Essar Oil and Gas to invest Rs 900 cr in CBM block

New Delhi: Ruia family-owned Essar Oil and Gas will invest Rs 900 crore in drilling 150 more wells on its Raniganj CBM block in West Bengal to more than double gas output to 2.3 million standard cubic metres per day by 2021, its Managing Director and CEO Vilas Tawde said.

Essar Oil and Gas Exploration and Production Ltd (EOGEPL) has so far drilled 348 wells on the blocks and is producing 1 mmscmd of gas from coal seams.

"We have already invested about Rs 4,000 crore in the Raniganj East coal-bed methane (CBM) block in drilling wells, setting up supply infrastructure, and laying customer pipelines to Durgapur and nearby industrial areas. Another Rs 900 crore would be invested in drilling the additional 150 wells over the next two years," he said.

The company is selling entire production of coal-seam gas or CBM from the block to state-owned GAIL India Ltd.

"The April price is USD 8.164 per million British thermal unit on net calorific value (NCV) basis," he said.

GAIL in February outbid Matix Fertilizers and Chemicals Ltd, Graphite India Ltd and Positron Energy Pvt Ltd to buy entire output from Raniganj. CBM is a natural gas stored or absorbed in coal seams and contains 90-95 per cent methane.

According to the Directorate General of Hydrocarbons, India has the fifth largest proven coal reserves in the world and, therefore, holds significant prospects for exploration and exploitation of CBM.

Raniganj East block is India's most prolific CBM block, holding 1 Trillion cubic feet of recoverable reserves. The firm is eyeing a turnover of Rs 600 crore from the CBN business in 2018-19 and expects it to double in next two years.

Its CBM assets include five blocks, holding an estimated 10 Tcf of gas reserves spread over 2,700 square kilometres across West Bengal, Jharkhand, Chhattisgarh, Madhya Pradesh and Odisha. Raniganj East in West Bengal is the only block operational till now. Other four blocks are Rajmahal in Jharkhand, Talcher and Ib valley in Odisha and Sohagpur in Madhya Pradesh.

Tawde said the company will begin drilling on its Sohagpur CBM block in Madhya Pradesh post monsoon. In all 25 crore holes and three test wells would be drilled. Rajmahal will begin production in five years, he said.

Land acquisition approval for the Sohagpur minefield is pending from the Chhattisgarh government and the Petroleum Exploration Licence for the Talcher and Ib Valley coalfields is pending from the Odisha government. It is also on the lookout for CBM mining projects globally but will keep off "matured markets" like the US and Australia.