Prashant Modi led Great Eastern Energy features in Fox-Davies Newsflash

Great Eastern Energy (LON:GEEC) – Reserves Up, But Development Needed: Today’s news is a boon for the work that has been put in to date, and now that the appraisal programme is completed, it is imperative that the Prashant Modi led Company starts to deliver operationally, and starts ramping up production. Following this news, we are reiterating our BUY Recommendation and 440p Target Price.

In this news:

• Original-Gas-In-Place (OGIP) increased 2% to 2.40 TCF (from 2.35 TCF as at May 2012)

• Proved, Probable and Possible reserves (3P) increased 7% to 277 BCF (from 258 BCF as at May 2012). This represents a 507% increase from the time of Great Eastern’s listing on the Main Board of the London Stock Exchange, in May 2010 (3P numbers reported as at November 2009).

Prashant Modi – Coal mining occurring in CBM blocks

Prashant Modi - CBMCBM blocks by Prashant Modi

One of the main issues which companies such as GEECL have faced during their attempts to bring coal bed methane production to India is the overlapping of CBM blocks with conventional coal mining blocks. Here, Prashant Modi explains the problem in more detail, and suggests some possible solutions.

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It was the Ministry of Coal which sectioned off the coal blocks in India, Prashant Modi says, and gave these sections to the Petroleum Ministry so that companies could bid on CBM blocks. However, now the Coal Ministry is beginning to deviate from the contracts, setting up coal mining production in the same blocks where CBM drilling is being carried out. The contracts, Modi points out, are very clear regarding the fact that the government does not have the authority to give permission for coal mining in CBM blocks, as carrying out both at the same time will hinder CBM production and is a potential environmental hazard.

Prashant Modi also adds that in other overseas locations where the two operations are carried out simultaneously, there are two stipulations; firstly, the simultaneous operations are planned before work commences, so that they can both be done safely and efficiently. Secondly, only one company carries out both operations – again, this is primarily for safety reasons.

However, even when carefully planned for Prashant Modi does not believe that coal mining and CBM production should be brought together – he argues that CBM should be done first, so that when the mining is then carried out, the risk of gas explosions and toxicity for mine workers will be dramatically reduced and even eliminated, in some cases. Ensuring that CBM production is completed before coal mining also has environmental benefits, as less methane is accidentally released into the atmosphere when mining begins.

According to Prashant Modi, it is the responsibility of the Petroleum Ministry to ensure that CBM blocks are not interfered with by coal mining operations. India has the third largest coal bed methane reserves in the world, and it is important for the economic future of the country that this energy source is protected.

Prashant Modi discusses the benefits of CBM for coal mining

Prashant Modi - Coal miningCoal mining by Prashant Modi

Prashant Modi, CEO of Great Eastern Energy, says that the government’s policy on coal bed methane is quite encouraging in its simplicity, based primarily on royalty contracts. However, Modi believes that more initiatives will be needed in order to accelerate the pace of production of CBM.

Some of the current policies which, Modi says, are applicable to CBM are almost exactly the same as those for traditional oil and gas, in that they are purely theoretical. Because of this, Prashant Modi says that what really need to be done is to use the practices from CBM producers in Australia, Canada and the USA as examples, and alter the existing CBM policies in India so that they reflect these countries’ policies, which have already proven to be successful.

Overall though, Prashant Modi says that he is relatively happy with the government’s CBM policies, and its enthusiasm for this energy source. Once CBM production is in full swing, Modi days, it will not only serve as a cleaner source of energy for India, but will also make the process of mining safer, as CBM production obviously draws the methane out of the mines. In China, several thousand people die each, as the result of explosions caused by methane gas, despite expensive ventilation systems being used in the mines. These ventilation systems, Prashant Modi says, are also supplemented with a degasification system, made up of gas pipelines and boreholes, all of which could be eliminated if CBM production were carried out before mining.

