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Essar sees shale reserve prospects in Raniganj block

Business Standard

Apr 16th, 2018

Essar Oil & Gas Exploration and Production (EOGEPL) has said the company is expecting reserves of at least 1.5 trillion cubic feet (tcf) of recoverable shale gas in its Raniganj block in West Bengal, which could require investment of at least $1 billion.

It currently produces around 1.5 million standard cubic metres of gas per day (mscmd) of coal-bed methane (CBM) and will go ahead with its shale plans after further policy clearance from the government.

“Our expansion plans are on fast-track and we are looking to produce at least 2.5 mscmd by March 2021,” said Vilas Tawde, chief executive officer, EOGEPL. According to an estimate of the United States Trade and Development Agency (USTDA), the block has around 7 tcf of reserves. “Of that, around 1.5 tcf is recoverable,” Tawde added.

Last month, state-run GAIL had won the contract to buy CBM produced from Essar oil’s Raniganj block. The price will be around $8.16 based on net calorific value (GCV). CBM is the natural gas stored in coal seams and shale can be found at a much deeper level in the same block.

This comes at a time when the Union Cabinet relaxed the rules for state-owned Coal India to extract natural gas below coal seams in its blocks. Till now, Coal India had to apply to the petroleum ministry for a licence to extract coal-bed methane (CBM) from its coal blocks. Now, the world’s largest coal producer does not need such permission.

  • In FY17, India produced 564.6 million standard cubic metre (mscmd) of CBM, up 43%, compared to 392. 9 mscmd produced in FY16
  • Out of the 33 CBM exploration blocks awarded so far, 14 are operational, of which only five are under production or incidental production.

This is expected to increase CBM production in the Raniganj area to an average three mscmd for 20 years, leading to direct investment of around Rs 100 billion. “On an average, every cubic metre of additional CBM produced will save at least Rs 8 on fertiliser subsidy, add Rs 1.6 to state royalty, and bring a saving of Rs 22, considering the LNG import price.Hence, the decision is a boost for the CBM sector,” said an industry expert.

Reliance Industries, Great Eastern Energy and Oil and Natural Gas Corporation are the only other producers of CBM in India. “Producers in the area are also betting on the coming Urja Ganga project (Jagdishpur-Haldia pipeline) passing across the Damodar Valley, as it will turn out to be an excellent market linkage,” Tawde said.

CBM is presently sold at $3.4-15.5 per unit in the country. Essar owns CBM rights for five blocks — Raniganj in West Bengal, Talcher and the Ib Valley in Odisha, Sohagpur in Madhya Pradesh, and Rajmahal in Jharkhand. Looking into the production numbers of FY17, Raniganj East block by Essar is the largest producer of CBM in India with 385 mscmd, followed by Raniganj South field by GEECL at 169.6 mscmd and Sohagpur West by RIL at 6.3 mscmd.

Last year, the government had allowed marketing and pricing freedom to CBM producers. Many CBM players were not producing due to lack of clarity over pricing till then.