As India continues its struggle to find alternative energy sources to cope with the growing energy demand, it is looking aggressively at cbm (coal bed methane) gas as a source of clean, thermal energy, that is known for its easy inflammability. India currently consumes 140,000 mw of electricity per year, about 55 per cent of which is thermal-based and derived from coal. Experts say that the country can meet its projected gdp (gross domestic product) growth rate for the next five years only if it attains an additional 100,000 mw of power capacity, which will be predominantly coal-based. In the past few years, the Government of India has received over 50 bids to extract cbm from 10 different parts of the country, from a number of foreign and Indian companies. To augment its energy resources, India has already offered auction of oil and gas reserves in 70 blocks in the eighth round of the New Exploration Licensing Policy (nelp), which includes 10 coal seams. According to petroleum secretary R.S. Pandey, "This will attract an investment of $3 billion." The announcement could not have been more opportune for Yogendra Kumar Modi, part of the erstwhile Modi group and chairman of the Rs600 crore Great Eastern Energy Corporation Ltd (geecl), the Gurgaon-based energy company. Modi has been urging many businessmen, friends and investors to look at this sector seriously. Though Essar has been working in the sector since the early 1990s, geecl, incorporated in 1992, is the first Indian private sector entity to explore, develop, produce, distribute and sell natural gas from coal seams in West Bengal's Raniganj coal areas. The company was one of the few energy enterprises, apart from Reliance Industries (ril) and Essar, to have looked at the sector. In May 2001, when the government made seven cbm blocks available through bidding and by nomination, geecl received the exploration licence for the block from the West Bengal government by nomination, with a production-sharing contract from the ministry of petroleum and natural gas for a period of 35 years or until 2036, over an area spanning 210 sq km, which has an estimated 1.92 trillion cu ft of gas in place. (When the gas is embedded, it is measured in cu ft; once extracted, it is measured in cu metres.) Alongside, both Essar and Oil and Natural Gas Corporation (ongc) have started work on coal seams in the Birbhum region of West Bengal, but they still have a long way to go, as far as commercial exploitation is concerned. "We both still have a lot of work to do to produce gas," says an ongc official. According to an Essar spokesperson, the company has been awarded a cbm block at Raniganj and two more in Assam. The Raniganj block is spread over 500 sq km. "It has good economic viability," he says. Incidentally, in the early 1990s, Essar was the first Indian company to have undertaken drilling, hydro-fracturing and de-watering of three cbm wells in Cambay basin in Gujarat. According to ril sources, in the next few weeks, Reliance's natural gas find in the Krishna-Godavari basin in Andhra Pradesh will be producing around 40 million cu m per day from the 18 wells drilled so far. This translates into Rsl,400 crore in value, as per back-of-the-envelope calculations. P.M.S. Prasad, ril's petroleum business president and ceo, says the company is ramping up to double the production at Gadimoga, Andhra Pradesh, to 80 million cu m per day by the end of 2009. While both Essar and Reliance have just started working on their awards, geecl has already made headway in exploring, producing and selling gas commercially. The company spent more than five years in accessing geological data, drilling core holes and three pilot wells, and preparing market feasibility and development plan reports. Its development plans include drilling of 100 wells, construction of five gas-gathering stations, laying of underground steel pipelines, connecting them to wells, and construction of a gas-gathering station in Asansol, from where the supply will be delivered through pipelines and truck-mounted cascades to industries and other customers. All this will entail an investment of Rs820 crore over the next three years. So far, the company has already invested Rs350 crore. The funding was raised by the Modis through equity and debt. An SBi-led consortium raised Rs203 crore. The bank had earlier sanctioned another Rs350 crore, of which, the company withdrew Rs250 crore and deployed it on the project, geecl, which is incorporated at Asansol, was listed two years ago on London's Alternative Investment Market (aim) at 101 pence, where it raised $40 million. It is now trading at 212 pence. The company had filed a prospectus with the Securities and Exchange Board of India (sebi) in December 2008, for a proposed Rs850 crore initial public offer (ipo), but has stalled the plan for the next few months. "We will go to the market once the conditions improve," says Yogendra Modi. Enam Securities, along with abn Amro Asia Equities and sbi Capital, are the lead managers to the issue. "India's oil and gas sector has generated lot of interest among investors in India and abroad," says an official at sbi Capital. "The last few years have seen an increasing number of bidders. This proves that this is one sector which will attract lot of investment in the future. Therefore, companies that have already entered the area will do extremely well over a period of time." "We have completed 24 wells and 13 additional wells are in various stages of completion," informs Prashant Modi, son of Y.K. Modi and president and coo of the company. "We have also completed one gas-gathering station. Of the 13 wells, fracturing is complete at nine wells and pumps have been installed at seven wells." So far, the company has laid over 31.97 km of pipeline, which connects-19 wells to the gas-gathering station, and 11.34 km of the steel pipeline, which will ultimately connect the gas-gathering station to the central gas-gathering station in Asansol. It has also laid 11.45 km of pipeline, which will connect the central gathering station to Kulti, an area near Asansol. "After drilling all of the 100 wells as per our development plan and subject to the approval of the authorities, we expect