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The commissioning of a Rs 5,500-crore fertiliser project in West Bengal has been delayed by a year due to lack of gas supply from Essar Oil's Raniganj coal bed methane gas block. Bankers say Essar Oil is still grappling with land acquisition issues for the gas project.
The fertiliser complex, being developed by Matix Group and scheduled to be commissioned last year, was to be developed near the gas block. Matix Fertiliser is promoted by the Kanodia family (promoters of infotech firm Datamatics), related to the Ruias of the Essar group.
Emails sent to Matix Group and Essar Oil did not elicit any response.
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Sources in the West Bengal government say land owners in Burdwan district are seeking higher compensation and this has led to the delay. Insiders say while test production from the Raniganj gas blocks has started, projects of this scale are often delayed due to unforeseen circumstances.
The project is important for all stakeholders, including the West Bengal government and the Essar group. Essar has already invested Rs 1,700 crore in the project and plans to pump in another Rs 3,500 crore to develop the fields. The Bengal government had planned to use gas from the Raniganj coal methane bed to run vehicles of state transport companies and Calcutta Tramways Company and offer cheap fuel to the industrial units in Durgapur, Kolkata and Haldia.
Of the Rs 5,500 crore outlay for the project, Matix Group has invested Rs 3,500 crore so far. The group's website says 70 per cent of the project has been completed.
A JP Morgan report dated December 19 2013 said Essar Oil's Raniganj block would be scaled up to its anticipated peak rate (three million standard cubic metres a day) in the next two years. Once the Rajmahal block (located close to Raniganj) is developed, the company aims to target consumers in the industrial region around Haldia.
Unlike conventional oil and gas blocks, the fiscal terms for coal bed methane blocks tend to be simpler - government profit-sharing is linked to production levels, rather than a cost-recovery mechanism. A 10 per cent royalty payment is also applicable.
Currently, the Raniganj block produces 100,000 units of gas, with provisional sales to nearby consumers. Three gas gathering stations have also been completed, along with 48 km of pipelines to the Durgapur industrial area. Analysts say the company has to drill 350 wells to achieve the targeted production rate.
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Updated at 11 am, 14 Jan, 2014
When contacted, a Essar spokesman said: "The Matix project is progressing well, and we are working on building-up the gas supply position in parallel. Given the unpredictability of reservoir performance in the early stages of a project of this nature as well as absolute timings on off-take requirement, the synchronisation of the projects is always complicated. This is particularly in ensuring that we minimise any wastage of gas (given the immaturity of the local market and lack of national gas infrastructure) while Matix is getting completed, early days of commissioning and settling in from a process perspective. That said, these projects will work alongside one another for the next 20 years or so, and it is the long-term partnership of production and off-take that is key."
