July 13: Matix Fertilisers and Chemicals Ltd, the first big-ticket manufacturing project to come up during Mamata Banerjee's rule though it was conceived when the Left was in power, will start operations from the end of this year after it begins to receive a steady flow of coal-bed methane (CBM) gas from Raniganj.

Essar Energy, which is producing the eco-friendly fuel, said it would be able to ramp up its output by end-2016 to provide enough gas to Matix to start commercial production. The 1.3-million-tonne Matix ammonia-and-urea plant at Panagarh has come up at an investment of Rs 6,000 crore.

"We are expecting that the Matix plant will be able to start functioning by the end of this fiscal and we are preparing fast to give it adequate CBM. We are currently supplying around 2 lakh standard cubic metre of CBM a day to the plant for its pre-commissioning activities," said Manish Maheshwari, the chief executive officer (exploration and production), Essar Energy.

Essar, owned by brothers Ravi and Sashi Ruia, plans to produce 2 million standard cubic metres of CBM from the Raniganj (east) block by the end of this fiscal and increase the amount to 3 million standard cubic metres by the middle of the next financial year.

Maheshwari said another Rs 700 crore to Rs 1,000 crore would be invested in field development.

Former industries minister Nirupam Sen had laid the foundation of the Matix plant in 2008. The Left Front government had allotted 480 acres to Matix Fertilisers and Chemicals Ltd, a unit of the Datamatics Group, in Panagarh.

The development of the gas field and the construction of the fertiliser plant kept pace with each other as Matix will use the CBM produced by Essar. When gas production hits a plateau, Matix will use up to 80 per cent (2.4 million standard cubic metres) of the output. The two companies have entered into a 25-year agreement.

Essar has laid a dedicated 30km pipeline for the Matix plant. It has also built a 200km pipeline to deliver CBM to the other customers in the region. Now, CBM is priced at $3.4 per million British thermal units at the well head. Customers will have to pay transportation cost in addition to that.

When the Raniganj (east) block reaches plateau production, the gas, which is a replacement for the polluting coal and furnace oil, will generate $185 million in revenue a year at current prices. However, CBM prices are linked to global benchmarks and usually track crude oil costs. This will also mean a windfall gain for the Bengal government. The Essar CEO said the state would earn a royalty of Rs 2,500 crore from the company over the next 25 years.

Apart from Essar, Great Eastern Energy Corporation is the other producer of CBM in the region. Great Eastern Energy began production before Essar and now caters to industrial customers. ONGC is also exploring shale gas and CBM in Raniganj.

Before installing drill wells, Essar had faced protests over land acquisition. The company not only entered into a protracted negotiation with landlosers but also changed its gas production strategy. It packed more wells into a single pad and began extracting the maximum gas possible from each well. This reduced the land requirement.

Shale gas

Essar today said a study undertaken by an American firm with expertise in shale gas had made a preliminary assessment that the Raniganj (east) block had shale gas resources of around 8 trillion cubic feet underneath the CBM field.

"We are awaiting the final guidelines on the exploration and production of shale gas in India. After the production mining lease is signed, shale gas (richer methane) may be produced in three-four years," Maheshwari said.

The recoverable volume of shale gas could be 1.2 trillion cubic feet. He indicated that Essar could consider sending shale gas to other regions, including Calcutta and Haldia, apart from Burdwan.

The CBM reserve in the Raniganj field is 1.09 trillion cubic feet. Given that Matix will use up most of the CBM, the shale gas reserves may open up opportunities for other customers.

"We have started supplying CBM to various big industries in the region such as the Durgapur Steel Plant and the Alloy Steel Plant and signed a contract with the IISCO Steel Plant in Burnpur. We have approached the National Highways Authority of India to allow us to lay a pipeline to supply gas to the IISCO plant," Maheshwari said.