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| Edited By: Promit Mukherjee |Source: DNA |Updated: Mar 18, 2018, 02:11 AM IST
Essar Oil, the country’s second-largest private sector oil and gas company, is in pact with Sydney-based green fuel firm Clean Global Energy to diversify into underground coal gasification (UCG).
The company has “entered into a binding heads of agreement with Mumbai-based oil, gas and power multinational, Essar, to provide its UCG technology and expertise, under a Technology Licence Agreement (TLA),” Clean Global Energy said.
Essar Oil is in its silent period and did not reveal the details of the joint venture.
Under the TLA, Clean Global Energy will hand over operations of the plant to Essar Oil within three years of commissioning. The TLA is triggered if Essar is granted a UCG block by Coal India, it said.
Essar Oil will give Clean Global Energy 20% equity for free till the UCG Syngas plant is commercially viable. Once it turns commercial, Clean Global Energy will pay for the equity at cost, approximately $30 million, which should have a valuation of at least $100 million, the company stated.
Anticipated revenue streams for each potential project are $50-60 million for licensing and project management fees during design, construction and commissioning of UCG plants, and production royalties of $15 million to $20 million after achieving commercial production.
This is Clean Global Energy’s second joint venture with an Indian company, which had tied up with Nagarjuna Fertilisers in August last year to invest in UCG.
In fact, with India gearing up for investments in clean fuel, either foreign companies are eyeing India as a prospective source of next generation fuel or Indian companies are looking to tie up with them for technology.
Both the companies have together bid for one of Coal India’s maiden tenders for UCG in the Kaitha and Thesgora blocks bearing UCG assets.
According to World Coal Association, UCG is a method of converting unworkable coal, mining of which is inaccessible and unviable with traditional methods, into a combustible gas which can be used for industrial heating, power generation or the manufacture of hydrogen, synthetic natural gas (syngas) or diesel fuel.
“The technology for coal gasification had been around in the world for quite sometime but not in India. No Indian company has expertise in UCG and hence they have to look for technology overseas,” said Anish De, chief executive officer, Mercados Energy Markets, an energy consultancy company.
