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Essar Oil to invest Rs 1k cr in West Bengal

Business Standard:  July 14, 2016

Kolkata: To scale up its coal-based methane (CBM) production to three million standard cubic metres a day (mscmd) over the next two years, Essar Oil & Gas plans to invest Rs 700-1,000 crore in its Raniganj project in West Bengal to increase capacity.

So far, the company has invested Rs 3,300 crore in this project, which now produces one mscmd of CBM. “The investment will be made over 18 months,” said CEO Manish Maheshwari.

The company targets a production capacity of two mscmd in 2016-17. It also plans to increase its earnings before interest, taxes, depreciation and amortisation (Ebitda) margin from 48 per cent at present to 65-70 per cent.

It has a revenue-sharing contract with the government for the 260-acre Raniganj CBM project in West Bengal, where it has been granted mining rights for 500 sq km. Although it has secured CBM rights in other states, the Raniganj block is the only operational unit now.

It has priced its CBM in line with the government’s notification, at $3.4 for each million of British thermal unit.

The price, which gets revised every two years, was last revised in 2014. This means, a price revision is nigh.

“In 2017-18, we might see an improved price regime which will help improve the income further,” Maheshwari added.

Besides the Raniganj block, the firm owns mining rights in Sohagpur (located in parts of Madhya Pradesh and Chhattisgarh), Rajmahal in Jharkhand, and Talcher and Ib Valley mines in Odisha, making the company the largest private CBM producer in India.

It has received petroleum exploration licence (PEL) and forest clearance for the Sohagpur project with the environmental clearance pending. Operations in this region are not expected to start before five years.

In Odisha, the crucial PEL and other clearances are pending, making the company heavily dependent on the Raniganj project for the CBM venture.

The Raniganj project will mostly cater to the needs of Matix Fertilisers & Chemicals of the Datamatics Group. Currently, the fertiliser plant needs 150,000-200,000 scmd, which is likely to scale up drastically.

“This year, the fertiliser plant will be needing 1.2 mscmd while its peak requirement will be 2.4 mscmd once it is fully operational,” said Maheshwari.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.