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Essar signs 15-year gas sale deal with GAIL
August 10, 2018
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NEW DELHI: Ruia brothers-led Essar Oil and Gas Exploration and Production (EOGEPL) on Thursday announced that it has signed a 15-year Gas Sale and Purchase Agreement (GSPA) with state-run gas utility GAIL.

The Essar Group subsidiary said in a statement that GAIL had won the bid for the contract which will help EOGEPL monetise its entire coal bed methane (CBM) production of 2.3 million standard cubic metres per day (mscmd) from the Raniganj East block.

“The GSPA entails a 15-year gas supply contract whereby the company will be able to monetise its entire coal bed methane (CBM) production of 2.3 mmscmd from the Raniganj East block at a globally competitive price,” Essar said.

“GAIL emerged winning bidder by offering to pay gas prices linked to three-month average price of Brent crude. The discovered price will lead to a substantial increase in the Company’s (EOGEPL) topline,” it added.

Production

Of the 500 wells to be dug at the Raniganj East CBM block, EOGEPL has already completed drilling of 346 CBM wells. “The Raniganj East block is India’s most prolific CBM block that has achieved gas production of more than 1 mscmd, which will be gradually scaled to 2.3 mmscmd,” it said.

Commenting on the development, EOGEPL Chief Executive Vikas Tawde said: “On an upside, shale development would benefit greatly due to the synergy with CBM operations, like water requirement, and the gas evacuation and handling facilities.

“Initial estimates indicate that we would need to invest close to Rs7,000 crore for developing the shale gas potential in the block to recover about 1.6 tcf (trillion cubic feet) from the field.”

Further development of CBM in the Damodar Valley Basin of eastern India is imminent with the likes of ONGC, GEECL and Coal India also joining the search for CBM and shale, the statement added.

Earlier worried over an inordinate delay in the resolution of Essar Steel’s debt, Indian lenders are taking legal opinion on how to settle the Rs 60 billion debt of Uttam Galva Steels (UGSL). Insolvency proceedings of UGSL is pending before the National Company Law Tribunal (NCLT) in Mumbai since December last.

The delay in UGSL resolution is because ArcelorMittal, a co-promoter till February this year, has promised to repay the debt, provided it wins the race for another bankrupt company — Essar Steel.

ArcelorMittal was holding a 29 per cent stake in Uttam Galva Steel till February this year and was deemed ineligible by the resolution professional of Essar Steel to bid for Essar Steel as UGSL was a bank defaulter. The Insolvency and Bankruptcy Code (IBC) law debars defaulters to bid for any bankrupt company in India. The Essar Steel matter is pending in the National Company Law Appellate Tribunal (NCLAT) after ArcelorMittal appealed. This case has also delayed the resolution of UGSL, say bankers.

According to a source close to the development, banks don’t want to wait indefinitely for the resolution of UGSL as the Essar Steel case is expected to be appealed before the Supreme Court by both or either of the bidders − Numetal Mauritius and ArcelorMittal – if their bids are rejected by the NCLAT.

Agencies

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