After years of ‘complete madness’, success springs forth
Earth, water, air and fire — few personal histories are as clearly defined by the classical elements as that of Randeep Grewal.
An 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 the 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 countries.
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, droughtprone Southern Africa.
“We said the only way to do this right is to keep it clean.
“I grew up in Africa with little water. We had to collect water from dirty streams, heat it and filter it. I am water-sensitive because I grew up in that environment.” he said.
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 is not been an easy road,” Grewal said. “Last year was the first year of profit for our group in 20 years. It is 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 am an older chap with lots of white hair. But it has been a wonderful journey.”
Grewal attributes 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, Grewal 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 simple 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 mid1990s, when we first started having conversations about coal bed methane in China, to today, it has been a consistent policy. It was clear back then, and it is 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 and the chance that you might wake up one morning to a policy that erodes your economics,” Grewal said.
“And in January this year the government doubled that subsidy. There is no country in the world … that has that degree of stability. Hence the success.”
So what, if anything, went wrong in the decades leading to GDG’s first year of profit in 2015?
“Everything went wrong,” Grewal said, explaining that Chinese coal beds are incredibly complex, far deeper and more faulted than the norm.
“Everything that was available in technology did not work at all. And these are not lessons you learned in days; you learned them in years.”
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 vested.
“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.”
An ideal coal bed runs unbroken in a horizontal seam below the subsurface.
The beds GDG are mining are highly faulted, meaning sections have shifted above or below one another.
Grewal’s miners have to run drill lines that snake up and down “like an eel swims through the water” to access the coal, before meeting a vertical well that releases the gas to the surface.
GDG has also developed a way to mine without using chemicals. In drilling, air and water pressure are used to drive the drill bit. When rock is particularly tough, a substance called drilling mud adds the viscosity the bit needs to carve its course.
Typically, this substance contains chemicals that contaminate the vast quantities of water used, both in the drilling process and water released by the coal, along with methane gas, due to the change in pressure.
Certain rocks hold the gas molecule so tightly that the use of chemicals is unavoidable, but Grewal realized this is not the case in Chinese coal beds.
Starting in 2007, GDG began using a special biodegradable drilling mud that means farmers can use the water produced by the company’s mines.
“Today I can proudly say we drill with air or clean water. We do not use an ounce of chemicals. We produce clean water from the coal, which is used by the local farmers for irrigation purposes. Good clean water.
“And we have done this while enjoying the comfort of the central government policies and long-term vision toward coal bed methane. We bought into that vision on the day we got there, and the bet we took proved to be correct.”
I got there (China) and I was a young chap with lots of black hair, and now I am an older chap with lots of white hair. But it has been a wonderful journey.” aeronautical engineer