Essar plans first CBM sales this month

Vol 14, PW 6 (09 Sep 10) Midstream & Downstream

Essar Oil is confident it can begin much-delayed commercial sales from the 500-sq km Raniganj East CBM block in West Bengal by the end of this month (September).

“Essar expects ministry approval (of its CBM selling price) any time now,” an industry source tells PETROWATCH. He adds the ministry is expected to approve a price around $5.50/mmbtu – the same as CBM sales from ONGC’s Jharia block in Jharkhand.

Essar’s first supplies from RG (East)-CBM-2001/1 will go to industrial carbon producer Philips Carbon Black in West Bengal’s Durgapur district, under a 10-year contract for 60,000 cm/d. Essar has almost completed a 16-inch diameter, 26-km pipeline from the upcoming Raniganj gas gathering station to the outskirts of Durgapur.

“The last kilometre of this pipeline is now being buried,” says an industry source. Another 12-inch diameter, 14-km pipeline, he adds, will continue from the outskirts of Durgapur to connect several factories nearby.

Initial CBM sales will be formally called ‘test gas’ because the DGH has yet to approve Essar’s $400m Field Development Plan (FDP) submitted back in February this year. But DGH officials visited Raniganj in late August (last month) leading many to believe that the FDP will be approved by next month (October).

For now, Essar is flaring 20,000 cm/d of Raniganj CBM produced from 15 test wells drilled in Phase-I, which ended last May (2009). “Some wells are yielding gas,” says an observer, “and some are being de-watered.

Average production at each well is about 2000 cm/d.” Once ministry approval comes through, initial Raniganj commercial production will be 30,000 cm/d rising to 60,000 cm/d in two months.

Essar has also revived plans to “seed the local market” by supplying CBM to small factories in and around the Durgapur industrial belt in ‘cascades’ - cylinders stacked horizontally on trucks.

LNG Summit