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Thai coal miner Banpu pours $112m into US shale gas

BANGKOK -- Thailand's Banpu has invested $112 million in a U.S. shale gas field, as part of a shift toward energy that is cleaner than its mainstay coal.

     This is the coal mine developer's first foray into upstream gas operations. The investment gives it a 29.4% stake in the Chaffee Corners Joint Exploration Agreement, or JEA -- a shale gas operation in the northeast section of the Marcellus formation in Pennsylvania. Spanish oil company Repsol owns 65.4% of the JEA.

     Banpu is keen to go greener. It also wants to diversify geographically, since its existing operations are concentrated in the Asia-Pacific region.

     This year, Banpu aims to produce 21 million cu. feet of gas per day. The proven reserves amount to 156 billion cu. feet. Banpu's output will be sold solely in the U.S., mainly for power generation.

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

Climate change cue

The investment comes at a time of heightened concern over global warming, which is weighing on coal demand. Coal-fired power plants are notorious for their carbon dioxide emissions.

     Banpu's current business is centered on coal, with 80% of its EBITDA -- earnings before interest, taxes, depreciation and amortization -- coming from production of the black stuff. The rest comes from operating coal-fired power plants.

     "While we will continue to strengthen our conventional energy business, we will also begin to balance this with a greener new energy business," Somruedee said.

     The company pushed into renewable energy last year through multiple solar power joint ventures in Japan. By 2020, it expects renewables will account for 20% of its power generation.

     A Bangkok-based energy sector analyst suggested the shale investment may be a safer bet. "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."

     Banpu shares shot up 5.6% on Wednesday, closing at 18.9 baht.

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