India's Ministry of Coal Receives 22 Coal-to-Liquid Applications for Three Coal Blocks

Researched by Industrial Info Resources (Sugar Land, Texas)--India's Ministry of Coal has received 22 applications in response to the bidding process it commenced early last month for the allocation of captive coal blocks for coal-to-liquid (CTL) projects. Industry majors hopeful of securing captive coal mines include the Tata Group (Mumbai), Reliance Industries Limited (BOM:500325) (RIL) (Mumbai) and Reliance Power Limited (BOM:532939) (Mumbai).

Three coal blocks in the eastern state of Orissa with cumulative reserves of 6 billion tons are included. One of the blocks has reserves of 3 billion tons, and the other two blocks have reserves of 1.5 billion tons each. The company that secures the 3 billion-ton coal block would be permitted to use only up to 1.5 billion tons of reserves for its CTL project, while the remaining coal would be used later for other purposes.

A coal block with 1.5 billion tons of reserves is estimated to supply 28 million to 31 million tons per year of run-of-mine coal for a period of 30 years. A 3.5 million-ton-per-year CTL project is expected to entail costs of $6 billion to $8 billion to convert coal into liquid fuels, such as aviation turbine fuel, diesel, liquefied petroleum gas, petrol and naphtha.

The Ministry of Coal mandated that only companies with a minimum net worth of $1 billion could qualify as participants in the bidding process. Applicants were also required to divulge details of technology providers for their proposed projects as India does not have indigenous technology expertise for a CTL project. Multiple subsidiaries of the same group or parent company have also sent in individual applications. An interministerial group composed of representatives from the planning commission and the ministries of coal, petroleum and natural gas, finance and commerce would examine the proposals.

RIL had sent in an $8 billion investment proposal to set up a CTL project with a capacity of 80,000 barrels per day (BBL/d) of oil and requiring 1.5 billion tons of coal reserves. Sasol Limited (NYSE:SSL) (Johannesburg, South Africa) had also expressed interest in partnering with the Tata Group for setting up a similar CTL project with a capacity of 80,000 BBL/d and investments of about $8 billion. These unsolicited applications were not considered for the bidding process, and the companies had to send in new applications. Both companies are known to have applied for all three blocks.

Other private players and public sector undertakings competing for the blocks are Essar Oil (Mumbai), GMR (Bangalore, Karnataka), GAIL India Limited (New Delhi), Gujarat State Petronet Limited (Gandhinagar, Gujarat), Indiabulls Financial Services Limited (Mumbai), Indian Oil Corporation (IOC) (New Delhi), Jindal Steel and Power Limited (JSPL) (New Delhi), JSW Steel (Mumbai), Steel Authority of India Limited (SAIL) (New Delhi), Sterlite Energy Limited (SEL) (Mumbai), Strategic Energy (Pittsburgh, Pennsylvania), Vedanta Aluminium Limited (London, UK), and Welspun (Mumbai).

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