There are, according to Prashant Modi, two main benefits to carrying out CBM before mining; firstly, as mentioned previously, there will be little or no risk of explosions and subsequent fatalities. Secondly, when methane escapes into the atmosphere during mining, in its raw state, it is approximately twenty times more dangerous than carbon dioxide. However, if this methane is extracted before mining is carried out, the gas will not enter the atmosphere and will instead be manufactured and used as a clean fuel, thus preventing environmental pollution.

Prashant Modi – Challenges GEECL has overcome

Prashant Modi - Great Eastern EnergyCEO of Great Eastern Energy by Prashant Modi

Whilst CBM drilling has become a resounding success in the last five years, Prashant Modi explains that it has not been smooth sailing for his company, Great Eastern Energy Corporation, as there was a steep learning curve and quite a few serious challenges which had to be dealt with. In this article, Modi describes some of the main issues which GEECL met with during their journey to becoming one of India’s primary CBM drilling companies.

With no precedence for the drilling of coal bed methane in India, Prashant Modi says that all of the inevitable technology issues had to be solved by Great Eastern Energy Corporation. Today, Modi explains that they only use equipment made by Australian and American manufacturers, as these are the best in the CBM industry. However, this technology doesn’t come cheap, and one of the primary reasons for GEECL’s success, Prashant Modi says, has been its willingness to invest in this essential technology, when other energy companies chose not to.

Another key challenge has been the heterogeneous nature of coal; Prashant Modi says that their company may find gas in one coal seam, yet discover no gas just three or four hundred metres away.  Modi gives the example of the forty wells which were dug to the north of the River Damodar; just a couple of hundred metres, to the south of the river, the coal block held virtually no gas.

Reaching out to potential consumers and creating a demand for coal bed methane has also proven to be difficult. The vast majority of the CBM blocks in India, including those in Jharkhand, Andhra Pradesh, West Bengal and Odisha, are located in areas where there are no existing networks of pipelines. Most trunk pipelines, Prashant Modi says, are situated in Western India are of no use to producers of CBM. According to Modi, the only way in which a CBM producer could sell gas, is through investing their own money into the development of a pipeline network, which is precisely what GEECL has done, digging more than eighty kilometres of pipeline so as to be able to provide its customers with the gas they need.

Prashant Modi – Industrial uses for natural gas

Prashant Modi - red gasNatural gas  by Prashant Modi

Although natural gas as a whole is used for things like the generation of electricity and heating, its chemical components are often extracted for use in various industries too. According to Prashant Modi, the chemical methanol, which is a derivative of the methane found in natural gas, is a hugely important chemical used to produce a whole range of industrial products, including vinyl, plastics, acetic acid, formaldehyde and fuel additive. Using a conversion process, methanol can be converted into both propylene and ethylene; these two chemicals can also be produced using the other gaseous compounds found in natural gas. These two compounds are then used in many different ways; they’re converted into foams, plastics, textile fibres, packaging materials, automotive components, paints, anti-freeze, resins and PVC plastics.

More than 98% of the synthetically produced fertilizer in the world is produced using ammonia, which is derived from natural gas. This process requires high pressures and temperatures, and therefore needs to be made using a cheap source of energy so as to be economically viable. Prashant Modi says that natural gas, being one of the cheapest fossil fuels, is ideal for providing both the feedstock and the energy for this process.

The single largest consumer of industrial energy is the steel industry, taking up approximately 5% of the world’s entire energy production. Steel manufacturers use the methane derived from nature gas as part of their steel production methods, by reacting methane and ore. As with fertilizer production, natural gas is the obvious choice, from an economical standpoint, as the main source of energy and feedstock.

One newer area where natural gas is being put to use is in the transport industry. Although the benefits of using natural gas as a transport fuel are quite well understood now, Prashant Modi says that growth in this area has been relatively slow to materialise. However, many environmentalists are eager for this gas to be used for fleets of trucks and cargo vehicles, as some studies have indicated that when compared with diesel and gasoline, natural gas can reduce the output of carbon dioxide by up to twenty five percent. It has also been shown to significantly cut down on the emission of nitrous oxide, as well as particulates and non-hydrocarbons.

