Essar’s rising CBM gas output raises hopes for Matix unit

Having idled for over two years for want of gas, the Matix Fertilisers and Chemicals project in Panagarh, West Bengal is finally set to start manufacturing urea from the second quarter this fiscal.

With Essar Oil stabilising gas production at 0.5 million standard cubic metres a day (mscmd) from its nearby Ranigunj coal-bed methane (CBM) asset, the Matix plant expects gas supply for starting production. Matix has a gas purchase agreement with Essar.

The Ranigunj asset has made Essar the single largest producer of CBM gas in India.

For an upstream energy company that was producing barely 0.15 mscmd gas till about an year ago, it’s a major development. The capacity is ramped up by 40 per cent in the last three months.

It’s also a major development for the CBM industry where nearly a dozen companies were producing as little as 0.55 mscmd gas (mostly in West Bengal) till December 2014.

Matix had invested over ₹4,700 crore in setting up the 1.3 million tonne urea unit – the first one in the region – based on a gas purchase agreement with Essar.

Promoted by the Kanodias of Datamatics group, the fertiliser plant required 2.8 mscmd gas to run at full capacity. In the changed circumstances, the company is looking for 1.2 mscmd gas by June so as to bring part of the capacity on stream and start repaying lenders.

“Unless the reservoir behaves in an abnormal manner”, the company will be able to reach the goal, said Essar.

“Going by the current rate of capacity addition and the simulation model, production should reach 1.2 mscmd by June-July,” an Essar official told BusinessLine .

The company has already laid the gas pipeline to the Matix plant. Peripheral supply infrastructure like gas compression facility and others will be commissioned latest by end-May, the official said.

According to Essar, the current production is from 104 wells at an average of over 5,000 standard cubic metres a day (scmd). The company is hopeful of improving the average significantly in the next 150 wells that are already drilled and currently on de-watering.

Unlike the natural gas reservoir where gas oozes out due to high pressure, CBM wells require water to be pumped out first to let the gas flowing. The craft lies in hitting the sweet spot that will have less water and more gas.

Essar claims to have done that and is now waiting to be the first company to breach 1 mscmd production mark on a sustainable basis. The fully developed field located next to the industrial city of Durgapur will have 370 wells.