Essar Oil plans to lay a 160-km pipeline from Durgapur to Kolkata to transport gas from its CBM blocks to consumers in West Bengal.
Essar Oil has applied to the sectoral regulator, Petroleum and Natural Gas Regulatory Board (PNGRB) for permission to lay a 24-inch pipeline from Durgapur, according to the company's January 13 application to the regulator.
The company is likely to start producing gas found below coal seams, called Coal Bed Methane (CBM), from its Raniganj block in West Bengal this quarter.
The initial output is likely to be 9,000-10,000 cubic meters per day with peak production of 3.5 million standard cubic meters envisaged in mid-2013. Peak output will last for 20 years.
"In order to sell the entire production potential of the block we propose to supply CBM in Kolkata region," Shishir Agrawal, Head Essar Exploration Production Division, said in the application to PNGRB.
A special purpose vehicle would be set up for executing the project, Essar said.
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Besides Raniganj, the pipeline may also be used to transport gas from Essar's Rajmahal CBM block in neibouring Jharkhand.
Agrawal said 15 test wells have already been drilled in Raniganj and 500 more are planned. "Initial estimates suggest that the demand enroute the pipeline will be about 3 mscmd."
Essar has suggested a pipeline capacity of 4 mmscmd considering PNGRB requirement of having 33 per cent excess capacity for leasing out to third parties.
"The proposed pipeline will pass along the National Highway-2 from Durgapur industrial area to Kolkata, which is highly polluted because of steel plants and the use of coal in plants. CBM gas will help in improving the environment in the entire region and in future, will be a push for city gas development in Kolkata and adjoining areas," the company said.
Essar is investing $300 million in Ranigang block that has in-place resource of 4.6 trillion cubic feet and recoverable resource of around 1 Tcf.
In Rajmahal block, where Essar has been declared provisional winner in the recently-concluded auction of CBM areas, in-place resource of 9.5 Tcf has been estimated with recoverable resource of 4.7 Tcf.
The 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 a huge appetite for gas in the vicinity.
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.
Essar in its application listed 25 prospective consumers including Jayshree Ceramics and Bhusan Steel.