EIT identifies Eluru UCG as potential gas source from 2030

Energy Infra Trust identifies a proposed Eluru underground coal gasification (UCG) project as a potential synthetic natural gas source for Pipeline Infrastructure Limited’s east-to-west network from 2030, subject to exploration, viability and approvals. The proposal envisages Rs 2.73 lakh crore of investment over 30 years and conversion of 3,131 million tonnes (MT) of coal.

What is EIT’s proposed Eluru UCG project?

EIT describes the Eluru project as a proposal to convert deep underground coal into in-situ syngas, which could be used to make synthetic natural gas (SNG), hydrogen, methanol and ammonia. The project is planned for Eluru district in Andhra Pradesh and is not presented as an approved operating asset, as its progress depends on exploration results, commercial viability and required approvals.

The proposal identifies a 3.13 billion-tonne coal resource across two areas. Chintalapudi Sector A1 has 905 MT of coal across about 3,000 acres and is classified G-12, while Recherla has 2,226 MT across about 5,500 acres and is classified G-13. EIT says both coal seams lie deeper than 600 metres, beyond conventional mining depths.

EIT states that 3,131 MT of coal could be converted over the project’s 30-year life. Its stated conversion chain is underground coal to syngas, followed by processing into SNG or other products. SNG is the product relevant to Pipeline Infrastructure Limited, or PIL, because EIT says it could create a new domestic gas volume for pipeline transportation.

How is the Eluru project planned to progress?

EIT says Phase 1, covering exploration and a pilot, is planned from the third quarter of 2026 to the fourth quarter of 2027, with spending of up to Rs 3,000 crore. This stage is intended to test the project’s viability, making its findings the first disclosed condition for a larger development commitment.

The proposed development phase would run from 2028 to 2030 and involves Rs 1.20 lakh crore, or 44% of the stated total investment. EIT explicitly says this phase would proceed only if exploration findings support development. The amount is therefore part of an indicative phased plan rather than confirmed construction expenditure.

Commercial production is indicated from 2030 onwards, with Rs 1.50 lakh crore, or 55% of total projected spending, assigned to that phase. EIT’s presentation labels this spending as production across the rest of the 30-year project life. The 2030 date is consequently a potential production start, conditional on the exploration, development and approval stages being completed.

The proposal also includes estimated steady-state employment of 3,000 to 5,000 direct jobs and 20,000 to 35,000 indirect jobs. Those figures are linked to the full commercial project, rather than the 2026 to 2027 pilot. EIT also connects the plan with India’s National Coal Gasification Mission, which targets gasification of 100 MT of coal by 2030.

Why could Eluru add volumes to PIL’s pipeline?

EIT says Eluru is in coastal Andhra Pradesh, close to the KG Basin and the starting point of PIL’s east-to-west pipeline. Its internal assessment is that SNG from the project could feed fresh domestic volumes directly into this network from 2030. This would create a potential injection source near the pipeline’s eastern entry point.

PIL’s utilisation is stated at 44%, which EIT says leaves spare capacity for additional throughput. EIT’s internal assessment is that potential Eluru volumes could be transported with little added cost and that most incremental tariff income should flow through to earnings. This is not a disclosed tariff forecast, contracted volume or commitment by the proposed project.

The wider UCG model described by EIT is syngas upgraded to SNG and piped to demand centres. EIT says target coal seams in southern states fall within PIL’s catchment, while each block that comes online could add both new injection points and industrial demand nodes. Eluru is its Andhra Pradesh example of this prospective midstream opportunity.

Eluru would differ from existing KG Basin supply growth because it is based on processed coal-derived SNG rather than offshore conventional gas. EIT says KG Basin volumes are expected to grow at a compound annual growth rate of about 26% as drilling activity increases and new wells are commissioned. The Eluru volume opportunity remains conditional, whereas the KG Basin discussion refers to known reserves and planned drilling activity.

What does India’s UCG backdrop mean for EIT?

EIT says India has 307 billion tonnes of thermal coal resources, with 30% to 40% too deep for conventional mining. It presents UCG as a mechanism to access these deep reserves and support domestic production. The Eluru resource, at more than 600 metres below ground, fits the deep-coal rationale outlined in the presentation.

The presentation states that India imports 50% of its gas consumption as liquefied natural gas (LNG). EIT says SNG prices after subsidies are expected to be more cost-competitive than regasified LNG, or RLNG, supporting the policy case for domestic synthetic gas. It does not disclose an Eluru-specific SNG price, subsidy amount or expected operating cost.

EIT also cites industrial-feedstock dependence, stating that India imports about 100% of its ammonia and 80% to 90% of its methanol. Syngas from UCG can be used in urea and ammonia production and can support methanol and chemical output. These end uses broaden the proposed Eluru product slate, although only SNG is identified as the potential new volume for PIL.

Policy milestones cited by EIT include draft UCG guidelines in October 2025, a live pilot at Kasta in Jharkhand during 2024 to 2026, and the first commercial UCG block auction in April 2026, when two developers were selected. The draft guidelines address mining plans, real-time monitoring and escrow-based mine closure, indicating that operational and closure requirements remain part of UCG project development.

How does other gas infrastructure support EIT’s volume case?

EIT identifies several LNG connections associated with PIL’s network. PIL is connected to Shell’s 5 million tonnes per annum Hazira LNG terminal and, through Gujarat State Petronet Limited, to Petronet’s 18 million tonnes per annum Dahej terminal and Hindustan Petroleum Corporation Limited’s 5 million tonnes per annum Chhara terminal. These facilities provide context for the system’s west-coast connectivity.

A pipeline to Indian Oil Corporation Limited’s Ennore LNG terminal, with capacity of 10 million standard cubic metres per day, is under development and is expected to be commissioned by FY30. EIT also notes a planned 7.2 million tonnes per annum offshore regasification terminal at Kakinada. Neither facility is presented as a committed destination or supply route for Eluru SNG.

The regional infrastructure discussion therefore supports EIT’s broader view that additional supply and demand connections can raise PIL throughput. But the Eluru proposal has separate conditions: exploration must test viability by the end of 2027, development must be supported by those findings, and approvals are still required. The presentation does not disclose an offtake agreement, pipeline connection agreement or allocated capacity for Eluru.

Conclusion

EIT’s central assessment is that the proposed Eluru project could become a new domestic SNG source close to PIL’s eastern starting point from 2030. The Rs 2.73 lakh crore proposal targets 3.13 billion tonnes of deep coal, while PIL’s stated 44% utilisation underpins EIT’s view that potential new volumes could use available pipeline capacity with limited incremental cost.

The next milestone is the exploration and pilot phase scheduled for Q3 2026 to Q4 2027, funded by up to Rs 3,000 crore. Investors should watch whether those findings support the proposed Rs 1.20 lakh crore development phase from 2028, along with the viability and approval decisions that determine whether production and pipeline volumes begin from 2030.