying varied prices.

Under CBM policy, Govt. of India has recognized CBM as natural gas and has accorded the producer "Freedom to market gas in domestic market at market determined prices". Since CBM in India does not fall under the purview of APM, the CBM pricing vis-a-vis natural gas in other countries may be used as benchmark, USA is the biggest market for CBM where CBM is approx. 9% of the total gas production. The CBM produced from San Juan Basin, the most prolific producer accounting for almost 86% of total US production, is directly fed into the natural gas pipeline grid for transportation. The operator company can do the feeding of CBM into the national gas grid if certain specifications in terms of composition of CBM are maintained. The pricing of CBM is on prorata basis for its Calorific value subject to the specifications being maintained. The average calorific value of CBM produced from Jharia coal field is 7800 Kcal per cu. m. An elementary comparative study between various fuels being used in the nearby industries and CBM gas has indicated a minimum rate of Rs. 4086 per' 1000 SCM or US$ 3 per MMBTU. As CBM would be compressed and delivered at customer premises, the pricing can be based on the price of CNG as fixed by the government in case of Panna Mukti Tapti tussle. The Panna Mukta Tapti field, which supplies around 10.8 MMSCMD of gas was selling at $3.11 per MMBTU, while the customer price was pegged at APM levels. The production-sharing contract (PSC) allowed for a revision in prices from April 2005. After long deliberations among all the parties involved, the government mandated that around 4.8 MMSCMD of gas would be directly sold by the PMT consortium (i.e., ONGC, RIL and BG India), while the remaining 5.5-6.0 MMSCMD would be available for sale via GAIL to the existing customers along the HBJ network for the current year. These quantities have been reserved for power and fertilizer sector players, who showed reluctance to accept the increase in prices. Meanwhile, the government increased the producer price of gas to $3.86 per MMBTU at the level of LNG prices. This move was again contested and, subsequently, the users agreed to pay the incremental 75 cents per MMBTU. The matter, however, has still not been resolved, with NTPC refusing to offtake gas, resulting in reduced production at the fields. The RIL-NTPC deal may also be considered where a price US$ 2.97 per MMBTU was agreed but lately, RIL has sought a change in terms and conditions of the contract. Since, there isn't much clarity on the price determination of CBM, the price fixed by the 'Government i.e. US$ 3.86 per MMBTU has been assumed as the minimum price, ONGC would be able to command in the market. 3.5 Distribution of CBM The development of pipeline infrastructure has been quite limited in the last few years, the only exception being the Dahej-Vijaipur Pipeline (DVPL), which commenced operations in April 2004. At present, the country has a total pipeline infrastructure of around 7,500 km, supplying around 70 MMSCMD of gas (excluding internal consumption). Gas Authority of India Ltd. GAIL/ currently owns and operates around 80% of the onshore pipeline network with ONGC following at 13.5%. Company-wise pipeline ownership (km) OnshoreOffshoreTotal GAIL 5.340 0 5.340 ONGC929 67.1 1.600 OIL 213 0 213 GSPC 360 0 360

Others2 Total 6,844

0 671

2 7.515

The development of pipeline network is key focus area in the years to come. ONGC would be setting up a pipeline for supply of CBM to its prospective customers. As the company already has strengths in Pipeline construction and operations, setting up of pipeline infrastructure for marketing CBM gas may not pose any problems for ONGC. 4. THE CBM PROJECT - AN ONGC INITIATIVE 4.1 The Project Oil and Natural Gas Corporation (ONGC) proposes to develop b square km. central part of Parbatpur area in Jharia Block through 14 horizontal in-seam multi-lateral wells, to be drilled from 6 pads, for commercial production of Coal Bed Methane (CBM). Once drilled and put on production, these 14 wells are to produce CBM at a peak rate of 0.784 MMSCMD for a period of 3 years and then decline @ 5% per annum. Cumulative gas production during 20 years shall be 3.93 BCM, recovery factor being 49.1 %. The above 14 wells include 2 wells to be completed in Lower Barakar coal seams having very low permeability values. However, once encouraging results are obtained from these two wells due to application of horizontal in-seam multilateral technology, 6 more wells; 5 in Lower Barakar coal seams and 1 in Middle Barakar coal seams shall be drilled in the same area, improving the recovery factor substantially. The Site Jharia CBM Block is located within Jharia coalfield, about 25 km. east of Bokaro Steel city. Total area of Jharia block is 84.5 sq. km. Out of it area of Parbatpur area is approx. 18 sq. km. and the area under present early pilot scheme is 6 sq. km. in central Parbatpur. The Jharia Coalfield which is located about 300 km. north- west of Kolkata, lies mainly in the Districts of Dhanbad and Bokaro with a small north-western portion of it falling in Giridih District in the State of Jharkhand. The Jharia QM Block (84.55 sq.km.) falls mainly within Bokaro District with a small eastern part falling in Dharibad District. The Parbatpur area, under present discussion forms the south-eastern part of Jharia coalfield and is located towards south of river Damodar in Bokaro district. This U/G Block (as per mining industries) covering an area of 18 sq. km. (Approximately) forms a part of Survey of India Toposheet No. 73 I/06 (RF 1:50,000). The area is located between Latitude - (N) 23o39'30' - 23o42'06' Longitude - (E) , 86o19'15" - 86o23'28" It is bounded on the north by Damodar river, on the south by boundary fault, leading to direct juxtaposition of Archaean Metamorphics with Lower Gondwana sediments, on the west by Aluara (Aluara U/G block as per mining industry) area on the east and partly by Amlabad area and partly by Mahal area (Mahal U/G block as per mining industry). The area can be approached from Dhanbad, which is about 27 kms. north-east of it, via - Bhowrah by road. The area can also be approached by road via Chas located on NH 32. Talgaria railway Station on Bhojudih-Mohuda loop line in Adra-Gomoh section of South Eastern Railway falls within the said Parbatpur area. Shewababudih railway station on this loop line is also located nearby this area. The site was selected for the exploration of CBM on the basis of following.

a. The 6 sq. km. area around Parbatpur village has a high Borehole density. b. Depiction of geological model of this area with much higher confidence level is possible
due to good Borehole control. As most of the Boreholes have been drilled upto shallow depths (600m - 800m) by the mining industries for fulfilling their mining objectives, confidence level of construction of geological model for the Barakar Succession below that depth is much less and it is largely conceptual. d. The identified 6 sq. km. area of central part of Parbatpur ar6a covers the entire Parbatpur dome. Thus all the regionally correlatable good coal seams are expected to occur at shallower levels. e. Direct production testing data are available from 3 vertical Exploration wells of ONGC, which lead to identify this area as one of the most potential locales in terms of CBM prospectivity and production. f. Play of the regional and local normal faults can be envisaged with much higher confidence level due to availability of high density of Boreholes of mining industries at least up to 600m - 800m. Thus the uncertainties involved in prediction of geological set up due to pressure of faults are much less in this area up to 600m - 800m. However, geological uncertainties still remain for the lower portion of the Barakar succession. g. Presence of several normal faults in the central part of Parbatpur area is assumed to have given rise to better permeability development and in turn better producibility. h. Several interactions were made with different CBM operators, engaged in developing CBM fields in USA and Australia. They also are of the opinion that the central Parbatpur area holds such level of CBM prospectivity which can be considered for introducing a development scheme applying horizontal inseam drilling technique or similar technology. c. Background & Exploration History: ONGC, in pursuit of its CBM exploration activities has been working in-Jharia coalfield area since 1992. In 1997, ONGC made significant breakthrough by flowing out CBM from its first R&D well (JH# 1 ) in Parbatpur area (18 sq km) of Jharia Coalfield, first time in India. Taking the lead from this success, ONGC drilled three more R&D wells in Parbatpur area. These wells are under different stages of production testing and have so far yielded encouraging results, leading to further steps for exploration activities in this area. Nine Pilot wells were planned and released in this area. Apart from Parbatpur Sector, activities have also been undertaken in the adjoining areas of Parbatpur, where 6 Core holes/Boreholes have already been drilled by ONGC for acquiring CBM specific information to increase acreage of Exploration. Meanwhile, ONGC and Coal India Ltd. jointly identified 21.55 sq km area in the adjoining part of ONGC's activity for joint working. Govt. of India awarded an area of 84.55 sq. km. as Jharia CBM Block to ONGC-CIL Consortium on Nomination basis in January, 2002. As per Contract with Govt. of India, a Minimum Work Programme of drilling 8 Boreholes and 2 Exploratory wells besides 9 Pilot wells in Parbatpur during Exploration Phase in Jharia Block was committed to Govt. of India by ONGC-CIL Consortium. The PEL grant for the Block was received from Govt. of Jharkhand w.e.f. 28.08.2003. As per JOA with CIL Borehole drilling activities are the responsibilities of CIL, whereas drilling and testing of the Exploratory and Pilot wells are the responsibilities of ONGC. The status of wells / boreholes drilled in Jharia Block as on 1.10.2005 is as follows: : Total Exploratory Wells drilled in Parbatpur area = 4 Total Exploratory Wells drilled outside Parbapur Area = 0 (nil) Total boreholes drilled by ONGC outside Parbatpur area = 10

Estimation of In-place CBM: In-place CBM in the 6 sq. km. area have been estimated and are given below. The 8 BCM gas inplace CBM has been considered in the present Project for exploitation through initially 14 horizontal in-seam, multilateral wells in 6 sq. km. of central Pearbatpur area, and subsequently, if required, through additional 6 horizontal in- seam multilateral wells. Coal SeamResource (MMm3)Gas in place (MMm3) XV 1223.22 978.58 XIV A 864.78 691.83 XIV 673.48 538.79 XIII 873.21 698.57 XII 919.22 735.38 XI 827.62 662.10 IX 377.94 302.35 V-VII 1873.97 1499.98 III-IV 2359.12 1887.30 Total 774.88 (8 BCM Approx.)

