New Delhi: The operator of India’s second largest non-state refiner, Essar Oil Ltd, may start production of natural gas from coal seams in West Bengal by the end of this year, an official said on Wednesday.
The area has gas reserves of 2.2 trillion cu. ft and may produce 2.5 million cu. m a day of the cleaner burning fuel at the peak rate in three years, Shishir Agrawal, chief executive officer of Essar Exploration and Production India Ltd, said in an interview. The reserves are equal to 19% of the deposits in Krishna-Godavari (KG) D6 block, the country’s biggest gas field operated by Reliance Industries Ltd.
Essar Oil was among explorers that bid for coal bed methane fields when they were first auctioned by India in 2001. India, which imports about 75% of its energy requirements, is currently holding talks with potential bidders for India’s biggest oil and gas field auction, including 10 coal bed methane blocks.
Energy requirements: Exploration at the Krishna-Godavari (KG) D6 basin. Essar’s Bengal reserves are equal to 19% of deposits in the basin.
“All this gas production and discoveries may not be enough to bridge the shortfall as demand is continuously rising,” A.N. Sridhar, a fund manager at Sahara Asset Management Co. Pvt. Ltd in Mumbai, said by telephone. “Production costs for industries will, however, reduce as domestic gas starts to replace more expensive naphtha and fuel oil.”
Reliance Industries, India’s most valuable company, started producing natural gas from KG-D6 in April. The explorer may increase production from the field to 80 million cu. m a day by the end of the year, which will double domestic output.
India imports gas in liquefied form to meet shortages.
Essar Oil gained 1.83% to Rs131.05 at close in Mumbai trading after climbing as much as 4.12%.
The stock has gained 53% this year compared with a 56% increase in the benchmark sensitive index of the Bombay Stock Exchange.
The gas reserves in the West Bengal area were certified by the Directorate General of Hydrocarbons (DGH) last week, Agrawal said.
The field will produce the fuel for up to 25 years, he said.
Great Eastern Energy Corp. Ltd, listed on the London Stock Exchange, started selling gas from coal beds in West Bengal in July 2007, according to the company’s website. The company produces 68,000 cu. m of coal seam gas a day, oil minister Murli Deora had said on 24 February.
Reliance Industries and Oil and Natural Gas Corp. Ltd, India’s most valuable companies, have 135.8 billion cu. m of coal seam gas reserves, the minister said that day.
“We will sell the gas at prices our competitors may offer in West Bengal,” Agrawal said. The government has set a price of $4.2 (around Rs205) a million British thermal units for the KG-D6 gas, transportation charges and taxes excluded.
India is offering 70 oil and gas areas to domestic and overseas companies in a bid to increase local output and reduce dependence on imports. Bids for the 24 deep-water blocks, 28 shallow-water blocks and 18 on-land blocks on offer will close on 12 October, according to the website of the oil ministry.