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Coal India in multi-billion dollar plan to diversify into oil

business Updated: Jan 27, 2011 00:17 IST
Anupama Airy
Anupama Airy
Hindustan Times
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State behemoth Coal India Ltd (CIL) is all set to diversify into the cash-rich oil sector and has sought the government’s permission to set up a multi-billion dollar coal-to-liquid (CTL) project in India in a joint venture with South African major SASOL.

SASOL, which already has a tie-up with Tata group for developing another CTL facility in India, has one of the largest CTL facilities in the world.

In a recent letter to the coal ministry, CIL has sought the allocation of Deocha-Pachami coal block in West Bengal, which has huge coal reserves to the tune of 19 billion tonnes of coal.

The move follows the visit of coal minister Sriprakash Jaiswal to the world’s largest CTL facility set up by SASOL, official sources said . According to COL, on an average, the Sasol plant at Secunda in South Africa converts 100,000 tonnes of coal into 160,000 barrels of liquids each day, meeting roughly 27% of the oil requirements of South Africa.

“Besides it (SASOL’s plant) produces a whole range of coal chemicals. The unit is so profitable that in even in fiscal year 2009 after the global financial crisis, it recorded a turnover of $15.2 billion, earnings of $1.5 billion and an return on equity of 17%,” CIL informed the ministry while forwarding its proposal to set up a similar CTL facility in India.

According to CIL, the coal requirement for a similar facility in India will be huge — to the order of 40 million tonnes per annum.

“Considering a 50-year life of the plant (Secunda plant, Sasol is already 60 years old), a block size of over 2 billion tonnes reserve is required for supply of coal on a long-term basis to the plant,” CIL said in the letter.

The Deocha-Pachami coal block, according to CIL, has so far not been considered for mining because of a thickbed of overlaying hard rocks. Earlier, NMDC had come forward to join hands with CIL for setting up a large coal mine in the area, ofiicials said.

“The West Bengal government has also shown its interest to participate in the joint venture with a minority stake. It is proposed that the allotment of this block under government dispensation to CIL/NMDC joint venture with minority share holding for Bengal government or its nominated institution, be considered expeditiously for setting up a large CTL Plant,” CIL said in its letter.

The SASOL experience, it said, has demonstrated the relevance of such a facility in enhancing energy security along with a hedge against extreme volatility of global oil pacts.

“It would also lead to industrial rejuvenation of the eastern part of the country, which is known to remain backward in industrialisation, compared to other regions,” CIL said.

A healthy liquid diet