Considering a recovery factor of 49%, about 3.93 BCM of gas would be produced during the lifetime of the project. Reservoir & Production Testing Data: A number of injection fall-off tests have been carried out for different coal seams in 4 exploratory wells drilled so far to estimate reservoir parameters, chiefly permeability and reservoir pressure. Also, different-objects, either individually or in commingled fashion, in these wells have been test flowed. The four Exploratory Wells viz. JH#l, JH#2, JH#3 and JH#4, which were drilled by ONGC in 1999, have been taken as key wells for estimating gas content and gas saturation characteristics of the Barakar coal seams of this area directly and to estimate the CBM resource of each object coal seam. Production testing and well and data of three of these wells have been considered to the estimate the Gas to be produced from the different coal seams. Gas Production data of CBM Wells, Jharia field Well Object tested Cum Gas produced, m3 (15.10.2005) 0907424 9211539 0272401

JH # 1 I, II JH # 2 I,II,III, IV, V, VI, VII, VIII JH # 4 I, II, III, IV, V, VI, VII, VIII, IX Fluid Characteristics:

Typical composition of CBM gas in Jharia Coal Field shows high methane content. S.No.Component 1 Methane 2 Ethane 3 Propane Percentage (%) 95-97 % 0.23-1.02% 0.00%

4 5

Carbon Di-Oxide2.26-4.02 % Nitrogen 0.03-1.23%

4.2 The Project Implementation The project would be implemented through Integrated Turnkey Contract including all the activities starting from civil work to regular production & creation of Surface facilities. The Project shall be spread over a period of 31 months from the date of award with a provision of 12 months period of maintenance of each of the wells. ONGC's role is limited to obtaining statutory clearances and land acquisition required for drill sites and installations. Technological Aspects Based on the interactions with global operators, it is found that the extraction of CBM resource from the coal beds using horizontal - multilateral drilling technology is becoming increasingly popular due to multifold increase in productivity and long term techno economic benefits. Different companies use different types of horizontal = drilling techniques, which are proprietary in nature. Out of these, few technologies are mentioned below about which some preliminary information have been gathered through interactions with few global CBM operators. a. Horizontal -lnseam - Multilateral Drilling technology. b. Z-Pinnet -Technology. c. Radial - Horizontal - Multilateral drilling technology. d. Dimaxian - Horizontal drilling technology. For all practical purposes and for formulation of development scheme in 6 sq. km. Parbatpur Central Block the "Horizontal = Inseam - Multilateral - Drilling technology has been considered and different technological inputs / requirements pertaining to this technique as are enumerated below have been incorporated while planning the Development well locations and Development Plan. Considerations for Drilling: Drilling of vertical well (12'/,") to a desired depth as per disposition of the top most coal seam.

a. Setting of surface casing (95/s") accordingly. b. Drilling of 8'/i' hole vertically down to Kick off Point (KOP). c. Drilling of 8'/2" deviated hole from KOP with building up of hole angle to 70 at a building
up rate of 10 per 30m. Once this required angle is achieved, it should be held constant and a tangent section is to be drilled through all and a sump of about 50 m. is also to be drilled below the deepest object coal seam. Setting of 7" casing up to desired depth. Cut window (6.125") in 7" casing against the bottom most object coal seam. After building up of the angle from 70 to about 90 (or little more as per requirement) drilling of horizontal drain hole along the object coal seam using under balanced drilling techniques with 6"bit.. Drilling of side laterals (multilaterals) from the main lateral (Drain hole). Maximum length of Main lateral (Drain hole) to be drilled - 1000m. Length of each side lateral - 400m. Distance between two consecutive side laterals - 250m.

d. e. f. g. h. i. j.

k. Drilling of two oppositely heading side laterals from the same point on the main lateral
(Drain hole). Accordingly drilling of b side laterals (2 x 3) from 3 points on the Main lateral has been envisaged. l. Average angle between the main lateral and each side lateral has been taken as 45o (Average). m. Each well will handle completion against three coal seam objects, which are 50 - 100m apart and are separated from each other by a non-coal parting. n. Up the dip -drilling of the Drain hole (Main lateral) portion has been considered as a preferred method. o. Incase of intersection of the main lateral with a normal fault, having more than 20m throw, possibility of further drilling along the fault plane to trace the same coal seam on the other side of the fault at a deeper depth has not been thought of. Accordingly, the well locations on each object seam/ pack of seams has been so designed that well course of each of the main lateral along with its 6 branches on either side are restricted within one fault sector/block. p. From each common point/site/pad possibility of drilling of maximum 3 wells have been considered. q. Considering all the above assumptions, the lateral (Drain hole) maximum cumulative meterage of horizontal main drilling in each coal seam has been worked out to range from 3400m - 1000m whereas maximum meterage of 6 horizontal side laterals has been worked out to be about 2400m. r. As each well will handle 3 object seams of one pack, the maximum cumulative horizontal coverage within. these 3 target coal seams have been estimated to be in the order of 10,200m. Considerations for Completion: a) Once drilling network (i.e. main lateral and side-laterals/branches) in each object seam is completed, the whip stock is retrieved fully and finally. b) Depending on the strength of the coal seam, provision of putting slotted/pre- perforated poly liner through the main lateral up to the desired depth and has been incorporated under the completion plan. c) It has been considered that after completion of drilling of three object seams under each pack, finally removing whip stock from the well and putting the slotted liner into the drain hole portion, an Electric Submersible Pump is to be installed with 3 '/2" production tubing within the sump portion below the bottom most object seam of the respective pack for faster de-watering and production testing. The Proposed Development Plan Considering all the technical requirements of the Horizontal - Inseam - Multilateral drilling technique, it has been observed that for full scale development of all the 9 object coal seams in the central part (6 sq. km.) of Parbatpur area, about 20 horizontal wells are required ,to be drilled. These 20 wells are distributed in such a manner that the, main laterals and the side laterals create maximum exposure of each object coal seam to the well bores leading to maximum extraction of in-place CBM resource from the said area. Pack-wise distribution of the indicated 20 Development Wells is summarized below:

a. For Upper Pack - 6 wells b. For Middle Pack - 7-wells

c. For Lower Pack- 7 wells

These 20 wells are to be drilled from 10 clusters /sites lpads. Out of these 10 pads, 4 pads (Pod B, Pad C, Pad D & Pad F) will contain 3 wells each, 2 pads (Pad A and Pad E) will contain 2 wells each and 4 pads (Pad G, Pad H, Pad I and Pad J) will contain 1 well each. Suitability of the Horizontal inseam multilateral drilling technology for extracting CBM from the poor permeability Indian Gondwana coal of Permfan, age is unknown. Moreover, permeability of the thick lower Barakar coal seams is found to be even poorer. In view of this, it is proposed under the current Development plan, which is to be giving on service contract, to initially take up drilling and completion jobs of only 14 wells out 'of 20 horizontal well locations identified, to test the applicability of the technology in the present geological setup, to practically experience its effectiveness in coals with low to very low permeability and to observe the magnitude of increase in deliverability. Once these factors are ascertained and in the case of obtaining favorable results from these wells, drilling and completion jobs of the remaining 6 wells may be taken up in future. Pack-wise distribution of the 14 Development Wells, proposed for initial drilling and completion activities under the current development plan is summarized below:

a. For Upper Pack - All 6 Wells, identified b. For Middle Pack - 6, out of 7 Wells identified. c. For Lower Pack - 2, out of 7 Wells identified.
These 14 wells will be drilled from 6 clusters/sites/pads, wherein 3 pads (Pad B, Pad C and Pad F will contain 3 wells each, 2 pads (Pad D and Pad E) will contain 2 wells each and 1 pad (Pad A) will contain 1 well. Production Forecasting Aspects In order to forecast production profile for the planned Development Wells, following factors have been considered and assumptions have been made Co-mingled production testing of five Middle Barakar object coal seams in the vertical Exploratory Well, JH#2 in Parbatpur area indicated a sustained production Q 6000m3/day for a period of about 1 '/2 years. Results of individual zone testing against two Lower Barakar object coal seams viz. III-IV composite seam & V- VII composite coal seam in the wells JH#2 8. JH#4 respectively indicated production @ 2000m3/day (approx). Production testing against seam XV in the well JH# 1 in Parbatpur area revealed approximate rate of production in the order of 1200m3/day. Combining the above observations and considering about 10 to 15 times hike in production performance by the use of horizontal in-seam multilateral drilling and completion techniques, production rate per day from the nine object coal seams, grouped under 3 packs, have been estimated. Preliminary assessment, based on the gas content data of the Exploratory Wells of ONGC, thickness of the coal seams and the density of the same indicated CBM in place of the order of 8 BCM. in the 6 sq.km. central part of Parbatpur area. While estimating CBM in-place, reduction of about 20% in the total resource of the central part has been conceived due to some geological uncertainties viz. heat effect on coal seams by

intrusives, omission of the seams by the normal faults, pinching of the seams, splitting of the seams etc. Measurement of permeability of the object coal seams by well tests in the 3 exploratory wells in Parbatpur area shows a trend of reduction in permeability with increase in depth as given below: Permeability of the seams-XV, XIV (A) 8, XIV which are clubbed under Upper Pack in the current scheme, range from 1.0 to 3.Omd. Permeability of the seams-XIII, XIV & XI, which are clubbed under Middle Pack in the current scheme, range from 0.5 to 1.0md. Permeability of the seams-IX, V-VII combined & 111-IV combined, which are ' clubbed under Lower Pack in the current scheme, range from 0.25 to even lesser.

Based on the above observations, a tentative allocation of permeability against the 9 object coal seams have been made as follows for the purpose of assessing deliverability of each seam: Seams under Upper pack - Average assumed Permeability 1.0md. Seams under Middle pack- Average assumed Permeability 1.0md. Seams under Lower pack - Average assumed Permeability 0.25md. Laboratory analysis revealed six middle Barakar coal seams, under upper and middle packs of the current development scheme, to have better type and quality than the lower Barakar seams, of lower pack. Gas content of the six seams under upper and middle packs range from 10 to 20cc/gm. with an average of 15cc/gm. and gas saturation range from 80 to 90%. Gas content of the three seams, under lower pack range from 6 to 15cc/grn with gas saturation up to 80%. It is assumed that the lesser gas content and poorer permeability of the seams, under lower pack, may be compensated to some extent by their huge thickness, which ultimately imparts betterment in terms of their kh values and thereby aid improving their production efficiencies.

Based on the above mentioned considerations, the co-mingled productivity per day from each Development Well, under current plan, are tentatively allocated as follows: Each well, which will be completed in the three coal seams viz. Seam XV, XIVA and XIV of the Upper pack is expected to deliver CBM gas @ 71,000 m3/per day. Each well, which will be completed in the three coal seams viz. seam XIII, XII and XI of the Middle pack is expected to deliver CBM gas @ 50,000 m3/per day. Each well, which will be completed in the three coal seams viz. Seam IX, V to VII and IIIIV composite seams of the Lower pack is expected to deliver CBM gas @ 29,000 M3/per day.

