Essar Oil & Gas Exploration & Production Ltd (EOGEPL) has signed a gas sale and purchase agreement with GAIL (India) Ltd. A company statement said the agreement entails a 15-year gas supply contract, whereby Essar will be able to monetise its entire Coal Bed Methane (CBM) production of 2.3 mmscmd from the Raniganj East block at a globally competitive price.

Essar had invited bids from prospective buyers of CBM gas based on a government notification dated April 11, 2017, which lays out a policy framework for the early monetisation of CBM gas. The policy provides for marketing and pricing freedom at arm’s length price in the domestic market to contractors of CBM blocks.

GAIL submitted the winning bid, offering to pay gas prices that will be linked to three months’ daily average price of Brent crude. The discovered price will lead to a substantial increase in the company’s topline, the Essar statement said.

EOGEPL would now focus on ramping up production from its existing 348 Coal Bed Methane wells and the 150 wells it intends to drill in the future in the block. The company is also looking at other opportunities in the unconventional space, including shale gas exploration, that exists in the EOGEPL portfolio, the statement added.

“On the upside, shale development would benefit greatly due to the synergy with CBM operations, like water requirement and gas evacuation and handling facilities. Initial estimates indicate that we would need to invest close to ₹7,000 crore for developing shale gas potential in the block, to recover about 1.6 tcf from the field,” Vilas Tawde, Managing Director & CEO, Essar Oil and Gas, said.

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