Coal bed methane takes on fuel oil in India

LONDON Thu Mar 28, 2013 7:08pm IST

A local woman prepares to collect coal from an open cast coal field at Dhanbad district in Jharkhand September 20, 2012. REUTERS/Ahmad Masood/Files

A local woman prepares to collect coal from an open cast coal field at Dhanbad district in Jharkhand September 20, 2012.

Credit: Reuters/Ahmad Masood/Files

Related Topics



LONDON (Reuters) - Coal bed methane (CBM) pioneer Yogendra Modi believes India's huge coal fields could provide 10 percent of its fast-growing gas needs within 20 years, displacing some potentially costly imports.

His company, London-listed Great Eastern Energy Corp Ltd(GEECq.L) (GEECL), is set to deliver its first annual net profit this year as it ramps up CBM output ahead of a share sale in its home country.

GEECL makes its money persuading industrialists in West Bengal to convert their generators from heavy fuel oil, or furnace oil, to natural gas. The gas is fed to their doorsteps through GEECL's proprietary pipelines from rich virgin coal deposits less than 60 kilometres away.

The selling point? It's half the price of furnace oil and other liquid oil fuels, still the second most important industrial energy source in the country behind coal.

Modi offers his customers gas at $12 per million British thermal units (mmBtu) delivered via its own 100 kilometre pipeline network to the steel works and food processors of Asansol, Raniganj and Durgapur.

"Some industry is even setting up in West Bengal specifically to take advantage of our gas," Modi told Reuters in an interview. Conversion costs can be recovered in less than a month, he said, and can result in fewer clean-up stoppages due to the cleaner-burning nature of gas.

Modi would not disclose his costs of production, but asked about a figure below $2 per mmBtu he said that was "in the right ball park".


GEECL has been drilling for coal bed methane (CBM) since 2006, and unlike many other gas suppliers, who are obliged to sell at a fixed low price to the power and fertilizer industries, it has a government contract allowing it to charge market prices that are some three times higher.

It will remain a small player, and India's CBM fields are too small to interest big corporations, but Modi believes his localised, integrated West Bengal model can be replicated to great effect.

Government data predicts imports of Liquefied Natural Gas (LNG) will multiply five-fold to over 10 billion cubic feet a day by 2022 when it will satisfy half the country's predicted gas demand.

Yet India, the third largest coal producer in the world, could become the number four producer of CBM, according to a 2011 study in the International Journal of Chemical Engineering and Applications.

The gas price restrictions that experts say are holding back domestic gas output growth are under review as part of a government re-think of gas policy.

Although GEECL can already charge free market prices, Modi worries that continued price restrictions will delay development of local resources and leave the country increasingly dependent on LNG imports and gas potentially piped in from nearby Pakistan, Bangladesh or Myanmar.

"Unless government pushes hard on local exploration and allows a free market price they will be in trouble," he said.


As chairman and chief executive, Modi owns 59 percent of GEECL. The remainder is in the hands of UK institutional shareholders who have financed it since listing in 2005.

A shareholder meeting this week voted through the company's first Indian share offering of up to about 8 million new shares, increasing the number in issue by about 13.43 percent and raising between 35 and 40 million pounds to fund more drilling and well development.

The Bombay Stock Exchange and National Stock Exchange listing is partly an Indian regulatory requirement to list at home after moving into profit. Modi's holding will be diluted to about 52 percent by the sale.

GEEC has moved into profit on production of 15 million standard cubic feet (mmcsfd) a day with 144 wells drilled on its Raniganj (South) Block, but it plans to drill 40 wells a year in future and to be pumping 100 mmcsfd by 2019.

GEEC estimates the reserves at Raniganj South at 2.4 trillion cubic feet (tcf) and has another licence at Mannagurdi in Tamil Nadu in India's south east which could contain 1 tcf and could use a pipeline infrastructure left behind by depletion of conventional fields.

With a market value of around 320 million pounds, GEEC made a net profit of $4.03 million in the six months to September last year. Its annual results are due in May.

(Editing by Keiron Henderson)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Shares Hit Record

Sensex, Nifty rise to second consecutive record high

Sensex surges 500 points on BOJ easing, L&T gains

The BSE Sensex and Nifty surged to record highs for a second consecutive session on Friday after Bank of Japan's surprise expansion of its massive stimulus programme raised hopes for additional foreign inflows, boosting blue-chips such as Larsen & Toubro.  Full Article 


Wilful Negligence?

Wilful Negligence?

SEBI piles pressure on Sahara to sell overseas hotels  Full Article 

Indian Economy

Indian Economy

India's fiscal deficit in H1 almost 83 pct of full-year target.  Full Article 

M&M Earnings

M&M Earnings

M&M Q2 net profit down 4 percent, hit by poor monsoon.  Full Article 

Ban on E-Cigs?

Ban on E-Cigs?

Govt considers ban on e-cigarettes, sale of single smokes.  Full Article 



Silver futures in India hit four-year low on global cues.  Full Article 

BOJ Policy

BOJ Policy

BOJ shocks markets with surprise easing as inflation slows.  Full Article 

Shadow Banking

Shadow Banking

China's shadow banking sector growing rapidly, third largest in world - FSB.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage