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| Edited By: Sreejiraj Eluvangal |Source: PTI |Updated: Mar 16, 2018, 05:32 AM IST
Great Eastern Energy, the only Indian company producing natural gas trapped in coal deposits, will approach the primary market to raise Rs350-400 crore to meet its capital expenditure needs.
The firm, which had raised GBP19 million from London's Alternative Investment Market (AIM) in 2005 to fund its development activities at its sole site in Raniganj, said it is about to complete its 75 km supply pipeline before the issue hits the market.
Great Eastern is one of the only three companies in India that have gone ahead with the implementation of coal-based gas production, despite nearly 30 blocks already assigned to exploration companies. Reliance Industries (RIL) is working on commercialising the 3.5 trillion cubic feet (tcf) of coal gas it discovered in two of its coal blocks, while the Essar group has recently discovered another 2.2 tcf of gas in one of its fields. In comparison, Great Eastern has around 1.9 trillion cubic feet in its block in West Bengal.
India is expected to have total natural gas reserves of around 250 tcf, of which around 45 tcf is expected to be trapped in coal fields. Only around 60-70% of gas trapped in coal beds are recoverable under current technology.
"We have already commissioned a 40-km stretch of our supply pipeline, but there are no big clients on that stretch. Most of the big clients are in Durgapur and we will be able to reach them in one-and-a-half months after completing the remaining 1.5 km of the pipeline," YK Modi, part of the Modi business family, said.
Modi said the company had spent around Rs420 crore till March 2009 on exploration and production of gas at the Raniganj gas field, its sole asset. It had a total debt of around Rs220 crore.
GEECL's current production capacity is 0.1 mmscmd (million cubic metres per day) from 30 wells. It will gradually be ramped up to a maximum of 3 mmscmd from 300 wells by around 2017 at the rate of 30-50 new wells per year. Modi said the next 100 wells, including the collection centres and plumbing, are expected to cost around Rs700-800 crore over the next three years.
Once the pipeline is complete, GEECL also expects revenues from the sale of gas to start trickling in. The company is allowed to charge a price arrived through arms length negotiations and will get a base price of around $6.9 per million British thermal units (1,000 cubic feet). At its peak production rate of 3 mmscmd, gas sales will generate revenues of $27 (Rs 130 crore) million per month for 25 years.
According to its exploration and production contract with the government, GEECL can keep 87.5% of the profits, while government gets the remaining 12.5%.
The company's shares are currently trading at around GBP 6.2 (Rs 500) on the AIM. At the same valuation, the company's offer of 5.9 million shares are worth around Rs300 crore. The company, however is likely to price the offering at a premium.
