- Company aims to take advantage of new exploration policy
- Water from CBM production can be used for shale fracking: CEO
Essar Oil Ltd. has approached the government for permission to further explore shale formations in its eastern India coal-bed methane block as part of its effort to maximize the production of unconventional resources.
The company’s current production of coal-bed methane, which generates a large volume of water, can complement shale gas exploration, which involves blasting water, sand and chemicals underground to release fuel, according to Manish Maheshwari, chief executive officer of Essar Oil’s exploration and production business.
“The unconventional can become the new conventional in India,” Maheshwari said in an interview. “The unconventional will include CBM, shale and tight gas.”
Essar Oil’s optimism about shale production from its Raniganj block in West Bengal has been further boosted by a streamlined government hydrocarbon policy announced in March that allows companies to explore and produce for all forms of hydrocarbons in a designated area under a single license.
The company is currently producing around 900,000 cubic meters a day of coal-bed methane from the Raniganj block and plans to double the volume by March. It aims to hit peak output of 3 million cubic meters a day by March 2019, a delay of four years, which the company attributed to reservoir and technical difficulties. Essar Oil is part of a group of companies that includes shipping, steel and energy units controlled by the billionaire Ruia brothers.
Extracting both shale and CBM from the same block won’t be easy for Essar, said Sachin Mehta, an analyst at Centrum Broking Ltd.
“It could be technically very challenging to extract shale gas out of coal-bed blocks and then the cost required to achieve that could make it more difficult,” he said. “Commercial viability is an issue as shale is viable only at a certain price.”
The Raniganj block holds proved, probable and possible reserves of 1.1 trillion cubic feet of coal-bed methane, according to Maheshwari. It’s also contains 1 trillion cubic feet of gas trapped in shale formations, using the Society of Petroleum Engineers classification as “best estimate" resources, he said.