Essar submits $400m plan for Raniganj CBM

Vol 13, PW 19 (11 Mar 10) Exploration & Production

Mumbai-based Essar Oil is about to clear the final hurdle before it can begin commercial production from its 500-sq km Raniganj East CBM block located in West Bengal.

PETROWATCH learns Essar submitted its Field Development Plan (FDP) for RG (East)-CBM-2001/1 to the DGH last month (February). In its FDP, Essar says it will invest $400m to produce 3.5m cm/d of CBM from 500 wells by end-March 2013.

These wells will be drilled across a 250-sq km â€کsweet spot’ (the best identified drilling location) and will have 80-acre intervals between each other. Under the PSC, the FDP needs to be approved within 120 days of submission but Essar sources tell us it is in talks with the DGH to secure approval by next month (April).

“There will be a field visit by DGH officials as part of the approval process,â€‌ reports a company source. “We expect this visit to happen before the end of March.

â€‌ All Raniganj CBM sales will be classified as â€کtest gas’ sales until the FDP is approved and implemented, we hear. So far Essar has drilled 15 test wells in Phase-I and nine exploration wells in Phase-II for which the Minimum Work Programme is 60 wells to be drilled by March 2012.

It is also laying a 50-km total length, 16-inch diameter pipeline to the Durgapur industrial area in West Bengal located 26-km away, which will be used to begin commercial supplies to its first two customers for Raniganj CBM: carbon manufacturer Philips Carbon Black, with whom Essar has signed a 10-year contract; and a private steel producer, whose name could not ascertained. Essar refuses to give its planned CBM selling price for which we understand it has sought oil ministry approval.

“We are targeting fuel oil users,â€‌ says Essar. “So our CBM will be about 10% cheaper than fuel oil.

â€‌ Essar plans to produce 300,000 cm/d of Raniganj CBM by end-December this year and is in talks with five other customers whose names it declines to disclose.