Explorer in Oldest Indian Coal Region Bets $1 Billion on Gas

Updated on
  • Great Eastern Energy to drill 144 wells in Raniganj CBM block
  • CBM producer also keen on unconventional energy such as shale

India’s first producer of natural gas from coal seams in the country’s oldest mining region will spend about $1 billion to look for some of the newest forms of energy.

Great Eastern Energy Corp. will invest as much as 20 billion rupees ($312 million) over the next four to five years to drill 144 new wells at its Raniganj block in the eastern state of West Bengal, according to Chief Executive Officer Prashant Modi. The company, which began looking at the block in 1993, will invest an additional 50 billion rupees in other unconventional assets, including shale.

“We are thinking about shale in the manner we thought of coal-bed methane more than 20 years back,” Modi said in an interview in New Delhi on Monday. “We will bid for areas which we feel are unconventional. But in the order of priority, CBM is first and then shale.”

Prime Minister Narendra Modi’s administration is easing rules to make exploration more attractive in a bid to reduce imports. The government has freed gas prices, given marketing autonomy to producers, and approved a uniform licensing policy that will give operators the right to explore all forms of oil and gas resources, including coal-bed methane, shale gas and oil under a single license.

“These steps will help push India’s goal to produce more hydrocarbons locally,” according to Great Eastern’s Modi. “We expect about 15 CBM blocks that had been sitting idle should see some development starting.”

Budding Industry

India has awarded 33 blocks for extracting coal-bed methane, but only three have started production so far. Billionaire Mukesh Ambani-owned Reliance Industries Ltd. last month began commercial production from its coal-bed methane block in central India after winning extraction rights in 2002.

Great Eastern, which was the first to start coal-bed methane production in India in 2007, currently produces 500,000 cubic meters of gas a day at the Raniganj block, while Essar Oil Ltd. said last year it produces about 900,000 cubic meters a day from another block in Raniganj, where coal mining started in the 18th century.

Producing gas from coal beds is a budding industry in India. Coal-bed methane contributed only about 1 percent to the total gas consumption in India in the year ended March, which is estimated to have established reserves of about 10 trillion cubic feet of the fuel. In contrast, coal-bed gas production on Australia’s east coast is used to supply its domestic market as well as feed three liquefied natural gas projects, which sell the fuel to buyers across Asia. 

Patchy Infrastructure

India is seeking to increase the share of natural gas in the nation’s energy mix to 15 percent by 2020 from 6.5 percent and is investing over $8 billion to develop the gas market in eastern India, including building new pipelines and import terminals.

The company sells most of its output to about three dozen industrial companies close to the block such as steel mills, sponge iron plants and bakeries, limited by a lack of infrastructure such as a regional pipeline to take output further afield.

“More infrastructure means greater market access for gas producers like us,” Modi said. “Maybe we can take our gas to a bigger market like Kolkata in the future.”

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