Alkane looks to extract gas from shale5 May 2011
Notts energy group Alkane could begin a programme of extracting methane directly from the UK's coal beds.
It currently extracts the gas from former pits which it then converts into electricity.
But with the price of energy escalating, Alkane is turning its attention to methane which lies in the coal beds and shale beneath areas such as the Notts-Derby border.
Alkane chief executive Neil O'Brien said the it was early days for the concept which involves digging a bore hole and connecting it to a converter at a cost of about £600,000.
He said: "The industry as a whole is getting very excited about underground gas reserves which are partly in mines and coal reserves but also in shale.
"Our licences along the Notts-Derbys border such as Mansfield would allow us to extract shale gas.
"The industry has invested as much as £100 million in shale gas over the past six months.
"We could have something moving in a couple of years."
Alkane yesterday issued a trading update, saying that 88 per cent of its production this year had been contracted at a selling price of £49 MWh (megawatts per hour).
About 15 per cent of its anticipated 2012 output has also been contracted at a price of £55 MWh and the market price for 2013 is more than £60 MWh.
Revenues for the three months to March 31 have risen by 51 per cent, driven by a 54 per cent increase in electricity output to 37 GWh (gigawatts per hour).
Mr O'Brien said pricing continued to "strengthen" in recent months as global concerns over the situation in the Middle East and Japan influenced sentiment in the energy market.
Alkane specialises in capping abandoned mines and extracting the methane which can be converted to electricity. It currently operates from 12 sites.
This year it began construction of a methane plant at Calverton and has begun a drilling programme at Clipstone in Notts.
A planning application for the site of the former Gedling pit, if successful, could lead to construction beginning this year.
Mr O'Brien said: "We believe that our experience from more than 20 coal mine methane (CMM) projects gives us the best-researched CMM programme in the UK but there is always some risk.
"Historically, we have successfully identified commercial reserves in approximately three out of four drill projects with one unsuccessful drill programme included in the budget each year as a precaution."
Alkane will be bidding for more extraction opportunities when the Department of Energy and Climate Change begins its 14th onshore licensing round later this year.
Mr O'Brien added: "We set out on the current CMM expansion phase two years ago when selling prices were falling and investment funding limited due to the financial crisis.
"We are now seeing the result of our growth strategy as we benefit from increased output and rising market selling prices."
Mr O'Brien said higher prices will allow Alkane to look a marginal mines that were unprofitable.
The new licensing round could see Alkane step up its programme, he added.
He revealed that Alkane was looking at a programme of "stand-by facilities" for times of peak demand between 4pm and 7pm.
It would buy gas from the grid at peak demand and convert it to electricity.