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EOGEPL’s Santosh Chandra speaks with Bloomberg Asia | Essar

EOGEPL’s Santosh Chandra speaks with Bloomberg Asia

Speaking with Bloomberg Asia, Santosh Chandra – CEO, Essar Oil and Gas Exploration and Production Ltd. (EOGEPL), discusses how India’s natural gas price hike will spur exploration and attract investments.

4 Oct 2021
Press Report

Speaking with Bloomberg Asia, Santosh Chandra – CEO, Essar Oil and Gas Exploration and Production Ltd. (EOGEPL), discusses how India’s natural gas price hike will spur exploration and attract investments.

Transcript of the interview

Journalist - Give us a sense of how you’re navigating the energy crisis at the moment?

Santosh –From a business perspective, we are able to realize higher prices but the country is facing a bigger issue of energy prices and its effect. We have other divisions dealing with gas marketing.  So the skyrocketing gas prices benefits any upstream player and as an upstream player, we are generating what we would call record revenue from Coal Seam Gas fields that we operate

Journalist - You are someone in the sector where gas prices are regulated in India, hence as some of the gains are limited, but is it enough at the moment for your investment plans or can you up your investment plans as you see more income coming through?

Santosh – We have a large pipeline of investment and Essar is going to invest more in the upstream business. I would like to clarify one thing, India has two gas price regimes, one of them is regulated and the other is sold at market prices.  The gas that we produce from the coal seams, the unconventional hydrocarbon is market linked to global Brent crude price and with Brent going up we are getting good revenues.

Journalist – Santosh investors are tracking Opec+ meeting on Monday later today what do you expect Opec to do? Will it boost its output beyond, 400,000 plan?

Santosh – As you see there has been an energy crisis in Europe, partly it’s to do with the fallen hydel power generation in Southern China and partly because of less wind based renewable power in Europe. So in many European countries, utilities are switching on into some other form of energy, like coal, furnace or fuel oil.  Therefore I believe Opec will take a call soon, because there has to be a right balance in the market, otherwise there will be demand destruction in the oil markets, particularly in the oil sector. Opec would probably try to manage things in line with their stated policy of maintaining a right balance, so that there is a sustainable business both on the upstream E&P producers as well as the customers.

Journalist - Santosh, you talked about how you have benefited from higher prices, what about consumers and the industry could they revive back to fuel oil.

Santosh – This has always been the concern. Oil & Gas as an energy source is going to stay for a long time, maybe for several decades to come. However, there is a lot of push on renewables driven by the climate change agenda and there will be some spikes in that as well, but they are not going to be sustainable for the long term.  It will surely have an impact, where industry or society will switch to these fuels but that would be short-term. For eg. Europe, in energy crisis did switch back to coal power generation in some ways, so did China.  But I think the direction is clear, there is an energy transition happening and Gas will be the ‘bridge fuel’ as more and more renewable capacity gets added.

In India, consumers are relatively protected when it comes to increased gas prices, because we don’t use a lot of gas in power generation. However larger industries do get impacted and there would be some demand destruction if the prices stay high, but as I mentioned, it is short term and should stabilise in some way.

Journalist - You talked about how there’ll be greater reliance on gas and India is targeting 15% of gas for its energy mix but we have report by OPEC suggesting that India will get to only 10%. What do you make of that?

Santosh – Well I agree, that is one assessment.  But the current government at the very top level are fully committed to the aspect of including Gas in the energy mix.  Yes, 15% looks a bit of a stretched target, but the government and our country is known to set some stretched targets and achieve them e.g in renewables.

So, I feel that in a decade India will move closer to that figure. There is a lot of activity happening on ground, particularly on the city gas distribution, and the piped gas networks. Gujarat as a state has almost 25% gas in its energy mix, which was mainly due to work done in the previous decade. There are various analysis and assessments, but there is also a lot of effort going on in the area of policy changes as well as thrust on gas.  Also, there are still many areas to work and focus on but I am certain we will reach closer to 15% gas in the energy mix in a decade.

Journalist - As an exploration company here, and you are talking about being able to invest more now, do you have a field in view at the moment, is there anything you have found off late that could really help your bottom line, in the soil? I want to know if you have discovered anything, really?

Santosh: Essar Oil & Gas is the largest unconventional player in India. Our flagship project Raniganj Coal Bed Methane block operates in Eastern India near the city of Kolkata which has got a huge resource base. We operate in about 500 sq km lease area within that the estimated gas reserves in place is of almost 15 TCF, both coal bed methane and potential shale gas.  

So our main focus is to make more investments and convert the resources into reserves.  By realising some decent energy prices we are able to actually reinvest in the business for further gas production growth, which is what we are focussing now.


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(Source: Bloomberg)