In accordance with the above mentioned per day per well production rate estimation, initial gas production rate from the proposed 14 Development wells is estimated to be in the order of 7,84,000 m3/per day. From preliminary tentative production projection analysis the following production pattern is anticipated. The above mentioned per day gas production rate from 14 wells will sustain for a period of initial 3 years. It has been assumed that after initial 3 years production from 14 wells, there will be a reduction in total production @ 5% per annum.

In this manner cumulative gas production from 14 Development wells in 20 years life cycle of the project has been estimated to be of the order of 3.93 BCM, which leads to estimated recovery factor of the order of 49.1 %.

Apart from the gas production projection, water production estimation has also been done as follows based on the present experience of water production of the existing Exploratory Wells of Parbatpur area. Initial rate of de-watering from each Development well has been assumed to be 50 M3/per day. Accordingly cumulative volume of water production from 14 Development wells is estimated to be 700m3/day.

Surface Facilities Considering the volume of per day gas and water production from 14 Development wells and based on the proposed locations of the sites / pads, pipeline network within the 6 sq. km. identified area has been tentatively planned. Necessity of installing one GCS of 1 MMms/ day handling capacity in the central part of the said 6 sq. km. area has been felt. Accordingly, initial requirements under surface facilities viz. installation of compatible compressors, ETP, Dehydration Unit etc. in connection with installation of the said GCS has been incorporated under the Development Scheme and cost implication therein has been considered while working out the techno-economics of the project. Implementation Schedule The execution of entire project is planned for 31 months including creation of surface facilities, but excluding 12 months of maintenance of the wells after putting on regular production. The schedule of project implementation shall be as follows: Date Activity 15.01.2006 Award & Commencement of Work 15.06.2007 Drilling & Completion of 5 wells. Completion of GCS & connecting of 5 wells to GCS after their production testing. Commercial production of gas from 5 wells @ 0.3 MM m3 per day. 15.08.2008 Drilling and completion of all 14 wells under the contract, their connecting to GCS for regular commercial production. Gas rate 0.784 MMm3 per day. 15.08.2009 Completion of the contract with completion of successful regular maintenance of 14th well 4.3 Status of the Project Activities The status of project activities is as follows.

a. Tender for Integrated Turnkey Contract is floated.

b. All 14 early pilot locations stand released after their firming up, staking and ground checking. c. Land acquisition work for different drill sites and GCS area Under progress.

d. Environment clearance in progress.

Status of Environment and other Statutory, clearances:

a. Guidelines of JSPCB and DGMS shall be strictly adhered to. b. All other statutory clearances from state govt, local bodies etc. will be obtained whenever
required for implementation of the scheme. 4.4 Marketing Arrangements ONGC team carried out a market survey in September 2005 to evaluate CBM requirements of prospective consumers and likely selling prices. The team visited the area around Bokaro steel city and Dhanbad to have a first hand exposure of energy requirement /market in the vicinity of Jharia area. Interaction was held with Bokaro Chamber of Commerce and nearby major industries in the area, such as Bokaro Steel Plant, Sindri Cement Plant of ACC and Bharat Refractoriness Ltd. Prior to Survey, letters seeking expression of Interest were sent to major consumers from different sections of user industries. Based on interest shown the following were called for discussions to understand their requirements, details of various energy sources used by them, a comparative cost to the consumers, gauge their interest and price affordability. The industries included SAIL, Bokaro Steel plant, Bokaro, Damodar Valley Corporation, Kolkata, Tata power, Jamshedpur, Hindqlco Industries, Chhotamuri, Ranchi Distt., Lafarge Cements, Jamshedpur, CC&L/ WBTIDCL (for CNG in Kolkata) and Greater Calcutta Gas supply Corporation Limited The CBM requirement in the nearby region of about 60-70 km radius including eastern parts such as Bokaro Steel city, Chhotamuri, Ranchi and western markets like Dhanbad, Sindri, Maithon etc is estimated over 4.5 MMSCMD. The following end-uses of CBM has been suggested. a) As Substitute of Existing Fuels in Use Some of the companies have expressed keen interest in switching over to CBM gas. They are as follows. SAIL- Bokaro Steel Plant uses coke as feedstock for its blast furnaces, which could be substituted by CBM. Considering the landed prices of imported coke, the fuel valuation for CBM is around $5.3 to $5.5/MMBTU on energy equivalent basis. As only about 69% of the coke is effectively utilized for blast furnaces, the effective imputed valuation of CBM works out to nearly $8/MMBTU. DVC Maithon is having it Gas Turbine station at Maithon in idle condition due to high costs of liquid fuel it was using earlier. The turbine at present can be operated in open cycle mode. The valuation for CBM is estimated to be $3.74 MMBTU in open cycle. The installation of combined cycle system will make the valuation of CBM even more attractive.

b) Sale as CNG in Kolkata for Mass transport The West Bengal government is interested in introducing CNG for public transport vehicles in Kolkata in a gradual manner. CC&L led consortium, authorized by West Bengal Transportation Infrastructure Development Corporation has desired the delivery of gas (about 6000 kg/day) by December 2005. Keeping in view the instructions of the Green Bench of the Kolkata High court, the demand would be gradually ramped up to the level of 3 lakh SCMD by March 2007. The total

estimated demand potential is about 1.0 MMSCMD for this sector. However, there is no concrete development on this front as of-now. c) Option of generating power from gas ONGC has also explored the avenue for generation of power from CBM to work out comparative analysis for different options in marketing of CBM. Power industry is gradually getting deregulated and any party is now allowed to generate power for commercial purpose. There is shortage of power in Jharkhand in general and it would be possible to market power in the region. Power Trading Corporation of India has offered a rate of Rs. 2.05/kwh in case ONGC decides to generate power from CBM. The imputed valuation for gas works out to $3.33/MMBTU for Combined Cycle Gas Turbine system. Considering the available options for the sale of CBM, it is ,unlikely that ONGC will face any problems with respect to the marketing of CBM. However, the financial projections have assumed the sale of entire production to SAIL as a scenario. This is due to the fact that SAIL has conveyed their readiness to purchase the entire projected production of 0.78 MMSCMD for their Bokaro plant. pipeline for delivery of the gas to the Bokaro plant of SAIL as a part of the project. 4.5 The Project Cost and Means of Finance The total project cost has been estimated at Rs. 528 crores including the Rs. 75 crores as cost of setting up pipeline network-for transportation of gas to the to be totally funded by equity or internal sources. The breakup of the project costs is given below. S. Details No 1 Drilling Costs for 14 wells 2 3 4 5 6 7 8 9 Mobilization Costs of Drilling Rigs Civil Work at Well Sites Approach Road and Culvets Civil Work at GCS Logging Operations Costs of Interpretation of Logs Well Completion Production Testing Amount (Rs. In Crores) 215.89 10.00 3.33 2.78 1.02 38.54 0.48 13.26 2.21 8.40 59.76 10.00 73.84 13.53 453.06 75.00 528.06

10 Maintenance Charges 11 Surface Creation Facilities 12 Setting Up of Office 13 Contingencies @ 20% 14 Escalation in Capex 6% TOTAL 15 Setting up of Pipeline Network for SAIL TOTAL

The details of the individual cost heads are given in Annexure- I. The year wise breakup of capex schedule is as follows.

Capex Schedule including contingenciesin Rs. Crores 2006-07 196.11 2007-08 300.11 2008-09 30.14 2009-10 1.70 Total 528.06 The cost of setting up of the pipeline network for transportation of gas to the SAIL's plant in Bokaro is considered in the year 2007-08 as the commercial production of the gas begins in that year. The year wise detailed breakup of Capex schedule is given in Annexure II. The total project cost is proposed to be met by internal accruals as ONGC has surplus cash funds. 5. FINANCIAL FEASIBILITY AND SENSITIVITY ANALYSIS 5.1 Financial Projections The financial projections have been made considering two scenarios. Scenario 1: Delivery at GCS Fence Under this scenario, the entire production is assumed to be sold at the GCS Fence at a price of US$ 3.86 per MMBTU or Rs. 54.95 lac per MMSCM. The price has been assumed on the basis of the price fixed by the Government in the case of Panna Mukti Tapti consortium. A brief profitability statement under this scenario is as follows. Year ending 31 Production Levels Annual Production (MMSCM) Revenue Royalty to State Govt. Production Linked Payment to GOl Net Revenues Less: Operating Expenses PBDIT Depreciation Interest PBT Provision for Tax PAT May-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 0 40% 100% 100% 100% 95% 90% 86% 81% 0.00 109.76 274.40 274.40 274.40 260.68 247.65 235.26 223.50 0.00 0.00 54.70 5.48 136.74 136.74 136.74 129.91 135.75 128.96 122.52 13.71 13.71 13.71 13.02 13.61 12.93 12.28

0.00 0.00

4.47 53.37

3.68 3.68 3.68 3.49 3.65 3.47 3.30 133.42 133.42 133.42 126.75 132.45 125.83 119.51 16.36 15.82 22.51 23.55 25.62 26.83 117.06 117.60 110.91 103.20 106.83 99.00 53.04 43.92 37.25 31.66 26.91 22.87 0.00 0.00 0.00 73.68 0.00 73.68 0.00 73.66 0.00 73.66 0.00 71.54 0.00 71.54 0.00 79.92 0.00 79.92 0.00 76.12 0.00 76.12 28.14 91.40 19.44 0.00, 71.95 24.22 47.73

2.78 15.86 (2.78) 37.51 39.22 68.56 0.00 0.00 0.00 0.00

(42.00) (31.04) 64.01 (42.00) (31.04) 64.01

The detailed financial assumptions, projected Profitability Statement, projected Balance Sheet and projected Cash Flow statement is given in Annexure III, Annexure V, Annexure VI and Annexure VII respectively. Scenario 2: Delivery at Customer Premises Under this scenario, the entire production is assumed to be sold to Steel Authority of India Limited at a floor price of US$ 3.86 per MMBTU or Rs. 54.95 lac per MMSCM. However, it is expected that ONGC would be able to negotiate better price as it will be setting the distribution network for the same on its own cost. The capital expenditure in this case assumes an additional investment of Rs. 75 crores for the purpose of setting up pipeline and compressor system for the transportation of the gas at the premises of SAIL's steel plant at Bokaro. The operating expenses have also been suitably adjusted to account for the fuel consumption by compressor and other expenses relating to the maintenance of the pipeline. The brief profitability statement for this scenario is as follows. Year ending 31 Production Levels Annual Production (MMSCM) Revenue Royalty to State Govt. Production Linked Payment to GOl Net Revenues Less: Operating Expenses PBDIT Depreciation Interest PBT Provision for Tax PAT May-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 40% 100% 100% 100% 95% 90% 86% 81% 0% 0.00 109.76 274.40 274.40 274.40 260.68 247.65 235.26 223.50 0.00 0.00 60.32 5.5 150.81 150.81 150.81 143.27 149.71 142.23 135.12 13.7 13.7 13.7 13.0 13.6 12.9 12.3

