Essar Oil & Gas to triple capex to Rs 1,500 crore in FY25 to boost production

Pankaj Kalra- CEO of Essar Oil & Gas

Essar Oil and Gas Exploration and Production Limited (EOGEPL) plans a threefold growth in  capital expenditure to Rs 1,500 crore for 2024-25 (FY25) to achieve volume growth of 35 percent in the year, CEO Pankaj Kalra told Moneycontrol in an interview.

The Essar group’s E&P or exploration and production company, which primarily looks at coal bed methane (CBM) gas production, had spent Rs 500 crore in the financial year gone by.

“We have already started our Rs 2,000-crore capex cycle and have invested around Rs 500 crore in the last year and the plan is to work with more effort and energy. We will continue to invest over the next one and a half years and the balance Rs 1,500 crore will get invested,” said Kalra. The company’s head added that the capex would be financed through internal accruals.

EOGEPL focuses on unconventional hydrocarbons, and currently produces 65 percent of India’s total CBM output. The company contributes around 1 percent of the total gas production in the country.

Billionaires Shashi Ruia and Ravi Ruia, commonly referred to as the Ruia brothers, sold their oil refinery and fuel retail arm, Essar Oil, to Russia's largest energy company, Rosneft, and its partners for around $13 billion in 2017.

Production ambitions

Kalra said EOGEPL is eyeing a production ramp-up taking the current output of around 1 million metric standard cubic metres per day (mmscmd) of gas to 4-5 mmscmd by FY27, in line with Prime Minister Narendra Modi’s mission of Aatmanirbhar Bharat.

“We have already started to see a fair amount of uptick in our production. We are currently producing 900,000 scm (standard cubic metres). The plan is to take this to almost the 5-million level over the next three to four years,” said Kalra.

In FY25, EOGEP plans to achieve volume growth of 35 percent year-on-year with an average quarterly growth of around 7 percent, he added. The company aims to increase its share in total gas production to around 5 percent from the current 1 percent in the three to five years.

Development trajectory

In order to boost production, Kalra said the company would drill around 100 wells in the current year at its flagship Raniganj CBM project in West Bengal. The company, in addition to ramping up production from existing fields, would also look at new blocks in India.

“Our focus is also on taking up newer blocks of CBM and discovered small fields. CBM rounds (auctions where blocks are bid out) come in every year, so we would look at it. In parallel, we will also be looking at any other unconventional rounds on the discovered small fields. This is one area of interest we are actively looking at,” he said.

Kalra said EOGEPL would be “as competitive as any other player” while bidding for new blocks.

Outside India, Kalra said the company does not have plans for acquisition of new assets but would increase production from existing ones. EOGEPL has overseas assets in Nigeria and Vietnam.

“At this point in time, our prime focus in terms of acquisition of any new blocks would primarily reside in India. For overseas assets, we have operations in both Vietnam and Africa, in Nigeria. It will largely be development of the existing fields that Essar holds both in Vietnam and Nigeria that we will continue to work upon,” said Kalra.