Buoyed by new policy, Essar to invest Rs 70 bn to explore shale in Ranigunj

Representative Image
With the Union Cabinet clearing a policy giving operators the option to explore all unconventional hydrocarbons in the existing field, companies have started firming up their shale exploration plans. 

Essar Oil & Gas Exploration and Production (EOGEPL) on Thursday said that it is planning to invest about Rs 70 billion for developing shale gas potential in its existing coal-bed methane block at Ranigunj in 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 existing block.  

"We would need to invest close to Rs 700 billion for developing the 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 EOGEPL.    

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), CBM contracts and nomination fields. The move is expected to benefit Oil and Natural Gas Corporation (ONGC), Oil India, Vedanta Cairn, Reliance Industries and CBM players like EOGEPL. 

Now, an area of 72,027 square kilometre held under PSCs of pre-New Exploration Licensing Policy (NELP)/NELP regime and 5,269 sq km area 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 coal-bed methane 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 added. The company is currently producing from 348 wells in the block and intends to drill another 150 wells in the future. The company 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 months daily average price of Brent crude.   

EOGEPL has already invested more than Rs 40 billion in the Ranigunj 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.  

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel