India on the cusp of approving its first coal-to-oil project

India's government is on the verge of approving the country's first coal-to-oil project which Sasol of South Africa and India's Tata Group will jointly operate. The location of the proposed plant has not been finalizd. The estimated cost is around $8 billion. A formal Cabinet clearance is awaited.

The companies are not asking for tax or subsidy relief but are requesting an assured supply of 30 million mt/year of coal. The plant will produce around 3 million barrels of crude a year and run a 1,500 MW plant for the project. The plant would be based on the Fischer Tropsch process.

Experts suggest the location is all important. They believe that the high-ash coal found in India would require refined technologies for producing oil. "It's different in China or the USA, both of which have also opted for coal to oil," one said. "But I understand that a powerful lobby in the USA is claiming that the CTL plants are a heavy polluter." Another said, "More than one committee has suggested that the process should first be tried in a pilot project. That would be wise."

At one time Sasol reportedly favoured the high-sulfur coal available in India's northeast, but Coal India Ltd sources point out that the miner has already committed much of that coal for the coal liquefaction project that Oil India Ltd, a government company, and CIL are planning to set up in Assam state. GAIL India Ltd and Rashtriya Chemical and Fertilizers Ltd are also working on a coal gasification project in Orissa state.

India now imports around 1.5 million barrels/day of oil. The 3 million mt of yearly output from the planned project would not make much difference. But it could still mark a significant beginning as some other such plants might come on line subsequently. Reliance Industries Ltd, already a big player in the coal bed methane sector, has already shown interest in a project like this.

With India paying over $100/barrel of imported crude, anyone who can offer crude at anything less can expect a profitable industry. Experts are still unsure as to the final costs of the oil from the proposed CTL project , but many say it will not exceed $100 plus.

Created: March 24, 2008

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