CTL plan of India in doldrums: needs a fresh outlook..

The coal ministry is allocating one of the three coal blocks ( Sri rampur, palasbani, ramchandi coal blocks) in Talcher Coalfield in Orissa for liquefaction. With a coal reserve of 1 to 1.5 billion tonnes in each block, and about 30 million tonnes of coal available every year, each block could produce about one million tonne of oil. The expected investment for a 3.5 million tonne oil and oil products project is expected to be around 6 to 8 billion US dollars.

CTL (Coal to Liquid) is energy intensive and given current concerns with green house gas emissions, the carbon foot print of the CTL option per unit of final energy service delivered is an important element for evaluating technology alternatives. Water requirement is also an important consideration in the choice of technology given the severe water stress in the coal bearing areas.

There had been lots of hue and cry for the said project. Questions were arised on the viability of the project in terms of technology , operations and finances. As oil prices are hovering around $35 per barrel, experts feel that the project may not get the requisite support from the govt as the project is only viable if the oil price remains above $80 per barrel.

Out of 22 bidders for the project, the IMG ( Inter Ministerial group) short listed 2 bidders (Jindal Steel and Power Ltd (JSPL) and Strategic Energy Technology Systems (a joint venture between Tata Sons and South African energy company Sasol) on the basis of criteria specified ( RS 4000crore of minimum net worth with viable technology ).

The finance ministry in its recommendation said that the developer must be selected on the basis of profit sharing and not on the basis of royalty amount. This created an unnecessary delay as the coal ministry did not get finance ministry’s nod.

And now in a recent development, law ministry has suggested the government to invite fresh bids from companies interested in coal-to-oil projects if it is interested in profit-sharing. This has halted the coal ministry’s bid finalisation process for country’s first coal-to liquid project.

The ministry has advised that a fresh application for allotment of coal blocks for the project should be invited with the profit sharing clause, otherwise the other bidders may go to the court over the issue of profit sharing clause.

The government is very ambitious about the project but the selection procedure as well as the criteria for bidding remains the big hurdle. After questions raised by the finance ministry and now law ministry , govt may take extra time to finalise the process. The market scenario is also not helping the government as people feel that at this point of time the CTL will not be a good option for the government.

Amidst all the problems, for India’s energy security CTL will remain one of the options for a long term perspective. Lets hope India overcomes all the problems and the CTL project kicks of at a near future.