to continue drilling on 200 additional wells to fully develop our block over the next few years, as well as continue to construct additional gas-gathering stations and laying of pipelines," avers Yogendra Modi. The company, by way of royalty, shares 10 per cent of the ad valorem sale value at the well head with the West Bengal government, and a production level payment fee of 2.5 per cent of the sale value of cbm produced in any month with the Central government. According to experts, the market for cbm is the same as that for natural gas and also has the same calorific value. Improved sales Commercial production of cbm takes five to six years, which entails activities such as pilot assessment, accessing geological data, drilling core holes and pilot wells. The company started commercial sale of cbm in the Asansol-Raniganj-Burdwan belt only in August 2007. Initially, the sales were low, but they gradually increased between April 2008 and March 2009. In 2008-09, the company sold gas worth Rs50 lakh. "Once the production volume goes up, there would be an exponential growth in sales," says Yogendra Modi. "We have an early mover advantage," adds Prashant. "Ours will be the first cbm company to meet the demand for natural gas in West Bengal." The company's block has an estimated 1.92 trillion cu ft gas in place with low, best and high estimates of contingent gas (ready for sale) resources of 373.8, 1,356.5 and 1,778.1 million metric standard cubic metres (mmscm), respectively; and low, best and high estimates of prospective gas resources of 33.330.8, 88.754.4 and 238,972.4 mmscm, respectively. There is a huge demand for fuel in West Bengal. A large market for fuel exists within a radius of 60 km of the geecl block, which has a high concentration of several large industrial and individual customers. "This gives us an opportunity to distribute gas over short distances to reach customers quickly and reduces delivery costs," says Yogendra Modi. "We are aiming to reach Kolkata too, which is about 200 km away, in the next four to five years, once we are able to lay a pipeline to that city. Kolkata will provide a large market for cbm," he adds. As the company drills more and more wells, its sales are increasing and touched Rs50 lakh in 2008-09. "The sales look small right now," says a cbm expert. "But it is profitable and bound to gain a big mass in the next few years." The company has already tied up its cbm supplies with nine industrial customers in the Asansol-Raniganj area. "Once the pipeline is connected to Burdwan and then to Kolkata, geecl will have a big market for cbm," says a company executive. According to experts, cbm wells in India are similar to shallow natural gas reserves or oil wells. With the new drilling equipment, the company has been able to frack (fracture hydraulically) the wells speedily and competently. As a result, a company technologist says that the first 23 wells are already producing 2.5 million cu ft per day (mcfd) of cbm. Once completed, this block is likely to produce 0.15 million standard cu m per day of cbm. Experts feel the produce is expected to generate sales of Rs80 crore or more in FY 2010. With increase in production in FY 2011, the sales could even be in the range of Rsl80 crore. geecl is supplying gas at the international equivalent of $11-12 per cu m to industrial units and individuals. Reliance is selling gas to fertiliser and power plants at a government-regulated price of $4.2 per cu m. ril is allowed to charge an extra 13.5 pence as marketing margin on the sale price. Gearing up for the market Currently, geecl technicians are drilling three wells a month at full capacity. With development of more wells, the company has also accelerated the speed of laying pipelines and readying them well in advance, so that as soon as the wells are tracked and gas produced, it can be immediately supplied to the market. geecl claims one of the major components of its investment is deploying technology. It is using the same state-of-the-art technology and equipment that is being deployed in the US and other developed nations to harness cbm. For example, it has purchased Atlas Copco rd20 drill rig, which is linked to another Atlas Copco xrvs 1250 cd 6 portable compressor and a Hurricane booster to supply auxiliary air to explore and produce cbm. This also helps to maintain the ecological balance in the land's coal-bearing areas, where methane gas escapes into the atmosphere and damages the ozone layer. Prashant Modi says he had to learn everything from scratch to introduce pioneering technology in India. "For this, one only had to follow production methods that are in use in the US. There were difficulties in finding suitable drills in the beginning. Also, it was not cost-effective to hire a contractor each time to come in and drill a well or two," he says. The first 20 wells were contracted to drilling companies, which proved to be prohibitively expensive. But thinking of the future, that entailed drilling of 300 wells in the block, geecl purchased its own rig - a brand new Atlas Copco rd20 drilling rig. The future of cbm is bright. According to S.C. Sarma, head of department, cbm, directorate general of hydrocarbons, once ril commences commercial production of gas from Sohagpur East and Sohagpur West in Madhya Pradesh, there will be a surge in production of 5 million mmscm per day in three-four years. ril is building a power plant near its blocks to develop wells and produce gas. According to V.K. Sibal, director general of hydrocarbons, India has six trillion ft of cbm reserves in the coal blocks already awarded to bidders. ongc is also expected to start its pilot production by the beginning of 2010 and expect commercial production by the end of 2011. All these developments are raising Yogendra Modi's hopes. "Once we complete our pipeline to Asansol, we will be a fully vertically integrated cbm company, capable of exploring, producing, distributing and selling natural gas to end users, through an integrated network with drilling, production, compression, transport and logistics services all in place. Our integrated operations will provide both economic efficiencies and control over all aspects of our business," he says.