Essar sniffs Bengal shale scope - Essar | Creating Value

Essar sniffs Bengal shale scope

Sambit Saha

The Telegraph

Aug 3rd, 2018

Essar may spend $1 billion (Rs 6,900 crore) to explore and produce shale gas in Bengal.

The company is working on a detailed exploration plan with the help of consultants which will be submitted to the directorate general of hydrocarbons. Estimates suggest 400 wells may be drilled to take out the gas from the company’s Ranigunj field in Burdwan.

“We are looking at a 3-year horizon to start the production of shale gas from our existing field. This will be possible because of the new policy the Union cabinet approved on Wednesday, allowing the exploitation of unconventional hydrocarbons,” Vilas Tawde, managing director & CEO of Essar Oil & Gas Exploration & Production, told The Telegraph over phone.

Essar has a coal-bed methane (CBM) gasfield in Ranigunj, which produces 0.5 million standard cubic metres per day (mscmd) of gas.

Initial estimates suggest the block may have resources of 8 trillion cubic feet (tcf) and recoverable reserves of 1.5tcf of shale gas.

Unlike CBM, where it takes 2-3 years before gas production can be ramped up, 80 per cent of the recoverable shale gas can be extracted within two years of production, allowing a quick payback period for the field operator.

The extraction of shale gas requires fracturing of rock formation by water to release the natural gas trapped inside the rock. So, in shale gas production, water is a raw material.

In contrast, CBM is produced by de-watering the bore holes that extract gas. Hence, water is a by-product of CBM which is a raw material for shale gas. Essar plans to tap this synergy between CBM and shale gas. Each well could cost $2.5-3 million.

Before Essar starts extracting shale, the company will need to modify the existing production-sharing contract (PSC) with the government, besides receiving approval for field development.

Moreover, the company will need to acquire land to drill the wells, a sensitive issue in a densely populated state such as Bengal.

The new policy, approved by the cabinet, will come as a boon to all hydrocarbon explorers. Under the existing regime of PSCs, contractors are not allowed to explore CBM or other unconventional hydrocarbons in already allotted licensed/leased areas. Similarly, CBM contractors are not allowed to exploit any other hydrocarbon except CBM.

In the pipeline

A consistent availability of natural gas may tempt users of conventional energy to shift to gas. Under the Urja Ganga programme, Bengal is expected to be connected with the rest of the country by a national gas grid by the end of this year.

Essar will link its existing CBM production to the gas grid and raise production from Ranigunj to 1 mscmd from 0.5 mscmd.

The company has capped the production because of lack of demand. The pipeline has so far come to Dhanbad in Jharkhand, about 100km from Durgapur. Public sector GAIL plans to take the pipeline to Calcutta and offer the piped gas to household and public transport, apart from industry.