0.00 0.00 2.8 (2.8) 39.2 0.00 0.00

1.5 53.4 20.7 32.7 83.6 0.00 0.00

3.7 133.4 25.6 107.9 62.0 0.00 45.8 0.00

3.7 133.4 25.2 108.2 51.6 0.00 56.7 0.00 56.7

3.7 133.4 32.1 101.4 43.8 0.00 57.6 0.00 57.6

3.5 126.7 32.9 93.8 37.2 0.00 56.6 0.00 56.6

3.7 132.5 35.5 96.9 31.6 0.00 65.3 0.00 65.3

3.5 125.8 36.6 89.2 26.9 0.00 62.3 0.00 62.3

3.3 119.5 37.8 81.7 22.8 0.00, 58.9 19.8 39.0

(42.00) (50.8)

(42.0) (50.8) 45.8

The detailed projected Profitability Statement, projected Balance Sheet and projected Cash Flow statement is given in Annexure VIII, Annexure IX and Annexure X respectively. 5.2 Key Financial Indicators The key financial indicators in both the scenarios are as follows. Financial Indicators NPV (Rs.in Crores)* Post Tax Project IRR Delivery at GCS FenceDelivery at Custom Premises 191.90 70.73 19.67% 13.29%

PBP (No. of years) 5.16 ROCE (Year ending Mar 31, 2010) 25.96% Break Even (Year ending Mar 31, 2010)5.43% Project Cost of Funds

6.16 20.50% 12.91%

The project is- envisaged to be funded totally by internal accruals. The hurdle rate as approved by ONGC Board for project appraisal is 10%. Hence, the cost of capital is taken as 10% for the calculation of Net Present Value (NPV) of the project. 5.3 Sensitivity Analysis The sensitivity analysis for the project was carried out by considering the impact of the following factors on the profitability of the project. Sensitivity Factors Assumption Increase in Project Cost (A) +5% Decrease in Sales Price (B)-5% Increase in Expenses (C) +5% The following table assesses the Impact of the above sensitivity factors on the profitability of the project. Scenario 1: Delivery at GCS Fence Base CaseA Post Tax Project IRR19.67% NPV (In Rs. Crores) 191.90 PBP (in years) 5.16 ROCE 25.96% Break Even 5.43% B C

18.34%17.90%19.31% 173,08 154.74 183.15 5.20 5.21 5.17 24.72%24.48%25.78% 5.43% 5.73% 6.06%

In this scenario, project is commercially viable under .all the scenarios considered. However, the scenarios of decline in price had the biggest impact on the financial indicators. Scenario 2: Delivery at Customer Premises Base CaseA Post Tax Project IRR13.29% NPV (In Rs. Crores) 70.73 PBP (in years) 6.16 ROCE 20.50% Break Even 12.91% B C

12.18%11.68%12.78% 48.92 35.55 58.93 7.03 7.04 6.18 19.52%19.30%20.26% 12.91%13.35%13.92%

The above analysis shows that the project is financially viable under most of the scenarios that could have a negative impact on the profitability of the project. However, a decline in price by 5% leads to sharpest fall in project IRR falls to 11.68%. Therefore, the pricing of the gas is critical for the project to be viable. It is expected that ONGC would be able to negotiate for a better price, as

it would providing the gas at the premises of the customer. Also, if the recovery factor of the gas is improved leading to improved production volumes, the viability of the project can be further enhanced. 6. Risk Factors & Mitigants Risk Development Risk Mitigation Mechanism

Selection of EPC Selection of EPC Contractor ought to be done Contractor Approvals based on the ability and predetermined criteria & Clearences through a competitive bidding process Approvals required for the project are mostly environmental clearences and ONGC shall be obtaining all approvals prior to start of drilling operations. Construction Risk Machinery & Construction Adequate insurance policies shall be taken by the EPC contractor during supply of equipment up to the project site, during storage of equipment and during the construction period to cover for the asset risks. Cost & Time Overrun The project shall be implemented through an integrated tarnkey Contract, thus limiting the const overrun risks. The contract would also be stipulating adequate liquidated damages payable to ONGC in the event of any failure to comply. Funding Risk Arranging the project funding would not be an Issue, as ONGC would be investing in if from its internal accruals. Operating Risk Reserves Estimation The estimation of reserves has been carried out by ONGc itself by drilling exploratory wells. The four exploratory wells drilled by ONGC in 1999, have been taken as key wells for estimating gas content and gas saturation characteristics. The anticipated ultimate recovery of in place reserves has been estimated at a conservative recovery factor of 49%. Operations & Under the O & M agreement, EPC contractor Maintenance should provide an unconditional guarantee for certain minimum production output. Revenue Risk Offtake The site is located close to Bokaro Steel city and Dhanabd where __ number of Industries are located. The site is also close to Kokata where the CBM can be sold as CNG for mass transport. As of now SAIL has shown keen interest in sourcing entire production of CBM or the steel plant in Bokaro. The sales price of CBM is determined based on prevailing LNG price. The CBM Policy advocates market determined pricing for CBM. ONGC is

Price

Competition

still to negotiate with SAIL on the pricing of CBM. This project is first of its kind in India, Hence, no such risk is envisaged. However, on assessing the competition with substitute like coal or coke, CBM turn out to be superior and cheaper. The extraction of Coal Bed Methane leads to generation of watering of coal beds and therefore, its salline and cannot be concerned. This water is neither suited for irrigation. The deployment of water still needs to be addressed. Currently, the water is supposed to the drained within the coal field area. A comprehensive insurance cover needs to be taken by ONGC to account for losses because of Force Majeure. The Government of India is actively CBM development as it will help meet the growing demand of natural gas in the country. The CBM Policy provides for incentives for the development of CBM. It is expected that regulatory stance would be favorable for CBM in the years to come.

Other Risk Environment

Force Majeure

Regulatory

7. KYOTO PROTOCOL & BENEFITS FROM CARBON CREDITS The presence of certain gases, such as carbon dioxide (CO2), methane, and nitrous oxide, enables the atmosphere to act like a greenhouse, retaining part of the solar heat. The natural greenhouse effect is desirable as it traps part of the incoming solar energy to maintain habitable temperatures on, the earth's surface. However, human activities, like . burning of fossil fuels, deforestation, agricultural practices, and manufacturing are increasing the concentration of GHGs in the atmosphere and causing an enhanced greenhouse effect. resulting in higher global average temperatures. Impacts are likely to include changes in precipitation patterns, increased frequency and intensity of storms surges and hurricanes, changes in vegetation, and a rise in sea level. Developing countries, especially the poor ones, are more vulnerable to these changes given their high dependence on natural resources and their limited capacity-human, financial, and institutional-to adapt to extreme events. Climate changes can have severe adverse impacts on the health and livelihood of the poor. Extreme climate conditions exacerbated by climate change can, divert scarce development resources from poverty reduction into disaster recovery. Amidst growing concern and increasing awareness on the need for pollution control, the concept of carbon credit came into vogue as part of an international agreement, popularly known as the Kyoto Protocol. Kyoto Protocol is a voluntary treaty signed by 141 countries, including the European Union, Japan and Canada for reducing Greenhouse Gases (GHG) emission by 5.2% below 1990 levels by '12. However, the US, which accounts for one-third of the total GHG emission, is yet to sign this treaty. Carbon credits are certificates Issued to countries that reduce their-emission of GHG, which causes global warming. It is estimated that 60-70% of GHG emission- is through fuel combustion in industries like cement, steel, textiles and fertilizers. The concept of carbon credit trading seeks to encourage countries to reduce their GHG emissions, as it rewards those countries which meet their targets and provides financial incentives to others to do so as quickly as possible. Surplus credits (collected by overshooting the emission reduction target) can be sold !n the global market. One credit is equivalent to one tonne

of CO2 emission reduced. Carbon Credits (CC) are available for companies engaged in developing renewable energy projects that offset the use of fossil fuels. Developed countries have to spend nearly $300-500 for every tonne reduction in CO2, against $10-$25 to be spent by developing countries. In countries like India, GHG emission is . Much below the target fixed by Kyoto Protocol and so, they are excluded from reduction of GHG emission. On the contrary, they are entitled to sell surplus credits to developed countries. It is here that trading takes place. Foreign companies who cannot fulfil the protocol norms can buy the surplus credit from companies in other countries through trading. Thus, the stage is set for Certified Emission Reduction (CER) trade to flourish India is considered as the largest beneficiary, claiming about 31% of the total world carbon trade through the Clean Development Mechanism (CDM), which is expected to rake in at least $510bn over a period of time. The trading takes place on two stock exchanges, the Chicago Climate Exchange end the European Climate Exchange. CC trading can also take place in the open market. European countries and Japan are the major buyers of carbon credit. The Kyoto Protocol provides for three mechanisms that enable developed countries with quantified emission limitation and reduction commitments to acquire greenhouse gas reduction credits. These mechanisms are Joint Implementation (JET), Clean Development Mechanism (CDM) and International Emission Trading (IET). Under JI, a developed country with relatively higher costs of domestic greenhouse reduction would set up a project in another developed country, which has a relatively low cost. Under CDM, a developed country can take up a greenhouse gas reduction project, activity , in a developing country where the cost of GHG reduction project activities is usually much lower. The developed country would be given credits for meeting its emission reduction targets, while the developing, country would receive the capital and clean technology to implement the project. Under IET mechanism, countries can trade in the international carbon credit market. Countries with surplus credits can sell the same to countries with quantified emission/limitation and reduction commitments under the Kyoto Protocol. `Getting carbon credits -certified for Kyoto is a lengthy and complex process. There are four stages of CDM approval. The first stage is at the domestic level, where National CDM Authority (NCM) approves the project. After NCM's approval, the project is sent to the United Nations Framework Convention on Climate Changes. After this, the executive board of UNFCCC reviews the project. The project gets evaluated on every front and is then registered under UNFCCC only if it meets all the norms. Thereafter, certification is done for the reduction in emission and credits are issued. Currently carbon credits are being traded at US $ 7-10 per CER (1000 kg. of CO2). In India this can translate to improvement in project IRR between 3-5% and thus would be significant driver for growth in the sector once carbon credit trading becomes well established. The project proposal should establish the following in order to qualify for consideration as CDM project activity: Emission Additionality; The project should lead to real, measurable and long term GHG mitigation, The additional GHG reductions are to be calculated with reference to a baseline. Baseline is the scenario, which represents the emissions by sources of GHGs that would occur in the absence of the registered project activity.

