New Delhi, Aug 9 (IANS): 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 here 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.

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 Rs 7,000 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.