Kolkata: The city of Kolkata could find its commercial transport, industries and perhaps even some of its homes using natural gas as fuel if a new plan, signed Thursday, to distribute viable methane gas takes off in early 2009.

Oil and Natural Gas Corp. Ltd (ONGC) and Calcutta Compressions and Liquefaction Engineering Pvt. Ltd (CCL)—a private company—signed a memorandum of understanding on Thursday for distribution of coal bed methane, or CBM, in Kolkata and adjoining areas, starting January.

It is too early to predict how CBM would be received but, if embraced widely, it could help reduce pollution in Kolkata, where almost all commercial vehicles still run on diesel. Three-wheeled auto rickshaws run on petrol and liquefied petroleum gas, or LPG, in Kolkata but, they too are a major pollutant because most of them end up using adulterated fuel.

In major cities, such as Delhi and Mumbai, introduction of compressed natural gas, or CNG, has led to substantial reduction in pollution. CNG is not available in Kolkata.

CBM, which has a high calorific value of around 8,000kcal per cubic metre, can be used as an automotive fuel with the help of a converter.

This converter, which CCL will get from a French firm and distribute in India, is going to cost around Rs19,000 for auto rickshaws, Rs30,000 for petrol cars and up to Rs45,000 for diesel cars. Some diesel engines might, however, need minor modifications.

CCL is looking to tie up with Greater Calcutta Gas Supply Corp. Ltd (GCGSC), a West Bengal government-owned gas distribution firm, which owns an underground network of pipelines in Kolkata and adjoining areas. Though the two firms have not yet reached an agreement, the plan is to initially distribute 60-70% of the gas sourced from ONGC through GCGSC’s pipelines to industrial establishments in Kolkata and two neighbouring districts—Howrah and Hooghly—according to CCL’s director U.K. Bagaria.

GCGSC managing director M.V. Rao confirmed his company had received a proposal from CCL, but refused to elaborate, saying: “I can’t speak about it until a few days later because we haven’t signed an agreement as yet.”

CCL will set up four dispensing stations over the next six months and sell 30-40% of the gas it sources to taxis and auto rickshaws to start with.

“The government has promised to help us with this, and eventually we intend to sell to buses run by the state’s transport corporations as well. The transport minister (Subhas Chakraborty) has said if we could guarantee continuous supply he would launch CNG buses in the state,” said CCL director Srikanto Banerjee.

CCL proposes to initially price the gas at Rs35 per kg, or a shade over Rs25 per litre. It’s going to be significantly cheaper than diesel, but slightly more expensive than CNG in other cities such as Delhi and Mumbai, said Kingshuk Ghosal, director (technical), of CCL.

“That’s because of transportation cost which is going to be high initially, but with scale, we’ll be able to match the price of CNG in other cities,” Ghosal said.

The company, which has hired a consultant for a feasibility study, estimates demand from private and commercial vehicles in Kolkata can touch 3 million cubic metres a day. “If we could ensure uninterrupted supply, CBM could become household cooking gas as well,” said Ghosal.

Under the agreement signed on 10 July, ONGC will supply 5,000 cubic metres of CBM a day, which will be transported to Kolkata by road in steel containers. The gas, containing 97% methane, will be recovered from two CBM blocks in Jharia in Jharkhand.

ONGC will sell the gas to CCL at $5.1 per mbtu (or Million British Thermal Unit), which translates to around Rs8.10 per cubic metre. Supply will be scaled up to 50,000 cubic metres a day in a year, and to 750,000 cubic metres by end of 2010, according to CCL officials.

The “production potential is huge but, we can’t put a figure to it just as yet. Through tests we have established that the reserve is big enough for commercial production from our five CBM blocks in the region (in Jharkhand and West Bengal) to be economically viable,” said an ONGC official who didn’t want to be named as he is not authorized to speak to the press.

“The two blocks from which gas will be supplied to CCL measure 85 sq. km in all, but the area under exploration at present is as small as 6.5 sq. km,” he added.

As production and demand go up, CCL plans to lay a pipeline from ONGC’s CBM blocks in eastern India to Kolkata, which is estimated to cost around Rs325 crore. “But, we could opt for other means of transportation as well, such as turning the gas into liquid and carrying it in cryogenic containers. A liquefaction plant could cost Rs100 crore or thereabouts,” said Bagaria.

aniek.p@livemint.com