Green nod to Essar Oil's Raniganj block

Don't want to miss the best from Business Standard?

In a move that could give a fillip to India's unconventional gas production, the ministry of environment and forests has given the phase-III clearance for Essar Oil's Raniganj block in West Bengal. The company will now be able to drill up to 650 wells, compared with the current 135.

The clearances would help Essar Oil invest another Rs 2,500 crore to increase the number of drilled wells to 300 by the end of this year and also rise production to three million standard cubic metres of gas per day (scmd), up from around 60,000 scmd. The company, which owns five blocks across the country and is the largest player in coal-bed methane (CBM) space in the country, hopes to start drilling on its Rajmahal gas field in Jharkhand, with reserves of 4.7 trillion cubic feet by next year.

Currently, the firm has five CBM blocks —" Raniganj, Rajmahal, Sohagpur in Madhya Pradesh and Ib Valley and Talcher in Odisha. "If all the clearances are in place for the five blocks, we would be able to produce about 10 million scmd of gas per day within the next five years," said Iftikhar Nasir, CEO (exploration and production), Essar Energy.

As of now, Essar is producing CBM from 57 wells out of the total 135 drilled in the field. It has two blocks in Raniganj with an estimated reserves of 113 billion cubic feet (bcf) gross (3.2 billion cubic metres), or 18.8 million barrels of oil equivalent. Apart from Essar, Great Eastern Energy is the only other commercial producer of CBM in the country.

According to Nasir, the company will scout for local partners in countries such as Madagascar and Nigeria to take up projects. The company, which is a part of the UK-listed Essar Energy, said that it follow whatever pricing formula that the government will come out with following the Rangarajan committee report. While the firm is awaiting a government decision on an appropriate commercial sales price for Raniganj, it will continue selling gas from the block at the approved test sales price.

The majority of the gas sold from the project is being sold to a new Matrix Holding Fertiliser plant about 30 kilo metres away from the Raniganj field. The company is reportedly selling gas to Matrix at a price of $6.2 per million British thermal unit (mBtu).

The West Bengal government has also plans to tie up with Essar to run a fleet of buses of state transport corporations such as Calcutta State Transport Corporation ( CSTC), South Bengal State Transport Corporation (SBSTC), North Bengal State Transport Corporation (NBSTC), West Bengal Surface Transport Corporation (WBSTC) and Calcutta Tramways Company (CTC), using coal bed methane.

The plan is to bring about 50 buses under the project. The firm is already in talks with Indian Oil to put in place a franchise agreement that will enable access to their pump facility at the bus depots to convert CBM into Compressed natural gas (CNG ), which can be used to run the buses.

Essar Oil had signed a production contract for the blocks in 2002 and got exploratory licence in 2005.