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Essar Signs GSPA with GAIL for Offtake of Entire Production from Raniganj East CBM Block

Source: www.gulfoilandgas.com 8/9/2018, Location: Asia

Essar Oil & Gas Exploration & Production Ltd (EOGEPL) has signed a Gas Sale and Purchase Agreement (GSPA) with GAIL (Gas Authority of India Limited). The GSPA entails a 15-year gas supply contract whereby the Company will be able to monetise its entire CBM production of 2.3 mmscmd from the Raniganj East block at a globally competitive price.

On signing of the agreement, Mr Vilas Tawde, MD & CEO of EOGEPL said, “The signing of this agreement is mutually beneficial and is a major step in our efforts to expand our business. This is in line with the Government’s vision of moving towards a gas-based economy, thus fuelling development. Downstream consumers within GAIL’s network, such as gas-based industries and households, stand to benefit from this assured supply of gas.”

Having attained the GSPA milestone, EOGEPL would now be focussing on ramping up production from its existing 348 CBM wells and the 150 wells it intends to drill in the future in the block. The Company is also looking at other opportunities in the unconventional space, like shale gas exploration, that exist in the EOGEPL portfolio. Earlier last week, the Government of India approved the Simultaneous Exploitation of Unconventional Hydrocarbons, which has broadened the scope for foraying into this space in addition to its existing licenses. EOGEPL has appointed international consultants to study its assets and is keen to go ahead with extensive and structured exploration to development programmes across these assets. It is especially upbeat about the vast shale potential in the Raniganj East CBM block.

EOGEPL had invited bids from prospective buyers of CBM gas based on a government notification dated 11 April 2017, which lays out a policy framework for the early monetisation of CBM gas. The policy provided marketing and pricing freedom at arm’s length price in the domestic market to contractors of CBM blocks. GAIL submitted the winning bid, offering to pay gas prices that will be linked to the three months’ daily average price of Brent crude. The discovered price will lead to a substantial increase in the Company’s topline.

EOGEPL has already invested more than Rs 4,000 crore in the Raniganj East CBM block towards drilling wells, setting up supply infrastructure, and laying customer pipelines to Durgapur and nearby industrial areas. The block has 348 completed CBM wells, alongside robust gas and water handling capacity. EOGEPL is focussing on production optimisation by drilling more than 500 wells in line with the block’s FDP (Field Development Plan). The Raniganj East block is India’s most prolific CBM block that has achieved gas production of more than 1 mmscmd, which will be gradually scaled to 2.3 mmscmd.

“EOGEPL is one of the pioneers of Unconventional Hydrocarbons in India, having started CBM exploration in the early 1990s with a few R&D wells in Gujarat lignite. Today, the Company has nearly 3,000 sq. km of prime unconventional acreage with a cumulative in-place resource in excess of 18 tcf,” Mr Tawde said.

With the concept of CBM gas becoming a reality, further development of CBM in the Damodar Valley Basin of Eastern India is imminent with the likes of ONGC, GEECL and Coal India also joining the CBM and shale fray. “On an upside, shale development would benefit greatly due to the synergy with CBM operations, like water requirement, and the gas evacuation and handling facilities. Initial estimates indicate that we would need to invest close to Rs 7,000 crore for developing the shale gas potential in the block to recover about 1.6 tcf from the field,” Mr Tawde added.

Work on GAIL’s Jagdshpur-Haldia-Bokaro-Damra pipeline is going on in full swing. Four fertiliser plants in Gorakhpur, Sindri, Barauni and Panagarh, besides 25 others across geographies where City Gas Distribution rights have been awarded recently, will benefit from this pipeline. The total demand in the region is envisaged to be about 20 mmscmd. This would fuel demand in the area, ensuring that producers like EOGEPL would be able to market their gas with ease.

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