Essar begins CBM gas supply to GAIL

New Delhi: Ruia family-owned Essar Group has started supply of gas produced from coal seams to state-owned GAIL India.

In a tweet, the group said Essar Oil and Gas Exploration and Production Ltd (EOGEPL) "commenced supply of CBM gas from its Raniganj East block (in West Bengal) to GAIL." EOGEPL had in August signed a 15-year contract to supply the block's entire gas production to GAIL, Essar tweeted.

Peak coal bed methane (CBM) production from Raniganj East block is envisaged at 2.3 million standard cubic metres per day. 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.

At the time of the signing of Gas Sale and Purchase Agreement (GPSA) in August, EOGEPL had said it would 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.

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 metres per day of gas, which will be gradually scaled to 2.3 mmscmd.