Essar to Invest Heavily in Raniganj CBM

Essar Group, plans to invest $500 million to develop more coal bed methane (CBM) blocks in Raniganj, West Bengal.

“The company, in all, plans to drill 500 wells in the CBM-bearing area of Raniganj and has already received approvals for the field development plan,” Naresh Nayyar, managing director, Essar Oil, said in a conference call on Monday.

Essar, one of the early entrants into the CBM business, is currently producing 35,000 standard cubic metres per day (scmd) of gas and will be starting commercial production in the next few months.

“We are awaiting a few statutory approvals and that can take some time,” said Nayyar and added that once the approvals are in place commercial production will begin. Nayyar said so far 33 wells in Raniganj are production stage and 30 more have been drilled.

He said the company is expecting to touch a level of 100,000 scmd of gas production within one year of commercial production and has already tied up with few customers for its sale. The approved price for the gas is at $6.75 per million metric British thermal units (mmBtu).

“It is a broad-based price and will vary depending upon where we sell it and to whom we sell it,” Nayyar said.

An oil and gas expert from a leading international consultancy firm said the biggest problem with CBM gas is that it cannot be transported to large distances. “Most of the CBM gas is concentrated in the eastern parts and it is not connected to an overall gas network in the country. So in spite of being low-capex exercise, CBM is priced higher,” he said.