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Essar Oil set to focus on shale gas exploration

Firm plans $30-million investment to drill shale wells for assessing productivity

Business Standard

Nov 9th, 2018

After the sale of its Vadinar refinery in August 2017, Ruia-promoted Essar Group is focusing on its exploration and production business in the country. Part of Essar Oil and Gas Exploration and Production’s (EOGEPL)’s strategy for the next three to four years is to further invest in coal-bed methane (CBM) block and put shale gas on India’s map.

“We plan to drill a few shale exploratory and horizontal test wells to assess the resources and productivity in about 2-3 years. This will involve an indicative budget of $30 million,” said Vilas Tawde, managing director and chief executive officer for EOGEPL.

In addition, there are investments planned in the company’s CBM portfolio. Essar Oil has entered into a supply contract with GAIL for production from its Raniganj CBM block.

“GAIL supply contract was operational in October. We are confident that saleable gas volume of up to 1 million standard cubicmetresperday(mmscmd) production would be achieved by March 2019. Further, by the process of production ramp-up, the envisaged production would be in the range of 1.5 mmscmd and 2 mmscmd by March 2020 and March 2021, respectively,” Tawde said.

On the company’s current debt position of Rs 15 billion, Tawde said it would look to retire most of the debt in three to four years. “We will revisit the possible options for this once we ramp up to beyond 1 mmscmd by March 2019.”

The planned investment includes Rs 10 billion for development of the Raniganj CBM block. “There is a development plan for up to 500 wells in Raniganj block, which will take us to 2.6 mmscmd; of which 2.3 mmscmd will be the saleable, the investment, would be around Rs 10 billion,” Tawde said.

The company also plans to focus on development of Mehsana block. EOGEPL intends to undertake six exploration and appraisal wells in 18 months, starting tentatively from FY20. This will involve a capital expenditure of $5 million,” Tawde said.

Essar Oil plans to make a headway in its Vietnam block, which the company won in 2010. “We are upbeat on Vietnam. In June-July next year, we will be drilling our first well. The policy would be similar to what we have in India,” the company official said.

Essar Oil sold 50 per cent of its interest in this block to ENI SpA in July 2012 and will now develop the block with ENI as a partner. Tawde said the company was keenly following various upcoming and announced bid rounds in India. “Our approach to acquire new portfolio would be focused on possible synergy with the existing assets/concessions,” he said.