OREANDA-NEWS. August 29, 2011. Green Dragon Gas (LON:GDG) announced it has successfully installed two new Caterpillar generator systems to supply power to facilitate gas production on its Shizhuang South (GSS) block in Shanxi Province, China.

The company, one of the largest independent companies involved in the production of coal bed methane gas (CBM) and the distribution and sale of wholesale gas in China, says each of the distributed generator systems (gensets) will have a capacity of 2,000kW.

The gensets have been designed and built to replace the original ones at GSS. They will supply power to facilitate gas production of 28 new wells, plus other new related facilities which will come on stream by the end of 2011.

Green Dragon says the gensets have now been commissioned and are able to cover the current electricity demand at GSS. Following the successful completion of phase 1 of operations, two old 800kW gensets and three 400kW gensets were retired from service and the company has now commenced Phase 2 of the power systems upgrade.

Phase 2 will add a further 6,000 kW, thereby increasing total output to 10,000 kW. This is expected to be completed by the end of 2011.

The total cost of Phase 1 and 2 is approximately USD 3.5 million.

Randeep Grewal, chairman and chief executive of Green Dragon Gas, says: "This infrastructure build-out is a result of our confidence in predicting the gas production from each of the SIS wells being drilled.

“In scaling CBM projects, as evidenced at GSS, getting the infrastructure right is quite important as it forms a material component of the full cycle economics. This infrastructure is focused on self generated power, compression for CNG and pipeline gas sales. Henceforth, the infrastructure will be aligned and built along-side the wells being drilled.

Grewal adds: “Our short term target now is to achieve a breakeven EBITDA also within the upstream component of the vertically integrated business model."

CBM is a type of natural gas that was trapped when coal seams formed millions of years ago. In certain parts of the world it is abundant but getting it out of the ground is a complicated business, particularly in China where coal seams are brittle and highly faulted.

Indeed the geological complexities of China’s coal beds had posed an almost unsolvable puzzle. But in 2008, Green Dragon – through its recently spun-out drilling division Greka - cracked it with some clever technology called “surface-in-steam” methodology.