Delay in getting environment nod may impact Essar's CBM production plans

Pratim Ranjan Bose Kolkata | Updated on June 07, 2011 Published on June 07, 2011

The delay in obtaining environmental clearances for the second phase drilling of production wells may impact Essar Oil's CBM (coal bed methane) production plan from the Ranigunj (East) block near Durgapur in West Bengal. Sources suggest clearance is delayed by at least six-nine months now.

While responses were not available from the company, sources in the Ministry of Environment and Forests (MoEF) cited procedural reasons for the delay and indicated that clearance may be granted soon.

Essar Oil is part of the London Stock Exchange-listed group outfit Essar Energy plc. Apart from oil and gas operations at Mehsana in Gujarat, the CBM activity in Ranigunj is currently the only prominent producing asset of the company's E&P operations. Its other E&P assets across the globe are yet to reach the development stage.

Production plan

According to sources, having drilled 15 production wells — currently producing approximately 35,000 standard cubic metres of gas a day (0.035 mmscmd) — Essar is awaiting environmental clearances from the MoEF for the second phase drilling of a little over 100 wells in the block in a span of one-and-a-half years.

According to a company communication to the downstream regulator in February this year, production was slated to reach 80,000–1,00,000 scmd (0.08-0.1 mmscmd) by July-September 2011. The company was scheduled to supply approximately 58,000 scmd to Philips Carbon Black Ltd beginning 2010 and a pact is in place to supply 55,000 scmd to Graphite India beginning the fourth quarter of 2011. According to the IPO document, contracts are in place to sell 2.8 mmscmd of gas to Matrix Fertilisers and Chemicals beginning April 2012, for its (Matrix's) proposed greenfield fertiliser facility in the region.

Environmental tangle

Sources in the MoEF say the delay was due primarily to delay in securing clearances from the Coal Ministry. The Ministry was expected to clarify that there is no over-lapping of coal mining activity in the area (as is the case in other CBM blocks in the region). The process got further delayed due to the Assembly Elections in West Bengal.

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Published on June 07, 2011
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