CBM will be competitively priced: Arrow Energy chief

Australia's Arrow Energy, with Gail (India) Ltd as main partner, has got the rights to exploit three blocks for coal bed methane (CBM) with estimated reserves of about 11.5 trillion cubic feet (tcf), or enough to feed over 25 cities. The first gas is expected five years hence in a market which is likely to stay hungry for any gas for the forseeable future, Nick Davies, chief executive officer of Arrow Energy, tells Business Standard.

In Australia, you are looking at gas to liquids (conversion to gas to synthetic crude oil). Any plans to explore that in India too?

There is not really any economic driver to do that in India. You tend to do gas to liquids when there is a big disparity between oil and gas prices, and when you have too much gas in the local market.

In India we have much higher gas prices and there is a shortage of gas. It is better to sell the gas into local industry or into local power generation. When there is plenty of local demand for gas anyway, there is no need to change it into liquids.

What is the comparison in the cost of gas supplied from say the Krishna-Godavari (KG) Basin and CBM?

Without knowing the details of KG basin economics, my guess is that CBM would be competitive, and perhaps slightly lower than the conventional gas. I am not sure that there is going to be a case for "either, or" in the Indian gas market since the demand projections are so enormous. I think there will always be plenty of room for gas that is produced domestically.

So, all other factors being constant, the price at which the consumer gets gas in the city, whatever the source, will not be too different?

The only thing that will determine the price will be the overall demand and supply in India and given the demand growth that is predicted here, I don't think there will be an oversupply for many years to come.

While you are transferring technology to Gail, I understand you are also looking at some help from Indians in Australia?

In Australia, there is a shortage of skills and people to work in the industry, so this is a very complementary thing we are doing with Gail. We need some short term help and we are also very keen to train the Gail employees in the CBM industry.

We are looking for people who are geologists and engineers who can come and learn CBM technology, which is mostly a drilling technology and a completion technology, to complete the wells in the right way after you have drilled them to maximise and optimise production form the wells.

We have talked provisionally about 4-5 people at a time, coming to Australia for periods of 6 months perhaps.