Jindal Steel and Tata-Sasol Joint Venture to Develop India's First Two Coal-to-Liquid Plants

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Researched by Industrial Info Resources (Sugar Land, Texas)--Following initial plans to set up a single coal-to-liquid (CTL) petroleum project in Orissa at a cost of $8 billion, the Indian government is now planning to set up two CTL units in the state. Of the 22 companies that had bid for the initially announced pilot project, the Indian government's Inter-Ministerial Group (IMG) has recommended Jindal Steel and Power Limited (BSE:532286) (JSPL) (New Delhi) and Strategic Energy Technology Systems Limited (SETSL), a joint venture between Tata Sons (Mumbai) and Sasol Limited (NYSE:SSL) (Johannesburg), for the two CTL projects. The IMG had shortlisted companies with a minimum net worth of $780 million whose bid proposals included an agreement with an overseas firm that could offer a suitable CTL technology.

In spite of the decrease in crude oil prices, the Indian government is eager to proceed with the CTL projects in an effort to reduce the country's dependence on imported oil. The two projects will require a total investment of $18 billion and will have a production capacity of 160,000 barrels per day (BBL/d) of crude oil. The CTL projects will require at least five years before production can begin.

Navin Jindal, Managing Director of JSPL, announced that the company has secured the contract for a CTL project that would be set up in the Angul district of Orissa to produce 80,000 BBL/d of crude oil. The facility will require 30 million tons of washed coal to operate at full output. The wastes produced by the facility will be used to generate 1,350 megawatts (MW) of electricity. JSPL plans to employ the indirect coal-liquefaction technology developed by Lurgi India Company Private Limited (New Delhi), a wholly owned subsidiary of Lurgi AG (Frankfurt, Germany).

According to a senior Coal Ministry official, JSPL and SETSL have been allotted coal blocks and will receive coal-prospecting licenses shortly. While JSPL has been allotted the Ramchandi promotional coal block in Orissa for its project, SETSL has been awarded a coal block north of Arkhapal Srirampur for the second CTL project. Both the allotted coal blocks are in Talcher, Orissa.

The Coal Ministry had offered three coal blocks in Ramchandi, Radhikapur and Srirampur in Orissa for the CTL projects. The three blocks have combined reserves of about 6 billion tons of coal. The Ministry has indicated that a 1.5 billion-ton coal block was sufficient to produce 28 million-31 million tons per year of run-of-mine coal for a period of 30 years. The Radhikapur block has a reserve of 3 billion tons of coal, but if allotted to a company for use in a CTL project, the company would only be allowed to mine 1.5 billion tons of coal.

In a related development, SETSL has objected to giving part of the crude oil produced by its CTL project to the government as a profit share, as that would entail a new tax component, which is not permissible under existing acts. Since the bill to introduce competitive bidding in the coal sector has yet to be approved by the Indian parliament, the Law Ministry has also objected to the government's proposal to seek a share from the CTL projects.

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