Essar begins piped CBM supplies to Durgapur

Vol 15, PW 5 (08 Sep 11) Midstream & Downstream

Mumbai-based Essar Oil has become the second company in India after Great Eastern Energy to sell piped gas from a CBM block.

PETROWATCH learns Essar began supplies about two weeks ago from its 500-sq km Raniganj East CBM block in West Bengal to graphite electrodes manufacturer Graphite India. Essar is supplying up to 45,000 cm/d from its Raniganj Gathering Station-1 to the Graphite factory in West Bengal’s Durgapur district through a 16-inch diameter, 25-km gas pipeline.

Essar expects supplies to increase to 60,000 cm/d from 15 wells in two months. “Essar needs at least a month to pump water from the wells and achieve maximum production,” explains an industry source.

The oil ministry, he adds, is allowing Essar to charge $5.25/mmbtu for CBM at the ‘well-head,’ plus $1/mmbtu as gas transportation charges plus Essar’s own undisclosed margin. These gas sales are currently classified as ‘test gas’ because Essar is still technically in the exploration phase at Raniganj East.

“But these are really ‘commercial’ supplies,” we learn. “Essar can’t say so until it secures a PML (Petroleum Mining Lease) from the West Bengal government.

” Essar plans to drill 300 wells in total at Raniganj East within the next two years but has suspended drilling until the monsoon ends in West Bengal where the ground has become “slushy.” Drilling is likely to resume by November with three ‘air-drilling’ rigs.

Essar originally planned to begin first piped gas supplies from Raniganj to Durgapur-based industrial carbon manufacturer Philips Carbon Black. But Philips tired of waiting for official clearances for Essar’s supplies and turned to Great Eastern instead, taking gas from its Raniganj South CBM block.

We hear Philips Carbon Black wants more CBM and could still buy from Raniganj East.

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