Essar Oil, which is slated to begin producing gas from below coal seams by the year end, has seen reserves in its Raniganj coal bed methane (CBM) block in West Bengal raised by 44.7 per cent.
Essar plans to drill 500 wells over the next 3-4 years to produce 3 million standard cubic meters per day of peak gas output from the CBM block whose life has been assessed at 20 years, said Shishir Agrawal, CEO and Executive Director, Essar Exploration and Production Ltd - a unit of Essar Oil Ltd.
He said the reserves in the block have been revised upward to 60.77 billion cubic meters (bcm) following extensive mapping of the reservoir through 17 core holes drilled by Essar. "We have a very good reservoir."
Essar will invest $300 million in the block but currently needs $150 million for which it is in talks with banks.
"On the basis of the exploration results of Essar Oil's Raniganj CBM block, the Director General of Hydrocarbons (DGH) has upgraded its gas-in-place estimates from 42 bcm to 60.77 bcm," the company said in a statement.
Separately, Neterland, Sewell and Associates Inc of USA is doing CBM reserve certification for the block and results are expected over the next couple of months, it said.
Agrawal said Essar has completed the first phase of work involving drilling of 17 information and 15 production test wells. "These wells are currently de-watering and producing some CBM gas."
Raniganj block is located in the industrial region of West Bengal with two major steel plants of SAIL, three existing and one upcoming power plant and a range of industries with huge appetite for gas in the vicinity.
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"The area is also dotted with a number of tier-II and III tonws, offering a great market for Compressed Natural Gas (CNG) as a clearner transportation fuel and for city gas distribution," the company said.
The projected demand for gas within a 150 km radius of the block was around 18 million standard cubic meters per day in 2010 which is expected to increase to 50 mmscmd by 2017.
"This indicates a definite deficit in supply with respect to the demand which means that gas marketing would be an easy task," Essar said. "The only barrier to direct gas sale appears to be the lack of transmission and distribution infrastructure in the region."
While CBM transportation using cascades to cater to smaller and remote customers is being planned, Essar plans to lay pipelines to cater to the industrial demand.
Raniganj is the country's oldest coal-mining zone. The block is located about 150 km from Kolkata near the steel city of Durgapur in Burdwan district.