Essar Oil has entered into agreements with K K Bangur-controlled Graphite India Ltd (GIL) for supply of 55,000 scmd (standard cubic metre a day) of coal-bed methane (CBM), latest by the fourth quarter of 2011. Gas will be supplied from Essar's CBM block near the industrial city of Durgapur in West Bengal.

According to sources, while supplies in smaller quantities have been initiated through cascades (by road), Essar had recently approached the Petroleum and Natural Gas Regulatory Board (PNGRB) to build a 3-km dedicated pipeline connecting the graphite facility in Durgapur. The proposal is reportedly approved by the regulator.

The Rs 1,200-crore GIL is a listed entity. According to the company Web site, GIL is the largest producer of graphite electrodes in India. The Durgapur facility is the largest as well as the oldest of the GIL facilities in India (three) and abroad (one in Germany).

While comments were not available from GIL, sources said that CBM will part replace the company's requirement of liquid fuel for furnace and generator operations.

In a letter to the downstream regulator in February, Essar said that the company was producing CBM from 38 production wells. Production is likely to reach between 40,000 and 60,000 scmd by end of March and would be ramped up to 80,000–1,00,000 scmd by July-September.

Based on an expression of interest (EoI) submitted by Essar, PNGRB recently invited bids for laying a trunk pipeline from Asansol to Howrah (approximately 200 km) in the State. If implemented, it will be the first common carrier pipeline in the State as well as the Eastern region paving way for monetisation CBM assets in the coal bearing areas of Bengal and Jharkhand.

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