‘Any infrastructure project in India has its own challenges, including clearance’
It was 10 years ago that India started commercial production of coal bed methane (CBM). The feat was achieved by the Great Eastern Energy Corporation Ltd (GEECL) at Raniganj in West Bengal. PRASHANT MODI, managing director and chief executive officer of the company, talks to Shine Jacob about the journey so far and their investment plans. Excerpts:
PRASHANT MODI Managing director and chief executive officer, Great Eastern Energy Corporation Ltd
How has the 10-year journey been for GEECL especially since you were the first ones to produce gas?
We started our commercial production in 2007. Obviously, being the first, there were a lot of challenges that we faced from laying pipelines to getting customers. Demand was always there in that area. Till then, they were using other fuels. Initially, people had to be convinced that CBM gas is a fuel that they can use. Customers used it and they saw the benefits.
Later, we started selling CBM as compressed natural gas (CNG) in partnership with Indian Oil Corporation and Bharat Petroleum Corporation Ltd. There also, initially it was more word of mouth on how people got to know about vehicles running on gas. Now, there are more than 3,000 vehicles running on CNG in the area. Recently, the West Bengal government has even started some buses in the region covering Durgapur, Asansol and Kulti, a 50-100 kilometre area it covers. The journey has been good and we are still continuing to invest. If it was not good, we wouldn’t have. The area where we operate has a lot of poverty. But, we are able to give direct employment to a lot of local people. It changed the whole demography of the area.
What was the biggest challenge for you so far?
Any infrastructure project in India has its own challenges, including clearance issues. The government has over the years made it much simpler. The new policies that have come out and are set to come out are making life easier for explorers, in terms of removing the red tape. Things are improving. The new marginal field policy, I think, is very good and progressive. From what we are seeing from the draft, the Hydrocarbon Exploration and Licensing Policy (HELP) also seems like a progressive policy being investor-friendly.
In January 2016, crude oil had gone to $26 a barrel and now it is in the range of $55. Lots of investment have started happening now. In the last two months alone, the amount of acquisitions that happened in the US have been tremendous. Big players have started deploying money, because at this prices exploration have become viable. Since oil prices are back, if HELP comes in, it will attract international attention.
What is the sort of investment that you are going to put in Raniganj and what is the status of your block at Mannargudi in Tamil Nadu, after it got stuck due to overlapping issue with ONGC?
I would not like to comment on Tamil Nadu because that is under arbitration. As far as Raniganj block is concerned, we are planning to invest another ~1500-2000 crore in this block to do another 144 wells. We have already done 156 out of the total 300 wells committed and has invested more than ~1,600 crore. There has been a lot of talks about shale in that area, if that is the case, then there could be an investment of another ~4,0005,000 crore in the region, once the HELP policy comes.
In oil and gas, we will like to explore the potential. But the government data shows signs of huge potential for shale. When we started CBM, a lot of people started asking what we are doing but we were successful.
What will happen to the pricing scenario?
Like in marginal field policy, it should be free-market price. In countries like China, producers get free market in addition to incentives. If you control the price, investment will not increase.
How are you planning to ramp up your production?
Our current production is around 17 million standard cubic feet of gas per day (mmscfd). From the current number of wells only, it can more than double but we will not be able to tell you a timeframe for this. In CBM, production increases slowly. We have over 30 customers from the block now who are basically small and medium-sized enterprises.
Once the Jagdish pur Haldia pipeline of GAIL comes in in 2019, we can even take gas to Kolkata which will need a lot of gas for city gas distribution and other industry. We anyway have enough demand locally in the Raniganj.