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Business / Companies

Bedding down for the long haul

By Angus Mcniece (China Daily) Updated: 2016-07-18 10:34

Bedding down for the long haul

Randeep Grewal, CEO of Green Dragon Gas. [Photo provided to China Daily]

Green Dragon targets classical elements to ignite 20-year quest for clean-burning fossil fuel in China

Earth, water, air and fire-few personal histories are as clearly defined by the classical elements as that of Randeep Grewal.

A trained aeronautical engineer, a second-generation miner and the son of India's first female pilot, Grewal has spent the past decades of his life extracting coal bed methane from beneath the subsurface of Central China.

His company, Green Dragon Gas, is the largest independent producer of methane in China and a key protagonist in the country's quest to diversify its energy mix, from about 5 percent to 25 percent gas, which is more in line with developed nations.

Grewal's proprietary drilling technology does away with the chemicals infamously associated with fracking, so the water produced when coal is depressurized is of sufficient quality for irrigation. Developing this technology was a long-term personal priority for Grewal, who spent his childhood in rural, drought-prone southern Africa.

"We said the only way to do this right is to keep it clean," he said. "I grew up in Africa with little water. We had to collect water from dirty streams, heat it and filter it. I'm water-sensitive because I grew up in that environment."

Cleaner air for China is another obvious motivation for Grewal. Having relied heavily on coal and oil during its industrial boom, China's energy mix has an extremely low proportion of gas, which is by far the cleanest-burning fossil fuel.

With strong support from the government, the industry goal is to increase the proportion of gas in the energy mix by 10 percent over the next four years. Residential customers and industrial players are expected to more than double their demand for gas by 2020, and domestic companies like GDG are essential to lessening reliance on imported gas as demand increases.

The fact that GDG exists and can actually perform this role is impressive-out of the five companies that entered China in the 1990s in search of coal bed methane, Grewal's is the only one that continues to operate in the country.

"It's not been an easy road," Grewal said. "Last year was the first year of profit for our group in 20 years. It's complete madness. A reporter said to me recently, 'You gave your youth to China,' and I did. I got there and I was a young chap with lots of black hair, and now I'm an older chap with lots of white hair. But it has been a wonderful journey."

Grewal attributed much of his perseverance to the "engineer nerd" in him. Geologically, China's coal beds are among the world's most challenging for miners, but such problems excite Grewal.

"The technical side has just been fun. The technical challenge never really frustrated me."

While some foreign companies have had trouble finding their bearings after entering a new market such as China, he said his years living in the developing world meant the adjustment was relatively straightforward.

"People have always quizzed me on how I got comfortable in China. My answer to them is the word 'simplicity'. In China, I found the same simplicity I grew up with in the middle of nowhere. Dad was scoping for minerals (in Northern Rhodesia, now Zambia), and the government was very keen for him to do so. So, it was a simplistic plan that he was executing."

In addition to a similarly clear directive-to help unlock the many billion cubic meters of gas trapped in coal beds beneath Chinese soil-stability has been key to the success of GDG.

"I can say with comfort that from the first day in the mid-1990s, when we first started having conversations about coal bed methane in China, to today, it's been a consistent policy. It was clear back then, and it's clear today."

Grewal entered into production sharing contracts with the government that granted several concessions to his company. In the early '90s, as there was no infrastructure to deliver natural gas to domestic consumers, China gave GDG the right to export its product. For every cubic meter of gas the company sells, the government provides a cash subsidy, and whatever China pays for imported oil and gas, that weighted average is translated across to GDG from a pricing standpoint.

"It eliminates the crystal ball effect. It eliminates the unknown. It eliminates the chance that you might wake up one morning to a policy that erodes your economics," Grewal said of his long-term arrangement with the government. "The central government said, 'We have a domestic energy resource, we've got lots of it, we can't get it out of the ground, we see that the Americans are succeeding at it and we'd like to get that technology along with capital; we'll give you economic stabilization, we'll give you a subsidy, just like what the Americans are doing, we'll do the same'. "

And in January this year, the government doubled that subsidy. There's no country in the world ... that has that degree of stability. Hence the success.

By 2003, every company except GDG, including Texaco, Arco, Phillips and Enron, had pulled out.

"The corporations rightfully made good economic decisions at that time. They decided that the complexity of the geological conditions did not support commercialization of the resource. We, on the other hand, were investing our personal capital, so we were already, in many regards, fully invested.

"It was a difficult call. Frankly, at that point, it could have gone either way-either you take a complete write-off and exit, as the corporations did, or you dig in and commit yourself to deliver what you promised to deliver. And we did."

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