Superintendent of police Bhanupada Chakraborty, who is camping in the area, said the well was abandoned about 20 years ago by ONGC and was sealed.
"Suddenly a huge fire broke out there in the afternoon and natural gas was gushing out," he said.
There was, however, no damage or any injury so far, he added.
As people panicked, those residing within a km's radius were evacuated and huge contingent of police and paramilitary forces were deployed.
Chakraborty said he has spoken to the ONGC asset manager S C Sony, who assured him that a special fire fighting engine is being rushed to the spot and a technical team of ONGC would also be sent.