Financial Additionality: The procurement of Certified Emission Reduction (CERs) should not be from Official Development Assistance (ODA). Sustainable Development Indicators - It is the prerogative of the host Party to confirm whether a clean development mechanism project activity assists It In achieving sustainable development. The CDM projects should also be oriented towards Improving the quality of life of the poor from the environmental standpoint.

The CDM project activity should lead to alleviation of poverty by generating additional employment, removal of social disparities and contribution to provision of basic amenities to people leading to improvement in quality of life of people. Economic well-being; The CDM project activity should bring in additional investment consistent with the needs of the people. Environmental well being: This should include a discussion of impact of the project activity on resource sustainability and resource degradation, if any, due to proposed activity; bio-diversity friendliness; impact on human ?health; reduction of levels of pollution in general; Technological well being: The CDM project activity should lead to transfer of environmentally safe and sound technologies that are comparable to best practices in order to assist in upgradation of the technological base. The transfer of technology can be within the country as well from other developing countries also.

The project proponent could develop a new methodology for its project activity or could use one of the approved methodologies by the CDM Executive Board. For small-scale CDM projects, the project proponent can use the simplified procedures. The project proposal should Indicate the formulae used for calculating GHG offsets in the project and baseline scenario. Leakage, if any, within or outside the project boundary, should be clearly described. Determination of alternative project, which would have come up in absence of proposed CDM project activity should also be described in the project proposal. Procedure for Registration The National CDM Authority is a single window clearance for CDM projects in the country, The project proponents are required to submit one soft copy of Project Concept Note (PCN) and Project Design Document (PDD) through online form and 20 hardcopies each of PCN and PDD along with two CDs containing all the information in each of them. The project report and CDs should be forwarded through covering letter signed by the project sponsors. The project report submitted should be properly bound. The National CDM Authority examines the documents and if there are any preliminary queries the same are asked from the project proponents. The project proposals are then put up for consideration by the National CDM Authority. The project proponent and his consultants are normally given about 10-15 days notice to come to the Authority meeting , and give a brief power point presentation regarding their CDM project proposals. Members seek clarifications during the presentation and in case the members feel that some additional clarifications or information is required from the project proponent the same is informed to the presenter. Once the members of Authority are satisfied, the Host Country Approval (HCA) is issued by the Member-Secretary of the National CDM Authority. Financial Implication of Carbon Credit Benefits I. The Role of Emissions Reduction Credits in Stimulating Project Development When coal mine gas supplants other fuels, emissions of SOx, NOx, and particulates are typically lowered. Coalmine gas projects may thus be eligible for emissions reduction credits - or other

types of environmental incentives that may be in place in the particular country or region where the project is implemented. Greenhouse gas emission reduction credits also may be available for projects that utilize or destroy coalmine gas. By preventing this powerful greenhouse gas from escaping to the atmosphere, such projects can mitigate global climate change. An active greenhouse gas market has emerged, however, and brokers have supported numerous transactions whereby parties that may benefit from offsetting carbon emissions have purchased the right to tradable credits that might exist in the future. These purchase options have already aided in developing projects that reduce methane emissions. Per unit of energy, combustion of natural gas results in 42 percent less carbon dioxide emissions than coal and 29 percent less than residual fuel oil. Significant reductions in carbon dioxide emissions could be made through fuel switching, for example, from residual fuel oil to natural gas. Each pound of non-combusted methane that escapes to the atmosphere is 21 times more potent as a greenhouse gas than carbon dioxide, Global Warming Potential (GWP) of methane (CH4) = 21, GWP of CO2 = 1, Combustion of one tonne of CH4 produces 2,75 tonnes of CO2; therefore the capture and combustion one tonne of otherwise fugitive CHQ emissions yields a GWP benefit of at least 18.25 tonnes CO2. If the captured CH4 is used as energy source (on-site or delivered into a pipeline) the full 21 tonnes of GHG reductions can be claimed. Since the project aims at capturing methane and using if' as energy resource, the project would be eligible for 21 tonnes of GHG reductions per 1 tonne of methane. The methane captured over the lifetime of the project is estimated at 950k of 3.93 BCM or 2.80 million tonnes (1 tonne of gas is equivalent to 1333 cu - m.) The total carbon credits the project would be eligible for is 58.8 million tonnes of GHG reductions or 58.8 million carbon credits over its lifetime. Assuming these credits are traded at a price of USD 5 per Credit, the cash-flows the project can be tremendously enhanced.

If Carbon credits are factored in financials of the project along with the cost incurred for availing the carbon credit benefit under CDM, these credits can increase the IRR by around 2.5% to 3%. Recent Developments A coal mine/coal bed methane utilization project in northeast China entered into agreements with two separate buyers under the Clean Development Mechanism (CDM), according to Asian Development Bank (ADB). ADB's Clean Development Mechanism Facility and Clear world Energy, a clean energy development company headquartered in Beijing, structured the transactions. The seller in the transaction is Fuxin Mining Group and the buyers are ICTJ Limited and a consortium led by Natsource. The project is expected to improve coalmine methane and coal bed methane extraction, distribution, and utilization at mines around Fuxin, Liaoning Province. 8. RECOMMENDATIONS UTI Bank has examined the financial viability of the propos6d proje6t based on the DFR made available along with extensive discussions with ONGC officials. UT'I Bank has assessed the viability of the project under the impact of various scenarios by carrying out sensitivity analysis under various scenarios, which seek to present the financial results in case of changes in the key assumptions. Based on the appraisal exercise, it may be concluded that the project is viable under the Base Case scenario under both the scenarios

Scenario l: Delivery at GCS Fence with a post-tax IRR of 19.67% and a NPV of Rs. 191.90 crores at 10% rate of return Scenario 2: Delivery at Customers Premises with a post-tax IRR of 13.29% and a NPV of Rs. 70.73 crores at 10% rate of return

The IRR for Scenario 2 is lower as additional investment of Rs. 75 crores is considered in setting up the pipeline and compressor for supplying the gas at customer premises. However, the price assumption has been kept constant at US$ 3.86 per MMBTU. Therefore to get better returns ONGC should negotiate with the customer to pay price higher than US$ 3.86 MMBTU, which would also cover up the expenses of transportation from GCS Fence to Customer Premises. The sensitivity analysis also shows that the project is viable under various adverse scenarios. It is expected that the returns from with project would further improve as the financial projections have been made at a conservative estimate of 49.1 % recovery of the estimated reserves of 8 BCM. The preliminary analysis done by ONGC suggests that there is good potential demand of gas in the nearby markets and thus the prices are likely to improve in comparison to the prices assumed for financial projections. Also, the eligibility of the project for carbon credits may further improve the profitability of the project. A study has also been carried out to assess the potential risks to the project and the expected risk mitigation mechanisms. The study indicates that the offtake risk is low due to existing demand of Gas in the area. The cost and time over run risks are being mitigated adequately by ONGC by entering into LSTK contracts with reputed CBM Service Providers and including suitable performance clauses to allocate these risks, to the extent possible, to the third parties. Keeping in view the above analysis and subject to the investment risks and the impact of the various scenarios as discussed under the sensitivity analysis, the capital expenditure; program of ONGC for the proposed project is considered financially and commercially viable. Annexure - I : Detailed Project Cost Break Up 1) Drilling Costs a) Cost of Drilling main deviated section of each well of 1850 m measured depth Item Drilling (hiring of rig) Cementation Casing Pipe Casing Pipe Well Head Mud Chemicals & other well consumables Total Cost per well Rate 7 Rs. lac per day 67 $/m for 9 5/8" 40 $/m for 7" 3 Rs. Lacs 25 Rs. Lacs Quantity 60.00 days 300 m 1850 m 1 Total Amount (In Rs. Lac) 420 51 9 34 3 25

25 Rs. Lacs

542

b) Cost of Drilling in -seam sections in each of horizontal well of 1850 m measured depth Item Rate Quantity Total Amount (in Rs. Lac)

Drilling (hiring of rig Cutting Windows MWD & Gamma Ray Package SDMM Package UBD Package Speciality Mud Chemicals & Other well consumables Total Cost per well

7 Rs. lac per day 60,000 US $ $ per day operational 1900 charges $ per day operational 2800 charges Rs. Lac per day 7.8 operational charges 50 Rs. lac

60 days 3 60 days 60 days 60 days

420 83 52 77 468 50 1,151

Cost of Drilling the wells of varying dpeths Cost of Drilling 1 well of 1850 m 1,693 Cost of Drilling 1 well of 1450 m 1,576 Cost of Drilling 1 well of 1050 m 1,458 Total Drilling Costs (in Rs. Lacs)21,589 C) Mobilization Costs of Drilling Rigs @ Rs.250 lacs = Rs. 1000 lacs Average Drilling Costs per well = Rs. 1613 lacs 2) Civil Work a) Drill Sites Type Quantity Total Amount (in Rs. Lac) 1 Well Site 38 Rs. lac 1 38 2 Well Site 52 Rs. Lac 2 104 3 Well Site 63.5 Rs. Lac 3 190.50 Total 6 332.5 b) Approach Roads and Culverts Description RateQuantity Total Amount (in Rs. Lac) New Road 13 Rs. Lac per km 12 156 Upgradation of Old Road9 Rs. Lac per Km 12108 Culvert 0.6 24 14.40 Total C) Cost of Civil Work at GCS = Rs. 100 lacs Total Costs of Civil Work = Rs.710.9 lacs 278.4 Rate

