Essar signs contract with GAIL for offtake of Raniganj CBM output

Essar Oil & Gas Exploration and Production Ltd (EOGEPL) today said it has signed a Gas Sale and Purchase Agreement (GSPA) with state-owned gas utility GAIL India for sale of entire coal-seam gas (CBM) it plans to produce from Raniganj block.

"The GSPA entails a 15-year gas supply contract whereby the company will be able to monetise its entire coal bed methane (CBM) production of 2.3 million standard cubic meters per day from the Raniganj East block at a globally competitive price," the company said in a statement here.

Essar had in February this year sold its entire CBM production from the West Bengal block to GAIL using the same formula that Reliance Industries used for pricing of its CBM. The price comes to around USD 8 per million British thermal unit at the current oil price.

Having attained the GSPA milestone, EOGEPL would now be focussing on ramping up production from its existing 348 CBM wells and the 150 wells it intends to drill in the future in the block.

"The company is also looking at other opportunities in the unconventional space, like shale gas exploration that exists in the EOGEPL portfolio," the statement said.

Earlier last week, the government approved the Simultaneous Exploitation of Unconventional Hydrocarbons, which has broadened the scope for foraying into this space in addition to its existing licences.

"EOGEPL has appointed international consultants to study its assets and is keen to go ahead with extensive and structured exploration to development programmes across these assets. It is especially upbeat about the vast shale potential in the Raniganj East CBM block," it said.

EOGEPL has already invested more than Rs 4,000 crore in the Raniganj East CBM block in drilling wells, setting up supply infrastructure, and laying customer pipelines to Durgapur and nearby industrial areas.

The block has 348 completed CBM wells alongside robust gas and water handling capacity.

The Raniganj East block currently produces more than 1 million standard cubic meters per day of gas, which will be gradually scaled to 2.3 mmscmd.

On signing of the agreement, Vilas Tawde, MD & CEO of EOGEPL, said, "The signing of this agreement is mutually beneficial and is a major step in our efforts to expand our business. This is in line with the government's vision of moving towards a gas-based economy, thus fuelling development. Downstream consumers within GAIL's network, such as gas-based industries and households, stand to benefit from this assured supply of gas."