Essar to invest ~70 bn in gas shale in Raniganj

Essar Oil and Gas Exploration and Production said on Thursday it was planning to invest about ~70 billion on developing shale gas potential in its existing coal-bed methane block at Raniganj, West Bengal.

With the Union Cabinet clearing a policy giving operators the option of exploring all unconventional hydrocarbons in existing fields, companies have started firming up their shale exploration plans.

Essar Oil and Gas Exploration and Production (EOGPL) said on Thursday it was planning to invest about ~70 billion on developing shale gas potential in its existing coalbed methane block at Raniganj, West Bengal. It has already appointed US-based Advance Resource International to come up with a plan on appraisal and development of shale in the block. “We would need to invest close to ~70 billion for developing shale gas potential in the block to recover about 1.6 trillion cubic feet (tcf) from the field,” said Vilas Tawde, managing director and chief executive officer of EOGPL.

Based on the new policy, which is yet to be notified, exploration of unconventional hydrocarbons can be carried out under the existing production sharing contracts (PSCs),

coal bed methane (CBM) contracts and nomination fields. The move is expected to benefit Oil and Natural Gas Corporation (ONGC), Oil India, Vedanta Cairn, Reliance Industries (RIL) and CBM players like EOGPL. Now, an area of 72,027 square kilometres held under PSCs of the pre- New Exploration Licensing Policy /NELP regime and 5,269 sq km under CBM contracts will be opened up for simultaneous exploration and exploitation of conventional or unconventional hydrocarbons.

This comes at a time when Essar has signed a gas sale and purchase agreement with Gail early this week. The deal entails a 15-year gas supply contract whereby the company will be able to monetise its entire CBM production of 2. 3 million metric standard cubic meter per day (mmscmd).

“This is mutually beneficial and a major step in our efforts to expand business,” Tawde said. The Ruia-owned firm is currently producing from 348 wells in the block and intends to drill another 150 wells in the future. It had invited bids from prospective buyers of CBM gas, following which Gail submitted the winning bid, offering a price that will be linked to the three-month daily average price of Brent crude.

EOGPL has invested more than ~40 billion in the Raniganj East CB block towards drilling wells and setting up other infrastructure. The company is expecting the current production of 1 mmscmd to be scaled up to 2. 3 mmscmd soon.