CIL to Return 75% Area of Mozambique Blocks

UNSUCCESSFUL EXPLORATION Move follows the local govt’s decision to double charges of holding the blocks, which have so far not yielded any coal worth the effort
State-run miner Coal India will relinquish 75% of the area in the two coal blocks it had acquired in Mozambique about six years ago.The move follows the local government’s decision to double the charges of holding the blocks, which have so far not yielded any coal worth the effort.

“At a board meeting last week, it was decided that foreign subsidiary of Coal India, Coal India Africana Ltd, will just about keep 54 sq km of the 205 sq km blocks that it had earlier acquired,“ a senior coal sector official said on condition of anonymity . “The decision was taken following completion of a near three-year exploration programme.“

About six years ago, Coal India had won a five-year licence for exploration and development of A1 and A2 blocks in Mozambique’s north-western province of Tete.The blocks were unexplored and it was upon Coal India to explore and ascertain the quality of the coal there. Following the acquisition, Coal India set up Coal India Africana for carrying out the exploration at the two blocks.

When Coal India acquired the blocks, the authorities in Mozambique had indicated that the 205 sq km of area holds a mix of premium quality and normal variety of coal, and reserves could be around 1 billion tonne. “We were told that 20% of the deposits in these blocks are expected to be of superior variety, good enough to be used in steel making, while the remaining was expected to be thermal coal that could be used as fuel in power plants. It seemed a viable option at that time,“ said the official quoted above.

But on exploration, Coal India found that 75% of the area contained nothing that could be called coal. The state-run miner had by then invested close to `. 500 crore in acquiring and exploring the two blocks. It also had to renew its licence during this period.

“The quality of the reserve at a large area of the two blocks does contain carbon but it is not good enough to be called coal,“ a senior Coal India executive said, requesting anonymity. “This reserve cannot sustain a 12% rate of return on investment in the medium to long run. Simply put, it is not coal.“

It took Coal India almost two years to explore the entire area.Sample coal was sent to India for analysis. Coal India had earlier targeted production from the blocks by 2014 but delays in awarding the exploration rights delayed the process. Renewal of the licence also added to the delay. The miner planned to bring the mined coal to India to meet the nation’s rising demand for thermal and coking coal.

Coal India lost about a year in appointing an explorer for the blocks.It had to scrap tenders twice due to technical reasons.

The previous UPA government was in favour of importing coal to meet the domestic requirement.But the NDA government at the Centre is keen on attaining self-sufficiency in coal production and hopes to stop import of thermal coal within the next five years.Thus, foreign acquisition of thermal coal is not on the government’s priority list any more.

Source: Economic Times; 07 July 2015

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