CBM : Potential and Challenges Petrofed, New Delhi
08 November 2013
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Disclaimer
Great Eastern Energy Corporation Limited is proposing, subject to market
conditions and other considerations, a public issue of its equity shares and has
filed its Draft Red Herring Prospectus (“DRHP”) with the Securities & Exchange
Board of India (“SEBI”). The DRHP is available on the website of SEBI at
(www.sebi.gov.in), Stock Exchanges at (www.bseindia.com) and
(www.nseindia.com) and the Book Running Lead Manager
(www.icicisecurities.com). This presentation does not constitute or form part of any
offer or invitation to sell or issue, or any solicitation of any offer to purchase or
subscribe for, any equity shares, nor shall it or any part of it nor the fact of its
distribution form the basis of, or be relied on in connection with, any contract or
investment decision. The Equity Shares of the Company have not been and will not
be registered under the U.S. Securities Act 1933, as amended or any state securities
laws in the United States. This presentation may not be released in the United
States. This presentation does not constitute an offer of securities for sale in any
jurisdiction, including the United States, and any securities described in this
presentation may not be offered or sold in the United States, except pursuant to an
exemption from, or in a transaction not subject to, the registration requirements of
the U.S. Securities Act.
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Our Coal Bed Methane (CBM) Blocks
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Downstream
Midstream
Tamil Nadu
Raniganj (South)
Mannargudi
• License area 210 Sq KM
• Estimated Gas in Place 2.40
TCF
• Situated in West Bengal’s
industrial belt
• Area is a hub of various SME’s
Raniganj (South) block
Mannargudi block
• License area 667 Sq KM
• 0.98 TCF Gas in Place as per
DGH
• Existing Pipeline Infrastructure
• Final approval expected from
the State Government
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DOWNSTREAM
MIDSTREAM
Raniganj (South) Block, West Bengal
— 2.40 TCF of OGIP
— 153 wells drilled
— 147 wells to be drilled; Total 300 wells
— Production achieved 20.40 mmscfd
— Increase of 7% in 3P reserves from May 2012, and 47% from Sep 2011
Mannargudi Block, Tamil Nadu
— 0.98 TCF of OGIP
— Commence work once expected approvals received
Raniganj (North) Block, West Bengal
— Awarded 25% Participating Interest by ONGC, subject to Joint Operatorship
Agreement (JOA) and Government approvals
Gas Gathering capacity increased from 15 mmscfd to 31.95 mmscfd, a 113%
increase
CNG supply agreement with Indian Oil and Bharat Petroleum
FIRST COMPANY IN INDIA TO START COMMERICAL PRODUCTION OF CBM IN 2007
UPSTREAM
OVERVIEW
Two CBM Blocks in India; One at Raniganj (South) in West Bengal and other at
Mannargudi in Tamil Nadu
Listed on the Main board of the London Stock Exchange (LSE)
Great Eastern Energy Corporation Ltd.
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Developing Customer Relationships
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CONTINUING TO LEVERAGE OUR INFRASTRUCTURE ADVANTAGE
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Deviated Drilling
Multiple wells from the same
geographic location
Inter-location movement is not
needed between wells
— Equipment rig up / down in a few
hours, not a few days
— Results in faster completion and
saving in costs
Reduces internal pipeline
infrastructure connecting the
wells to the Gas Gathering
Station
Reduces on-site infrastructure
facilities otherwise required for
each well separately
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Accelerated Production At Lower Cost
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Coil Tube Fracturing
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Coil-tubing hydra-jetting
perforation gives larger dia
holes with better penetration
Single run can complete
multi-stage completion
Easy sand cleaning by
reverse circulation
No Explosives needed
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Environmental Stewardship Strategy In Development Of CBM
First CBM company in India to be accredited with ISO:9001, OHSAS:18001, and
ISO:14001
Use of newer exploration and evaluation techniques for quantification of CBM
Reservoir
Deviated drilling to maximize productivity and drainage capability while at the same
time reducing the footprint
Use of self contained, extremely mobile rig to have a compact pad site with less
environmental disturbance
Use of advance techniques in Well Bore integrity
Strategic planning for pipeline connections to reduce gas flaring
MAINTAINING INTERNATIONAL QUALITY, HEALTH, SAFETY & ENVIRONMENT STANDARDS
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A Responsible Partner To Our Local Communities
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WE REMAIN COMMITTED TO CORPORATE SOCIAL RESPONSIBILITY
Medical camps
Blood donation camps
Health awareness program
Blanket distribution to the underprivileged
Health
Education & Employment
Recreation
Energy Access to sustainable sources of clean, reliable
and affordable energy
Mitigation of climate changes
Built study centre & distribution of books
Arrange evening classes for senior citizens in remote areas
Training / skills development for local community
Provide sponsorship to students
Sponsorship of state level swimming competition,
football, cricket, kabbadi tournaments
Organized and sponsored Rock climbing training
course & a marathon race “Asansol Marathon-
2012”
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A Responsible Partner To Our Local Communities
