Essar Oil & Gas Exploration & Production (EOGEPL) has signed an agreement to supply its entire coal bed methane (CBM) production of 2.3 mmscmd from the Raniganj East project in West Bengal, India, to Gas Authority of India Limited (GAIL).

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Image: Essar's EOGEPL to supply its entire CBM production from the Raniganj East project to GAIL. Photo by Zbynek Burival on Unsplash.

A gas sale and purchase agreement (GSPA) signed in this regard will be valid for 15 years which enables EOGEPL to monetize the entire CBM production at a globally competitive price.

The company said that GAIL submitted the winning bid for the CBM offtake by proposing to pay gas prices that will be linked to the three months’ daily average price of Brent crude.

EOGEPL said that having signed the gas supply contract, it will now focus on ramping up production from the existing 348 CBM wells and the 150 wells it plans to drill in the block in the future.

Currently, the CBM project has a gas production in excess of 1 mmscmd, which is expected to be scaled up gradually to 2.3 mmscmd.

In April, EOGEPL announced an investment of $1bn for shale gas extraction at the Raniganj block.

EOGEPL MD & CEO Vilas Tawde said: “The signing of this agreement is mutually beneficial and is a major step in our efforts to expand our business. This is in line with the Government’s vision of moving towards a gas-based economy, thus fuelling development.

“Downstream consumers within GAIL’s network, such as gas-based industries and households, stand to benefit from this assured supply of gas.”

Till date, EOGEPL has invested over Rs40bn ($580m) in the Raniganj East CBM block, which has been used for drilling wells, establishing supply infrastructure, and laying customer pipelines to Durgapur, West Bengal and neighboring industrial areas.

Along with the 348 completed CBM wells, the Raniganj East project also has gas and water handling capacity. EOGEPL plans to focus on streamlining its production at the CBM project by drilling over 500 wells in line with the block’s field development plan.

Tawde added that the company as per estimates will have to invest nearly Rs70bn ($1.01bn) for developing the shale gas potential in the Raniganj East to draw about 1.6 tcf of CBM.

EOGEPL is the upstream oil and gas exploration and production arm of Indian conglomerate Essar.