Average Costs per Drill Sites including roads = Rs. 101.8 lacs 3) Logging Operations a) Field Operations Type of Well Rate Quantity Total Amount (in Rs. lac) 8 1/2" Opern Deviated Section514.72 US $ per m15,900 m3764.66 7" Cased Deviated Section 12.28 US $ per m 15,900 m89.82 Total b) Interpretation of Logs & Report in Us $In Rs. LacQuantity Total Amount (in Rs. Lac) Interpretation Costs of all logs7435 3.42 14 wells 47.88 Total Costs of Logging 14 Horizontal Wells = Rs. 3902.36 lacs Average Costs of Logging per well = Rs.278.74 lacs 4) WELL COMPLETION 3854.48

a. Cost of Tubing of 18000 m = Rs. 66.5 lacs b. Cost of 14 ESPs required = Rs. 1050 lacs c. Cost of lowering ESPs = Rs. 1050 lacs
Total costs of Well Completion = Rs. 1326.5 lacs Average Costs of Well completion per well = Rs. 94.7 lacs 5) PRODUCTION TESTING a) Manpower Costs Manpower Costs per day (in Rs.) 750 Manpower Required per day 4 Manpower Cost per month (in Rs.)90000 b) Equipment Rental Cost per month (in Rs) = 100000 c) Power Consumption per month (in Rs.) = 600000 Total Costs of Production Testing = Rs. 221.2 lacs Average costs of Production Testing per well = Rs. 15.8 lacs 6) MAINTENANCE OF WELLS

WOR Hiring Charges per day = Rs, 100000 Total Maintenance Costs = Rs. 840 lacs Average Maintenance Costs per well = Rs. 60 lacs 7) CREATION OF SURFACE FACILITIES GCS Cost 2650 Flow line cost 1750 Underground Cable Cost 1000 Transformer Cost for each well 5 Area Lighting Cost for each pad 1 Initial Capital Cost of Power Electric Arrangements500 Total cost of surface facilities 5976.0 8) Expenditure for setting up of Project Office = Rs. 1000 lacs 9) Additional Capex for Delivery at the Premises of SAIL = Rs. 7500 lacs (includes the cost of compressor system and station at Rs, 6250 lacs and cost of setting up pipeline ne4work at Rs. 12,50 lacs) Annexure II: Cost Breakup in the different years of execution Capex 2006-07 Civil Work at 6 drill sites/pads including roads Civil Work at GCS Drilling of 5 wells Logging of 5 wells Surface Facilities (80%) Completion of 5 wells Production Testing of 5 wells Maintenance of wells TOTAL (in Rs. Lac) in Rs. Lac 611 100 8,067 1,394 4780.8 473.7 79 0 15,506

Capex 2007-08 in Rs. Lac Drilling of 8 wells 12,908 Logging of 8 wells 2,230 Surface Facilities 20%) 1195.2 Completion of 8 wells 758.0 Production Testing of 8 wells126.4 Maintenance of 8 wells 480 Total (in Rs. Lac) 17,697

Capex 2008-09 in Rs. Lac Drilling of 1 wells 1,613 Logging of 1 wells 278.74 Completion of 1 well 94.7 Production Testing of 1 well15.8 Maintenance of 4 wells 240 Total (in Rs. Lac) 2,243

Capex 2009-10 in Rs. Lac Maintenance of 2 wells (in Rs. Lac)120

Year 2006-07 2007-08 2008-09 2009-10 Total

Capex (in Rs. Lac) 15,505.56 17,697.38 2,242.77 120 35,565.71

Escalation @ 6% Effective Capex Contingencies @ 20% Total Capex (in Rs. Lac) 15,505.56 1,061.84 269.13 21.6 1,352.58 18,759.22 2,511.91 141.6 36,918.29 3,101.11 3,751.84 502.38 28.32 7384 18,606.67 25511.07 3,014.29 169.92 44.301.95

The project cost also includes the cost setting distribution network at Rs.7500 lacs and the cost of setting up project office at Rs. 1000 lacs. Annexure III: Detailed Financial Assumptions. Production at 100% Capacity Utilization = 0.784 cu. m. per day No. of days of Operation ="350 days , No. of hours of daily operation = 24 hrs Decrease in Production over the years = 5 % Sales Price (Rs. per 1000 SCM) = Rs. 5495.90 Increase in Price every 5 years = 10% Royalty to State Government = 10%/110% (has to be paid from the price at which gas is proposed to be sold and is included in the Gross Price Production Linked Payment to Got = 2.5%/102.5% (same as above) WDV Depreciation rates = 15% and 20% for a new investment in the year of investment Tax Rate (30% + 10% surcharge + 2% cess) = 33.66%

Assumptions related to Operating Expenses a) Power Costs Total transformer power requirement = 5 MVA =5000 KVA Power factor = 0.80 (assumed for industrial power) Average utilization = 60%-0.6 (assumed, considering that all the equipments do not Pin at a time) Energy consumed =5000*0.80*b.6 KWH (unit) Cost of power = Rs.4.50 per unit ( including fixed charges) Assuming 350 days to account for all maintenance and shut downs and 24 hours operation of electrical equipments and accessories Yearly power consumption = 5000*0.80*0.6*350*24 = 20160000 units Yearly power cost = 20160000* 4.50 = Rs.9.07 crores This Rs. 9.07 crore has been taken as cost of electric power consumption to begin with. Further, assuming an MOU with the supplier for 5 years for maintaining this rate of Rs. 4.50 pet unit and escalation @10% every five years, cost of power consumption has been worked out for entire project life. It is found that power costs are the biggest component of the Operating Expenses throughout the lifetime of project. In order to reduce O&M costs, the option of captive generation of power generation was explored as the gas produced may be used for the same bringing down power costs to a large extent, thus improving the profitability of the project. However this being a pilot phase it was not found appropriate to go in for captive generation at this stage and thus this option may be looked at during the expansion phase. a) Work Over Jobs Work-over jobs shall be required for clearing the coal debris, if any, repairing of ESPs etc. The total drilling cost of 14 wells, without considering different contingencies to be paid for execution of the work, is Rs. 235 Crore. As per guidelines for conventional oil and gas fields, 6 % of drilling cost is taken as well maintenance cost including work over operations. In case of CBM horizontal wells, comparatively lesser number of work over jobs are anticipated due to no zone transfer etc. Accordingly, only 2.5 % of total drilling cost is taken as work over cost (including man -power) in the 5th year i.e. Rs. 5.89 crores (in, the first four years the wells shall be drilled and maintained by the contractor)- and afterwards escalation @ 8% per annum has been considered. Manpower Approximate manpower of different disciplines and their annual expenditure shall be as follows. Discipline GCS Total man power in Annual expenditure per Total Expenditure different shits man-power (in Its. (in Rs. lakhs) lakhs) 24 7.5 180.0

Security (for 6 well 64 pads and GCS) Fire Section TOTAL 8

1.2 7.5

076.8 060.0 316.8=Rs 3.17 crores

The manpower costs are escalated at 8% per annum. Maintenance of Project Establishments These shall include civil, electric, communication and. other facility's maintenance of LAQ cost for office site; office establishment, communication facilities etc. This has been assumed as 10 % of initial expenditure (Rs.10 Crores) with escalation of 8% per annum. Manpower Cost for Project Office There shall be a multi-disciplinary technical team for supervision of entire work during its execution and maintaining the field afterwards. This team shall include Geologists, Geophysicists (Wells), Drilling engineers, Civil Engineers, Electric Engineers, Mechanical Engineers, Production Engineers, Reservoir engineers supported by team of Finance, HR and MM executives and supporting staff. This manpower shall be stationed in the Project Office. It is estimated that out of strength of 20 at Project office, 15 executives and 5 supporting staff will be dedicated for supervision and monitoring of present work. Their expenditures are considered Rs. 9 lakhs per executive per annum and @ Rs. 6 lakh per supporting staff per annum. Once the physical activities are over in first 3 years, it is planned to reduce the manpower to half dedicated for the present work. Opex for this head has been considered accordingly with an escalation of 8% per annum. Overhead Expenditure 5% of the total opex figure thus arrived at, by including all the heads considered above, has been considered to account for overhead expenses and has been added to the opex of each year. Additional Operating Expenses for Distribution The operating expenses requirements for setting up the distribution network for delivering the gas at customer premises has been considered as follows a) Total O&M charges including manpower considered @ 2.5% of the capital cost escalated @ 8% per annum. b) Fuel charges have been considered at the respective sale price of the gas. The full load fuel consumption or 35000 SCMD for the compressor into account. Annexure IV: Estimating the Cost of Capital For the purpose of calculating ONGC's cost of capital the following factors have been considered:

1. Market capitalization of ONGC is Rs. 125,873 crores as on 31st March 2005 (E). 2. Long-term debt of ONGC stands at Rs. 9,916 crores as on 31st March 2005 (D). 3. V = E + D = 125,873 + 9,916 = Rs. 135,789 crores

4. Effective corporate tax rate is taken as 33.66%. (Corporate tax rate = 30% + Surcharge +
2% Education Cess). Cost of equity using CAPM: r3 = r1 + (rm-rf) Where: rf = _ free rate a = Bets of the security rm = Expected market return Risk free rate has been taken as 7.12, which is the yield on the 10 year Govt security. Beta of the stock taken from Bloomberg is 0.99. Expected market return has been taken as 15.66%, which is the annualized return the Indian equity market has given in the last five years. (Mongan Stanley Capital International's country indices). Hence cost of equity = 7.12 + 0.99 * (15.66 - 7.12) = 15.57%

Cost of Debt The Cost of debt for the company is assumed to be 7.62% (50 bps spread over benchmark GSec yield as ONGC is a AAA Company). Cost of Capital using WACC: WACC = E/V * Re + D/V * Rd (I - Tc) Where Re = cost of equity Rd = cost of debt E = market value of the firm's equity D = market value of the firm's debt V=E+D Tc = corporate tax rate

Hence, WACC for ONGC = 15.57 * (125873/135789) + 7.62 * (9916/135789) * (1 - 0.336)= 14.81%

Annexure-V: Delivery at GCS Fence - Projected Profitability statement

Year 2007 ending Mar 31 Revenues 0.0 Royalty to 0.0 State Govt. Production 0.0 Linked Payment to Gol Benefits for Carbon Credits Net 0.0 Revenues Less: 2.8 Operating Expenses PBDIT (2.8) Depreciation 39.2 Interest 0.0 PBT (42.0) Provision for 0.0 Tax PAT (42.0) Cash (2.8) Accruals

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 60.3 5.5 1.5 150.8 150.8 150.8 143.3 149.7 142.2 135.1 128.4 121.9 127.4 121.1 115.0 109.3 103.8 13.7 13.7 13.7 13.0 13.6 12.9 12.3 11.7 11.1 11.6 11.0 10.5 9.9 9.4 3.7 3.7 3.7 3.5 3.7 3.5 3.3 3.1 3.0 3.1 3.0 2.8 2.7 2.5