Is natural gas a safe fossil fuel? Prashant Modi discusses

Coal, one of the fossil fuels.

Coal, one of the fossil fuels. (Photo credit: Wikipedia) – Prashant Modi

There’s no doubt that natural gas is one of the most eco-friendly fossil fuels. However, much like with every other energy source, its advantages and disadvantages are often the subject of debate amongst environmentalists, economists and energy tycoons. Here, Prashant Modi takes a closer look at its benefits and its shortcomings, as well as possible solutions to the latter.

Natural gas is made up primarily of methane and is the world’s lightest hydrocarbon. It’s also colourless and odourless. When burned, this fossil fuel produces huge quantities of energy which can be used for both industrial and domestic purposes, including the generating of electricity, heating and cooking. Additionally, Prashant Modi says that its one of the most economical fuels to produce and to transport.

This gas is often praised as one of the cleanest energy alternatives; the burning of it releases less pollutants than any other fuel. It emits relatively low levels of emissions such as sulphur, carbon dioxide and carbon monoxide, particularly in comparison to coal, and doesn’t produce any particulates such as ash which can cause health problems. Whilst it’s certainly not as clean as other energy sources such as solar or wind, and is not renewable, Prashant Modi says that its abundance, affordability and straightforward production makes it one of the most popular fossil fuels available.

But there are some critics of natural gas who say that it isn’t quite as clean as it initially appears, as some scientists have theorised that methane escapes from pipelines and wells into the atmosphere. However Prashant Modi says that there is a middle ground between these two opinions. Whilst it is true that the transportation and production of natural gas presents environmental risks, much research is being done into ways to minimise these dangers.

A liquefied natural gas tanker arrives in Bost...For instance, according to Prashant Modi, a number of energy companies are now using LNG (Liquefied natural gas), which provides them with a way to both store and transport natural gas economically, without the need for laying pipelines. Natural gas can be transformed into LNG by cooling it, and removing many of the other compounds which are present along with the methane. LNG takes up far less space than this fossil fuel in its gaseous form, and is thought to be safer and more eco-friendly.

Prashant Modi – A history of methane

Methane, also called natural gas, is an odourless, colourless and clean burning fossil fuel, which currently provides approximately 20% of the energy used in the UK.

English: Molecule of methane. Slovenščina: Mol...

Molecule of methane – Prashant Modi (Photo credit: Wikipedia)

Prashant Modi, a leading expert in the field of energy resources, says that methane has a number of advantages over other fossil fuels – it is easy to transport, clean and convenient to use. Methane is used for lighting homes, cooking, heating and for the general production of electricity. It also has several industrial uses.

The majority of geologists believe that methane was first formed several million years ago, when animals and plants died, and their decomposing remains were naturally deposited in the silt and mid. Over time these remains were covered over by sediment, and were then heavily compressed as a result of these sedimentary layers weighing down on them. The intense pressure and heat in the layers caused the organic materials to transform into methane and oil. Methane can be found trapped within the underground rock formations located all over the world – these include deep sea aquifers, sandstone beds, coal seams and shale formations.

Prashant Modi says that Britain was the first country in the world to use natural gas for commercial purposes. In the mid 1780s, methane sourced from coal mines was used by the British to light up streetlamps and lighthouses. America began to use this gas in the mid 19th century. In 1859, a former railroad conductor named Edwin Drake dug America’s first natural gas well. It was after Drake’s discovery of both oil and gas underground that the use of this natural energy source began to take off in the US.

Throughout most of the 19th century, methane was only used for lighting. At this point, Prashant Modi explains, no pipeline infrastructure had been built, which made it difficult to transport the gas, or to use it for things such as heating and cooking in homes. However when natural gas lights were replaced with electric lights towards the end of the century, transportation methods and more creative uses for methane were gradually developed, and over the course of the next century, the methane industry transformed into what it is today.