Essar Oil to double coal bed methane output in India; raise UK refinery capacity

Essar Oil, which sold its Vadinar refinery in Gujarat to a Russian group led by Rosneft in $12.9 billion deal, is now expanding its oil and gas business elsewhere. The company is investing in the coal bed methane (CBM) business in India and the Essar Oil UK refinery.

Essar Oil and Gas Exploration and Production Ltd plans to double coal bed methane production from its flagship Raniganj block in West Bengal by 2018.

Essar Oil, owned by the UK-based Ruias, also plans to invest around $250 million to expand the capacity of its Stanlow Refinery in the financial year ending March 2018.

''Essar Oil and Gas Exploration and Production Limited is currently producing close to 1 mmscmd (million standard cubic meters per day), from about 350 wells in its Raniganj block. We expect to reach a production of about 2 mmscmd by 2018 and expect to maintain this level for the next few years,'' a company spokesperson said in an emailed response.

CBM, a natural gas stored or absorbed in coal seams and contains 90-95 per cent methane, and with the world's sixth-largest proven coal reserves in the world, holds significant prospects for exploration and exploiting CBM.

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.

The Raniganj (East) block has sizeable CBM reserves with 25-30 years of field life. For the offtake of the increased gas production, Essar said it already has the required customer tie-ups.

The company has so far invested Rs4,000 crore in its Raniganj project. With most of the required gas compression and transmission facilities already in place, the company expects only incremental capital expenditure going forward. This would be funded through a mix of debt and equity, the company said.

Essar owns CBM mining rights in five coalfields with an area of 2,700 sq km and prospective resources of about 10 trillion cubic feet. Raniganj is one of five CBM blocks Essar holds. Other four blocks are Rajmahal in Jharkhand, Talcher and Ib valley in Odisha and Sohagpur in Madhya Pradesh.

''The other four CBM blocks are in the exploration stage. This fiscal, we plan to begin on ground physical activity in two of these blocks. For the other two blocks, we are awaiting regulatory clearances to begin work,'' according to a company spokesperson.