A survey has confirmed the presence of a large natural gas reserve in Dailekh district, raising hopes that the country could significantly reduce its dependence on imported cooking gas and move closer to long-term energy self-sufficiency. Preliminary findings suggest that the methane reserve discovered in Jaljale, Bhairavi Rural Municipality–1, could meet the nation’s cooking gas demand for the next 50 years.

The discovery comes amid growing financial training caused by the country’s heavy reliance on imported Liquefied Petroleum Gas (LPG). According to Nepal Oil Corporation (NOC), Nepal spent a staggering Rs 264 billion over the past five years to import more than 2.5 million tons of LPG. In the last fiscal year alone, Nepal imported 524,204 tons worth Rs 55.06 billion.

Massive Methane Reserve Confirmed in Jaljale

After years of geological investigations and deep drilling, a Chinese technical team has confirmed the presence of 112.1 billion cubic meters of natural methane gas beneath the surface in Jaljale. The exploration was carried out under the Nepal-China Petroleum Exploration Agreement signed in 2016 and involved drilling to a depth of 4,013 meters—making it the deepest exploratory well in Nepal’s history.

The geological survey was conducted by the China Geological Survey, while drilling and testing were handled by CNPC Xibu Engineering Company of China. Their analysis confirmed the existence of a substantial methane gas reserve.

“This is the largest natural gas reserve discovered in Nepal so far,” said Dinesh Kumar Napit, Deputy Director General and Spokesperson for the Department of Mines and Geology. “More than 90% of the reserve consists of methane, which is considered a cleaner and more environmentally friendly fuel than LPG.”

The Department of Mines and Geology entered into a Rs 2.4 billion agreement with the China Geological Survey in 2019 to conduct exploration and drilling. However, the project faced multiple delays due to the Covid-19 pandemic, difficult terrain, limited road access and land acquisition disputes.

Drilling took place on 45 ropani (approximately 2.29 hectares) of acquired land. A team of around 70 experts led the operations, supported by 100 local workers. The project was executed in two phases: the initial phase included seismic, geological, magnetotelluric and geochemical surveys, followed by the second phase of deep drilling.

During the drilling, 50 gas samples were collected from nine geological intervals between 2,500 and 3,940 meters. More than 3,000 rock cuttings were sent to China for labouratory testing. Rock samples were collected at every meter as the drill advanced to 4,013 meters, allowing scientists to analyze the quantity and quality of the gas deposits.

While the original objective was petroleum exploration, the discovery of such large gas deposits has shifted the focus toward methane extraction. Oil testing is currently underway, which will further determine the site’s petroleum potential.

Billions Lost on Transport and Imports

Nepal’s dependence on imported cooking gas is more than a trade imbalance; it carries direct financial consequences. The country sources its LPG from Indian refineries such as Paradip, Barauni, Haldia and Mathura. Each year, around 700 bullets are used to transport the gas from India to Nepal, allowing Indian companies to earn over Rs 6 billion annually—a dependency that has lasted for more than four decades.

To cut these recurring costs, Nepal Oil Corporation (NOC) has proposed the construction of a cross-border LPG pipeline connecting Motihari (India) to Pathlaiya to Sarlahi. A detailed engineering survey for the project has already been completed by Indian Oil Corporation (IOC).

What Next?

The Department of Mines and Geology (DoMG) has outlined a multi-stage process before full commercial production can begin. These stages include quality and pressure testing, a detailed commercial and economic feasibility study, an environmental impact assessment, and infrastructure development and planning.

Production testing will be carried out in two phases. The first phase will involve 60 working days focused on well development. This will be followed by approximately 15 days of test production in the second phase. The full testing process is expected to take about a year.

The Ministry of Industry, Commerce and Supplies has estimated the cost of testing and evaluation at Rs 650 million. So far, more than Rs 2.25 billion has already been invested in the project.

Industry Minister Damodar Bhandari has instructed the DoMG to complete the production testing within two and a half months, while Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel has requested a detailed implementation roadmap.

Two models are currently under consideration to move the project forward. One involves establishing a new public enterprise focused on energy extraction. The other envisions leveraging existing state-owned companies in partnership with the private sector. To secure technical expertise and financing, the DoMG also plans to seek support from the Chinese government under a government-to-government (G2G) framework.

A Turning Point for Nepal’s Energy Future

With rising domestic demand and an unsustainable import bill, the natural gas discovery in Dailekh could mark a strategic turning point in Nepal’s energy future. If successfully developed, the site could significantly strengthen energy self-reliance, reduce the trade deficit and lower emissions by shifting to cleaner-burning methane.

The final detailed report on the gas reserve is expected by December. As anticipation grows, policymakers now face the challenge of turning this rare opportunity into a foundation for long-term energy security and economic resilience.

(This article was originally publihsed in July 2025 issue of New Business Age Magazine.)

Correction: Laboratory tests on samples collected from the current site confirmed the presence of 112.1 billion cubic meters of methane gas. The print version contained an error in this figure.