53.4 15.9 37.5 68.6 0.0 (31.0) 0.0

91.8 41.8 50.0 6.2 0.0 43.8 14.7 29.1 35.3

133.4 133.4 133.4 126.7 132.5 125.8 119.5 113.6 107.9 112.7 107.1 101.7 96.7 16.4 117.1 53.0 0.0 64.0 0.0 15.8 117.6 43.9 0.0 73.7 0.0 22.5 110.9 37.2 0.0 73.7 0.0 23.5 25.6 26.8 28.1 29.6 31.1 33.8 35.6 37.5 103.2 31.7 0.0 71.5 0.0 106.8 26.9 0.0 79.9 0.0 99.0 22.9 0.0 76.1 0.0 91.4 19.4 0.0 72.0 24.2 84.0 16.5 0.0 67.5 22.7 76.8 14.0 0.0 62.8 21.1 79.0 11.9 0.0 67.0 22.6 71.5 10.1 0.0 61.4 20.7 64.3 8.6 0.0 55.6 18.7 39.6 57.1 7.3 0.0 49.8 16.8 33.0 40.4

(31.0) 64.0 73.7 73.7 71.5 79.9 76.1 47.7 44.8 41.6 44.5 40.7 36.9 37.5 117.1 117.6 110.9 103.2 106.8 99.0 67.2 61.3 55.7 56.4 50.9 45.5

Annexure-VI: Delivery at GCS Fence - Projected Balance Sheet

As on Mar 2007 31 Equity 196.1 Capital Reserves & (42.0) Surplus Borrowings -Total 154.1 Uses of Funds Gross Block 196.1 Accumulated 39.2 Depreciation Net Block 156.9 (2.8) Cash

2008

2009 2010 2011 2012

2013

2014 2015

2016 2017 2018

2019

421.2 451.4453.1453.1453.1 453.1 453.1453.1 453.1453.1453.1 453.1 (73.0) (9.0) 64.6 138.3209.8 289.8 365.9413.6 458.4500.0544.5 585.2

------------348.2 442.3517.7591.4662.9 742.8 819.0866.7 911.5953.1997.5 1,038.3 1

421.2 451.4453.1453.1453.1 453.1 453.1453.1 453.1453.1453.1 453.1 107.8 160.8204.7242.0273.7 300.6 323.4342.9 359.4373.5385.4 395.5 313.4 290.5248.3211.1179.4 152.5 129.6110.2 93.7 79.6 67.7 57.5 34.7 151.8269.4380.3483.5 590.3 689.3756.5 817.8873.5929.9 980.8

4 4

4 1

Balance
Total 154.1 348.2 442.3 517.7 591.4 662.9 742.8 819.0 866.7 911.5 953.1 997.5 1,038.3

Annexure-VII: Delivery at GCS Fence - Projected Cash Flow Statement

Year 2007 ending Mar 31 Sources of Cash Equity 196.1 Borrowings Income for the year Total 196.1 Uses of Cash Capex 196.1 Operational 2.8 Expenses & other charges Interest Expenses Tax paid Repayment of Borrowings Total 198.9 Net Cash (2.8) Inflow (Outflow) Opening Cash Net Cash (2.8) Inflow (Outflow) Closing (2.8) Balance ANNEXURE VIII:

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

2021

225.1 30.1 1.7 -53.4 133.4 133.4 133.4 126.7 132.5 125.8 119.5 113.6 107.9 112.7 107.1 101.7 278.5 163.6 135.1 133.4 126.7 132.5 125.8 119.5 113.6 107.9 112.7 107.1 101.7

96.7 96.7

225.1 30.1 15.9 16.4

1.7 15.8

22.5

23.5 25.6

26.8 28.1

29.6

31.1

33.8

35.6

37.5

39.6

--

24.2 -

22.7 -

21.1 -

22.6 -

20.7 -

18.7 -

16.8 --

241.0 46.5 17.5 22.5 23.5 25.6 26.8 52.4 37.5 117.1 117.6 110.9 103.2 106.8 99.0 67.2 (2.8) 37.5 34.7 34.7

52.3 61.3

52.2 55.7

56.3 56.4

56.2 50.9

56.2 45.5

56.3 40.4

151.8 269.4 380.3 483.5 590.3 689.3 756.5 817.8 873.5 929.9 980.8 61.3 55.7 56.4 50.9 45.5

1,026.3 40.4

117.1 117.6 110.9 103.2 106.8 99.0 67.2

151.8 269.4 380.3 483.5 590.3 689.3 756.5 817.8 873.5 929.9 980.8 1,026.3 1,066.7

Delivery at Customer Premises: Projected Profitability Statement

Year

2007

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 20

Ending Mar 31 Revenues 0.0 Royalty to 0.0 State Govt. Production 0.0 Linked Payment to Got Benefits from Carbon Credits Net 0.0 Revenues Less: 2.8 Operating Expenses PBDIT (2.8) Depreciation 39.2 Interest 0.0 PBT (42.0) Provision for 0.0 Tax PAT (42.0) Cash (2.8) Accruals ANNEXURE IX:

60.3 150.8 150.8 150.8 143.3 149.7 142.2 135.1 128.4 121.9 127.4 121.1 115.0 109.3 103.8 10 5.5 13.7 13.7 13.7 13.0 13.6 12.9 12.3 11.7 11.1 11.6 11.0 10.5 9.9 9.4 9.9 1.5 3.7 3.7 3.7 3.5 3.7 3.5 3.3 3.1 3.0 3.1 3.0 2.8 2.7 2.5

2.6

53.4 133.4 133.4 133.4 126.7 132.5 125.8 119.5 1116 107.9 112.7 107.1 101.7 96.7 91.8 96 20.7 25.6 25.2 32.1 32.7 83.6 0.0 (50.8) 0.0 107.9 108.2 101.4 62.0 51.6 43.8 0.0 0.0 0.0 45.8 56.7 57.6 0.0 0.0 0.0 32.9 93.8 37.2 0.0 56.6 0.0 35.5 96.9 31.6 0.0 65.3 0.0 65.3 96.9 36.6 37.8 89.2 26.9 0.0 62.3 0.0 81.7 22.8 0.0 58.9 19.8 39.2 40.7 44.0 74.3 19.4 0.0 54.9 18.5 67.2 16.5 0.0 50.7 17.0 66.7 14.0 0.0 54.7 18.4 45.8 61.3 11.9 0.0 49.4 16.6 32.7 44.7

47.8 50.0 52.4 56 53.9 10.1 0.0 43.8 14.7 46.6 8.6 0.0 38.0 12.8 39.4 7.3 0.0 32.1 10.8

39 6.2 0.0 33 11

(50.8) 45.8 56.7 57.6 56.6 32.7 107.9 108.2 101.4_ 93.8

62.3 39.0 89.2 61.9

36.4 33.6 36.3 55.9 50.1 50.3

29.0 25.2 21.3 21 39.2 33.8 28.6 28

Delivery at Customer Premises: Projected Balance Sheet

2007 As on March 31 Sources of Funds

2008

2009

2010 2011 2012

2013

2014 2015

2016 2017 2018

2019

2020

Equity 196.1 496.2 526.4 528.1528.1528.1 528.1 528.1528.1 528.1528.1528.1 528.1 528.1 Capita Reserves (42.0) (92.8)(47.0)9.6 67.2 123.9 189.2 251.5290.6 327.0360.6396.9 429.6 458.7 & Surplus Borrowings--------------Total Use of Funds Gross Block Accumulated Depreciation Net Block Cash Balance 154.1 403.4 479.3 537.7 595.3 651.9 717.2 799.6 818.6 855.1 888.7 925.0 957.7 986.8

196.1 39.2 156.9 (2.8)

496.2 526.4 528.1 528.1 528.1 528.1 122.8 184.8 236.4 280.1 317.3 348.9 373.4 341.5 291.7 247.9 210.7 179.1 29.9 137.8 246.0 347.4 441.2 538.1

528.1 528.1 375.8 398.6 152.3 129.4 627.3 689.2

528.1 528.1 528.1 418.1 434.6 448.6 110.0 93.5 79.5 745.1 795.2 845.5

528.1 460.5 67.6 890.2

528.1 470.6 57.4 929.3

Total

154.1

403.4 479.3 537.7 595.3 651.9 717.2

779.6 818.6

855.1 88.7

925.0

957.7

986.8

ANNEXURE X: Delivery at Customer Premises: Projected Cash Flow Statement

Year ending Mar 31 2007 2008 Sources of Cash Equity 196.1 300.1 Borrowings --Income for the year -53.4 Total 196.1 353.5 Uses of Cash Capex 196.1 300.1 Operational Expenses 2.8 20.7 & other charges Interest Expenses Tax paid Repayment of Borrowings Total 198.9 320.8 Net Cash Inflow (2.8) 32.7 (Outflow) Opening Cash (2.8) Net Cash Inflow (2.8) 32.7 (Outflow) Closing Balance (2.8) 29.9 xxxxxxxxxxxxxxx

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 202 30.1 1.7 -------133.4 133.4 133.4 126.7 132.5 163.6 135.1 133.4 126.7 132.5 30.1 1.7 ---25.6 25.2 32.1 32.9 35.5 ------125.8 119.5 113.6 125.8 119.5 113.6 -36.6 37.8 39.2 19.8 18.5 ------107.9 112.7 107.1 107.9 112.7 707.1 40.7 44.0 45.8 17.0 18.4 16.6 57.8 62.4 62.4 50.1 50.3 44.7 ----101.7 96.7 101.7 96.7

--91.8 91.8

47.8 50.0 52.4

14.7 12.8 10.8 -

55.7 26.9 32.1 32.9 35.5 107.9 108.2 101.4 93.8 96.9

36.6 57.7 57.7 89.2 61.9 55.9

62.6 62.8 63.2 39.2 33.8 28.6

29.9 137.8 246.0 347.4 441.2 538.1 627.3 689.2 745.1 795.2 845.5 890.2 929.3 963 107.9 108.2 101.4 93.8 96.9 89.2 61.9 55.9 50.1 50.3 44.7 39.2 33.8 28.6

137.8 246.0 347.4 441.2 538.1 627.3 689.2 745.1 795.2 845.5 890.2 929.3 963.2 991

