Essar Oil today said it will begin gas production from its Raniganj CBM block in West Bengal by September and will achieve peak output in late 2012.
"Production will begin this quarter... Either by end- August or early September," EOL Head of E&P Shishir Agrawal told reporters here.
The Raniganj coal bed methane (CBM) block will produce 90,000-100,000 cubic metres per day of gas initially and will touch a peak output of 3.5 million standard cubic metres per day by the fourth quarter of the 2012 calendar year, he said.
EOL is investing $300 million for CBM gas production.
Agrawal said the gas will be sold to a local fertiliser plant at a price of $4.2 per million British thermal units.
Essar Oil today signed production sharing contracts (PSCs) for four CBM blocks it won under the recently concluded fourth round of auction. It now has five CBM blocks to produce gas from below coal seams. One more block at Mehsana, in Gujarat, is awaiting signing.
Peak production of 3.5 million cubic metres a day will be reached in mid-2013 and will last 20 years.
The Raniganj block in West Bengal has in-place resources of 4.6 trillion cubic feet (Tcf) and recoverable resources of around 1 Tcf.
In the Rajmahal block, one of the four areas for which Essar today signed a PSC, the in-place resources have been estimated at 9.5 Tcf, with recoverable resources of 4.7 Tcf.
The company had stated in 2009 that it plans to drill 500 wells over the next 3-4 years to produce 3.5 mmscmd of peak gas output from the Raniganj CBM block, whose life has been assessed at 20 years.
The Raniganj block is located in the industrial region of West Bengal, where two major steel plants of SAIL, three existing and one upcoming power plant and a range of industries with a huge appetite for gas are 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.