The petroleum ministry has recommended that successful bidders in its proposed coal-to-liquid project should share a portion of their profits with the government, similar to what oil exploration firms are doing.
The projects, located in three different coal blocks in Orissa, would require investments in excess of $8 billion, and produce refined petrol and diesel at half of today’s global prices, said a petroleum ministry official.
“We have made our recommendations to the inter-ministerial group. The bidding companies will present their cases at the end of this month,” Petroleum Secretary RS Pandey said earlier this week.
While bidding for oil blocks under the New Exploration Licensing Policy (Nelp), companies are given blocks based on how much profits they offer to share with the government. However, they are allowed to recover their investments before sharing the profits.
The petroleum ministry’s views were put to an inter-ministerial group earlier this month by the Directorate General of Hydrocarbons (DGH), a technical arm of the oil ministry. The Department of Policy and Planning, the Department of Expenditure, the coal ministry, the DGH and the Planning Commission are represented in the group.
The coal ministry has identified three coal mines for the project which it estimates can add around 80,000 barrels per day, or 12 per cent, to the country’s total oil production. At this level of production, it will reduce India’s oil import dependence by around 3 per cent.
The coal ministry, which is handling the projects, has received 28 applications for the three blocks. Those who have applied include oil and gas companies such as Reliance Industries, Essar Oil, Indian Oil Corporation and GAIL India, power companies like Tata Power and Reliance Power, steel companies including SAIL, JSW Steel, Jindal Steel and Bhushan Steel, and infrastructure companies such as GMR Infrastructure and Reliance Infrastructure.
In the coal-to-liquid project, coal is gassified and then condensed into liquid hydrocarbons, which are further processed into petrol and diesel. The technology for this process is commercially used in South Africa by Sasol, which meets nearly 30 per cent of the transport fuel demand in that country. Sasol has tied up with the Tata group in its bid for two coal mines.
Coal Ministry criteria:
The coal ministry norms state that companies with proven technology will be preferred. Currently, of the 28 companies and consortiums which have applied, only the Sasol-Tata venture has the proven technology.
“All other technologies in the world are at pilot stage,” said a Delhi-based analyst.
A coal-to-liquid project producing around 80,000 barrels per day of fuel will require around 15 million tonnes (mt) coal every year. The 25-year project planned in India is projected to consume around 325 mt coal.
The three coal mines that have been selected for this project have total coal reserves of over 10 billion tonnes, with the Radhikapur coal block alone accounting for 4.5 billion tonnes. India has coal reserves of over 90 billion tonnes.