Subject: Drilling, Completion & Testing of 22 Pilot Wells (19 Vertical & 3 horizontal) in Jharia, Bokaro and North Karanpura CBM Blocks. 1.0 Background 1.1 Out of the three subject CBM blocks- Jharia, Bokaro and North Karanpura, Jharia block was awarded to ONGC-CIL Consortium on Nomination basis and Bokaro & North Karanpura blocks were awarded to ONGC-IOC Consortium in CBM Round-1 bidding, in January 2002 by Govt. of India. In Jharia Block, as per Contract with Govt. of India, a Minimum Work Programme of drilling 8 Boreholes and 2 Exploratory wells besides 9 Pilot wells in Parbatpur during Exploration Phase and 2 Pilot Wells outside Parbatpur during Pilot Phase was committed by ONGC-CIL Consortium to Govt. of India. The PEL grant for the Block was received from Govt. of Jharkhand w.e.f. 28.08.2003. As per JOA with CIL Borehole drilling activities are the responsibilities of CIL, whereas drilling and testing of the Exploratory and Pilot wells are the responsibilities of ONGC. Similarly In Bokaro Block, as per Contract with Govt. of India, a Minimum Work Programme of drilling 8 Boreholes and 2 Exploratory wells during Exploration Phase and 12 wells in Pilot Phase was committed by ONGC-IOC Consortium to Govt. of India. The PEL grant for the Block was received from Govt. of Jharkhand w.e.f. 21.02.03. Also in North Karanpura Block, as per Contract with Govt. of India, a Minimum Work Programme of drilling 9 Boreholes and 2 Exploratory wells during Exploration Phase and 6 wells in Pilot Phase was committed by ONGC-CIL Consortium to

Govt. of India. The PEL grant for the Block was received from Govt. of Jharkhand w. e. f. 21. 02.03. 2.0 Present Proposal 2.1 In order to fulfill the commitment of minimum work programme to the Govt of India. For the Pilot Phase of Jharia, Bokaro and North Karanpura Blocks, after the in principle approval of EC, as mentioned above, it is now proposed to carry out dolling, completion and testing activities in the three Blocks as per following break-up: Block Pilot Well Type Vertical Horizontal Jharia (Parbatpur, outside 6 sq. 6 0 km central part) Jharia (Outside Parbatpur) 2 0 Bokaro 8 2 North Karanpura 3 1 Total 19 3 2.2 It is proposed to execute the work through Integrated Turnkey Contract including all the activities starting from civil work to drilling, completion, coring, logging, laboratory studies, reservoir studies and production testing. The work schedule shall spread over a period of 31 months from the date of award. ONCC's role in this case shall be limited to obtaining statutory 3.0 Cost Estimates 3.1 Under the proposed Integrated Turnkey Contract, the cost for the execution of the work schedule is now estimated to be Rs. 225.6 Crore. The estimated cost includes all technical and non-technical contingencies. The costs have been estimated based upon in-house data, budgetary quotes and assumptions based upon interactions with USA and Australian CBM Service Providers. Block-wise break up of the costs shall be as follows: Block Cost Estimate (Rs. Crore) Jharia 082.04 Bokaro 102.54 North Karanpura041.02 Total 225.60 4.0 Approval Sought: 4.1 The approval of PAC / Board is solicited for "Drilling, Completion & Testing of 22 Pilot Wells (19 Vertical & 3 horizontal) in Jharia, Bokaro and North Karanpura CBM Blocks." at an estimated capital cost of Rs. 225.6 Crore with project completion schedule of 31 months from the date of award (LOI). xxxxxxxxxxxxxxxxxxxxxxxxx Subject: Drilling , Completion & Testing of 22 Pilot Wells (19 Vertical & 3 horizontal) in Jharia, Bokaro and North Karanpura CM Blocks. 1.0 Background:

1.1 Out of the three subject CBM blocks- Jharia, Bokaro and North Karanpura, Jharia block was awarded to ONGC-CIL Consortium on Nomination basis and Bokaro & North Karanpura blocks were awarded to ONGC-IOC Consortium in CBM Round-1 bidding, in January 2002 by Govt, of India. 1.2 In Jharia Block, as per Contract with Govt. of India, a Minimum Work Programme of drilling 8 Boreholes and 2 Exploratory wells besides 9 Pilot wells in Parbatpur during Exploration Phase and 2 Pilot Wells outside Parbatpur during Pilot Phase was committed by OhiGC-CIL Consortium to GoW. of India. The PEL grant for the Block was received from Govt. of Jharkhand w.e.f. 28.08.2003. As per JOA with CIL Borehole drilling activities are the responsibilities of CIL, whereas drilling and testing of the Exploratory and Pilot wells are the responsibilities of ONGC. Similarly In Bokaro Block, as per Contract with Govt. of India, a Minimum Work Programme of drilling 8 Boreholes and 2 Exploratory wells during Exploration Phase and 12 wells in Pilot Phase was committed by ONGC-IOC Consortium to Govt. of India. The PEL grant for the Block was received from Govt. of Jharkhand w.e.f. 21.02.03. Also in North Karanpura Block, as per Contract with Govt. of India, a Minimum Work Programme of drilling 9 Boreholes and 2 Exploratory wells during Exploration Phase and 6 wells in Pilot Phase was committed by ONGC-CIL Consortium to Govt. of India. The PEL grant for the Block was received from Govt,. of Jharkhand w.e.f. 21.02.03. 1.3 EC in its 277th meeting held on 5.5.2005, while according the in principle approval for carrying out development activities in 6 sq. km. central part of Parbatpur area in Jharia Block through horizontal wells, also accorded in principle approval for carrying out drilling, completion and testing of 22 pilot wells (19 vertical and 3 horizontal) in three blocks i.e. Jharia, Bokaro and North Karanpura, through Integrated Contract. 2.0 Present Status of Activities 2.1 Jharia Block 2.1.1 As on date, 7 boreholes have been drilled and 8th is under drilling. Locations of I exploratory wells have been released and are lined up for drilling by departmental rig. Within Parbatpur, all the 9 pilot locations are released and lined up for drilling through proposed contractual services. Out of these 9 well locations, 3 are falling within the development area of 6 sq. km. central part of Parbatpur. The 2 pilot locations outside Parbatpur area shall' be released based upon sub-surface information, to be available from 8 boreholes and 2 exploratory wells. The present proposal of drilling, completion and testing of pilot wells, therefore, includes a total of 8 pilot wells, all vertical, for this Block i.e. 6 in Parbatpur area, outside the 6 sq. km. central part and 2 outside Parbatpur area. 2.2 Bokaro Block 2.2.1 As on date all 8 boreholes and 2 exploratory wells have been drilled and the 2 exploratory wells are under production testing. Based upon sub-surface data, locations. of 10 vertical pilot wells have been firmed up and are under consideration for release. 2.3 North Karanpura Block 2.3.1 As on date 8 boreholes have been drilled and 1st exploratory well is under drilling. Based upon sub-surface data obtained from boreholes and two exploratory wells (under drilling) 4 pilot wells (3 vertical and 1 horizontal) would be firmed up.

3.0 Present Proposal 3.1 In order to fulfill the commitment of minimum work programme to the Govt of India. For the Pilot Phase of Jharia, Bokaro and North Karanpura Blocks, after the in principle approval of EC, as mentioned above, it is now proposed to carry out drilling, completion and testing activities in the three Blocks as per following break-up: Block Pilot Well Type Vertical Horizontal Jharia (Parbatpur, outside 6 sq. km. central part) 6 0 Jharia (Outside Parbatpur) 2 0 Bokaro 8 2 North Karanpura 3 1 Total 19 I3 4.0 Schedule of Work Execution It is proposed to execute the work through Integrated Turnkey Contract including all the activities starting from civil work to drilling, completion, coring, logging, laboratory studies, reservoir studies and production testing. The work schedule shall spread over a period of 31 months from the date of award. ONGC's role in this case shall be limited to obtaining statutory clearances and land acquisition required for drill sites. 5.0 Cost Estimates 5.1 CC in its 277th meeting held on 5.5.2005, while according the in principle approval for carrying out development activities in 6 sq. km. central part of Parbatpur area in Jharia Block through horizontal wells, also accorded in principle approval for carrying out drilling, completion end testing of 22 pilot wells (19 vertical and 3 horizontal) in three blocks- Jharia, Bokaro and North Karanpura, through Integrated Contract. Under the proposed Integrated Turnkey Contract, the cost for the execution of the work schedule is now estimated to be Rs. 225.6 Crore. The estimated cost includes all technical and non-technical contingencies. The costs have been estimated based upon in-house data, budgetary quotes and assumptions based upon interactions with USA and Australian CBM Service Providers. Block-wise break up of the costs shall be as follows: Block Cost Estimate (Rs. Crore) Jharia 082.04 Bokaro 102.54 North Karanpura 041.02 Total 225.60 5.2 The detail, activity-wise breakup of cost is given at Annexure-I 6.0 Approval Sought: 6.1 The approval of PAC / Board is solicited for "Drilling , Completion & Testing of 22 Pilot Wells (19 Vertical & 3 horizontal) in Jharia, Bokaro and North Karanpura CBM Blocks." at an estimated capital cost of Rs. 225.6 Crore with project completion schedule of 31 months from the date of award (LOI). 7.0 Resolution

7.1 PAC may deliberate and recommend the proposal for consideration and approval by the Board. The Board is requested to pass the following resolution as recommended by PAC with or without modification(s) as deemed fit. 7.2 "RESOLVED THAT approval of the Board; be and is hereby accorded for an expenditure sanction of Rs. 225.6 crore for "Drilling , Completion & Testing of 22 Pilot Wells ( 19 Vertical & 3 horizontal) in Jharia, Bokaro and North Karanpura CBM Blocks" with completion schedule of 31 months from the date of placement of LOI.

Annexure-I Block-wise Cost Break-Up of Different Activities

Sl. Activity No. Jharia Bokaro North Block Block Karanpura Block 1 Civil work 06.76 08.46 03.38 2 Drilling of 22 Wells 34.00 42.50 17.00 ( 19 vertical and 3 horizontal 3 Laboratory Studies 00.47 00.59 00.24 4 Hydro-Fracturing 14.51 18.14 07.25 5 Logging 06.33 07.91 03.16 6 Pre-Frac Reservoir 02.08 02.58 01.04 Tests 7 Post-Frac 00.69 00.86 00.35 Reservoir Tests 8 Well Completion 02.47 03.09 01.24 9 Production Testing 01.05 01.32 00.53 Subtotal 1 to 9 68.36 85.45 34.19 19 Contigency @ 13.67 17.09 6.86 20% of subtotal TOTAL 82.03 102.54 41.03 Total 018.6 093.5 001.3 039.9 017.4 005.7 001.9 006.8 002.9 188.0 37.60 225.60