BLBG : Essar May Start Gas Output From Coal Beds This Year
Aug. 20 (Bloomberg) -- Essar Oil Ltd., operator of India’s second-largest non-state refiner, may start production of natural gas from coal seams in the eastern state of West Bengal by the end of this year, an official said.
The area has gas reserves of 2.2 trillion cubic feet and may produce 2.5 million cubic meters a day of the cleaner- burning fuel at the peak rate in three years, Shishir Agrawal, chief executive officer of Essar Exploration & Production India Ltd., said in an interview. The reserves are equal to 19 percent of the deposits in KG-D6, India’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. The South Asian nation, which imports about 75 percent 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.
“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. 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 cubic meters a day by the end of the year, which will double domestic output. India imports gas in liquefied form to meet shortages.
Certified Reserves
Essar Oil fell 4.7 percent to 128.60 rupees in Mumbai yesterday, declining for the third day in four. The stock has gained 48 percent this year compared with a 54 percent 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 last week, Agrawal said in his office in Mumbai yesterday. The field will produce the fuel for up to 25 years, he said.
Great Eastern Energy Corp., listed on the London Stock Exchange, started selling gas from coal beds in West Bengal state in July 2007, according to the company’s Web site. The company produces 68,000 cubic meters of coal-seam gas a day, Oil Minister Murli Deora said Feb. 24.
Reliance Industries and Oil & Natural Gas Corp., India’s most valuable companies, have 135.8 billion cubic meters 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 per million British thermal units for the KG-D6 gas, excluding transportation charges and taxes.
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 Oct. 12, according to the Web site of the oil ministry.