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ECONOMIC TIMES AWARD FOR CORPORATE SOCIAL RESPONSIBILITY
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A Responsible Partner To Our Local Communities
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IMPROVING WELL-BEING WHERE WE OPERATE
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Overview of CBM Process
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CBM Well vs Conventional Gas Well
Gas Water
Time
Conventional Gas
Da
ily P
rod
uc
tio
n
CBM Production
Da
ily P
rod
uc
tio
n
Gas
Water
Time
Dewatering Stable production Decline
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Unconventional Potential Gas in India: CBM
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Source: DGH
CBM resources about 92 TCF
22 CBM blocks have so far been
awarded (11 blocks being relinquished)
GEECL, first company to start
commercial production
Contract Terms
No Cost Recovery
Royalty and Production level
Payment (PLP) contract
No upfront payment
No signature bonus
Exemption from payment of
customs duty on imports
Freedom to sell gas in the
domestic market
CBM Blocks
First Commercially
producing CBM Block
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Advantages of CBM
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Methane Avoidance:
Recovery of CBM makes future mining safer
Avoidance of Methane emissions during future mining
Fuel Switching
Used in various industries who are consuming polluting fuels
Cleanest burning Fuel
Used for Compressed Natural Gas (CNG) for Vehicles
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CBM Development
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Scale of Reserves
Reserves should be significantly large to be economically viable
Geography
Reservoir requires appropriate distribution of well density for better field
development and ease of land access
Drilling
Use of appropriate drilling techniques to maximize yield from a single location
Fracturing
Use of appropriate frac techniques if required
Infrastructure
Pipeline access
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Regulatory Issues
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CBM Contracts are NOT based on Cost Recovery Model, but the contracts have
clauses as a “hang over” from Cost Recovery contracts. Some are as follows:
Relinquishment clause should be removed. Since there is no cost recovery in the CBM
Contract, therefore, it is in the best interest of the Contractor to use the entire block for
monetising the CBM resource. If the area has no gas potential, then it will be in the
interest of the Contractor not to drill and to give it back to the Government
No approval should be required for Budgets, Annual accounts, Appointing auditors,
Creating mortgage for loans, and Development plan
Development plan can be submitted to the Government for information to ensure that
no operator is sitting idle on the block
PEL should be signed at the time of signing the contract. Mining Lease should be
deemed approved as long as contractor has completed its Minimum Work Program
There is a general clause that Government will provide security for operations but this is
practically not implemented. A specific clause should be there so that CISF is provided
to the main establishments of CBM operator
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Regulatory Issues
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Environment Clearance should be in place at the time of signing the contract. EIA studies
can be conducted by the Government before that and expense for the study can be paid by
the winner. Standard conditions should be made by MOEF in consultation with the Industry
and should form part of the CBM Contract
Government should have no right for vesting of assets, data, etc. acquired or owned by the
Contractor, since there is no cost recovery
Instead of getting approval for each Essentiality Certificate (EC) for imports, it should be
done on self certification and monthly report of the same can be filed with the Government
Excise duty should be clearly exempt on local purchases as it is a deemed export
Overlapping issues in any block should be clearly written in the bidding document itself to
help bidders to decide whether to bid for a particular block or not. These should not come as
a surprise after the blocks are awarded
In many blocks contractors have not received full rights and unrestricted access to their
entire CBM Block (overlapping issues), however, DGH is demanding submission of Bank
Guarantee from the Company. How can the contractor submit a guarantee when it is not
allowed to work?
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Challenges in CBM
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Land Acquisition
Land is a sensitive subject all over the world for the Government
Best course is for private sector to directly negotiate with land owners
Technology
Scarcity of service providers in Asia
Infrastructure
Pipeline network should be in place before gas production starts
Limited City Gas Distribution network
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Way Ahead for CBM Industry
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Investor friendly regulatory environment
“Arms Length Free Market Pricing” as announced at time of bidding should
be strictly maintained
No reservation / allocation to any sectors / consumers as that is against the
basic principle of Free market
All clearances should be in place at the time of signing of the PSC / Contracts
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www.geecl.com