Essar Oil & Gas eyes new consumers for its CNG business in Unlock 1.0

Expecting an improvement in its business in June after lockdown norms have been relaxed, Essar Oil & Gas Exploration & Production Ltd (EOGEPL) is planning to acquire new consumers to grow its compressed natural gas (CNG) business further.

The company set up a CNG facility in Durgapur in West Bengal in February 2020 with 50,000 standard cubic meters per day capacity (scmd). The facility can supply gas in a 150-km radius.

“We have signed up with a new customer in Jamshedpur and are on the lookout to acquire new customers in Jamshedpur, Bokaro, Kolkata and others, to whom we can supply CNG”, Vilas Tawde, managing director and CEO at EOGEPL said.

Currently, the company has around 20 consumers, based in and around Durgapur in West Bengal. While fertiliser, petrochemical and power projects are the major industrial consumers of CNG, the steel sector is fast emerging as a new consumer.

“The demand is expected to grow, and we need to be ready with our set of consumers to increase this business further”, Tawde said.

While the company's sales volumes at present are 65 per cent as compared to the pre-lockdown levels in March, it expects volume to improve further to 80-85 per cent in June as factories open up and resume operations. Tawde expects companies to resume normal operations after July which will drive demand further.

The West Bengal government has already allowed public as well as private companies to operate at their full workforce capacity which is driving optimism among various companies.

However, as compared to pre-lockdown levels, the prices of CNG are down by 20 per cent.

“On the revenue front, April was bad, but we recovered a bit in May and are expected to improve further in June”, Tawde said.

With Coal India proposing a second round of commercial Coal Bed Methane (CBM) exploration and extraction, EOGEPL is currently studying the technical clauses.

Although the Coal India leases are is expected to hold 90 TCF of CBM, Tawde said that the entire monetary risk has to be borne by the developer, which is substantial and the blocks on offer are smaller in size.

“No decision has been taken to participate in the tender yet. We have to first see and understand the potential in the blocks,” Tawde said.

EOGEPL is planning to double its CBM production from its Raniganj East Block in West Bengal as the GAIL gas pipeline, connecting users in Durgapur, is expected to commence operations from September this year. 

EOGEPL currently has an installed capacity of 1.6 mmscmd of CBM across 348 wells and is planning to increase it to 2.9 mmscmd with an addition of 200 wells.