Thai coal miner Banpu buys a stake in the Marcellus Shale for $112m

closeup of the facilities of a coal industry
Source: DollarPhotoClub

Thailand’s largest coal company, Banpu Plc, has made its first foray into shale gas. The company announced on Wednesday the purchase of a 29.4 percent stake in the Chaffee Corners Joint Exploration Agreement (JEA), a shale gas operation in the US state of Pennsylvania.

Banpu’s net interest in the Chaffee Corners JEA is equivalent to proven reserves of 156 billion cubic feet of dry natural gas and targeting net output of 21 million cubic feet per day this year. The gas is sold entirely in the US domestic market, mainly for power generation.

Commenting on the purchase, Banpu CEO Somruedee Chaimongkol said in a statement that: “The timing is good, given low oil and gas prices, and we have invested at a very attractive valuation with substantial upside potential.” She said the company had been assessing the investment for two years and is “confident we are investing in a highly de-risked situation.”

Located in the northeast section of the Marcellus Shale basin, and 65.4 percent-owned and operated by Talisman Energy, JEA was purchased for US$112 million in a bid to diversify the company away from environmentally-damaging coal. But tackling global warming was not the only motivation for the move toward natural gas. Banpu seeks to improve its image by turning to greener fuels while at the same time balancing the impact of weak coal prices. The company already has diversified into a solar-farm business in Japan.

“While we will continue to strengthen our conventional energy business, we will also begin to balance this with a greener new energy business,” Somruedee Chaimongkol said. “Our moves into solar photovoltaic power in Japan and now into shale gas in the US are our first steps towards achieving this transformation.

“These investments put Banpu directly into the mainstream of the global energy revolution,” she said.

By 2020, the company, which has coal mines in Indonesia, Australia, and China and interests in power plants in Laos, China and Japan, expects renewables to account for 20 percent of its power generation.

Even so, speaking to Nikkei Asian Review, a Bankok-based energy sector analyst suggested on balance, the shale investment may be a safer bet for the Taiwanese company than renewables.

“Renewable energy is only feasible when oil prices are high,” said the analyst on condition of anonymity. “Shale gas is as green as fossil fuels get, and fossil fuel-based energy will continue to be the core for years to come.”

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