Feature Stories | Dec 15 2009
(This story was originally published on Friday, 4 December 2009. It has now been republished to make it available to non-paying members at FNArena and readers elsewhere).
By Greg Peel
The small US city of Rawlins is a gateway to the wilderness of southern Wyoming. A few miles west of the city centre, at the charmingly named locale North Knobs, development has been underway since the 1980s on one of the few commercial trials of underground coal gasification (UCG) technology in the western world. To date, US$100m has been spent in preparation of design and feasibility studies.
The site is owned by the US Williams Companies group, and over twenty years the technological development of the project has been conducted by energy consultant Raven Ridge Resources, a team of world specialists in alternative energies such as coal seam methane (CSM) and UCG. Raven has teamed up with Energy Technology Partners LLC, which has developed its own proprietary technology and catalysts based on the Fischer-Tropsch coal-to-liquid process. This partnership exists as InSitu Energy LLC, principals of which had previously conducted the world’s first commercial scale oxygen injection project on behalf of Gulf Oil – being the second test at the site.
To pick up where Part I left off, underground coal gasification is achieved by drilling two bore holes into a coal bed which one might consider the inlet and outlet manifolds. Either steam, air, or in this case pure oxygen is then pumped into the first bore hole into the gasification chamber and the resultant reaction releases “syngas” through the second bore hole. The syngas is then processed to remove and capture the carbon dioxide leaving only a “clean” fuel behind. That gas can then be processed via Fischer-Tropsch technology to produce clean diesel.
Considering North Knobs to be a non-core project amongst its other developments, Williams Energy Ventures has sold an option to Australian-based company Energie Future to acquire 100% of the project. Energie Future is as yet unlisted.
Energie Future and InSitu Energy have formed a joint venture to share in the licensing of the technology. As such, were Energie Future to sell all or part of the North Knobs project to a major corporate investor some time in the future, the joint venture would continue to receive royalty payments based on the technology licence. Before the end of 2009, InSitu will finalise the acquisition of a 10% equity stake in Energy Future.
Ultimately, North Knobs will be the site of a coal to liquids plant producing 50,000 barrels of “ultra clean” diesel per day. Additional opportunities exist to expand the clean coal operations at North Knobs to include “Zero-Gen Electricity” (which uses syngas to power gas turbines), ammonia, petrochemicals, and hydrogen.
Energie Future is currently undertaking the necessary design and feasibility work and seeking US government approval to complete Stage One of the North Knobs project – a 2700 barrel per day plant – by 2013.
Funding for the project comes with assistance from Australian listed junior miner East Coast Minerals ((ECM)). When InSitu takes its stake in Energie Future, East Coast will remain as a 51% shareholder. East Coast recently issued one million new shares to cover its investment and a $1.5m obligation to fund Energie Future’s costs through to eventual listing. It was a fortuitous investment for ECM coming, as it did, twelve months ago at the depths of the GFC.
Energie Future’s interests do not end with its advanced Wyoming project.
The company has applied for an Australian mining licence covering almost 6000 square kilometres estimated to contain a significant world resource of 28 billion tonnes of coal. The licence is still under consideration by the NSW government ahead of requisite federal government approval. Energie Future’s plan is to tap into the resource and establish a UCG project or projects. Unfortunately however, the prospect of exploiting this particular coal resource has already drawn considerable controversy and some slightly hysterical media attention.
The 6000sqkm in question sits underwater a few kilometres off the NSW coast, in an area that stretches from in line with the Royal National Park south of Sydney to in line with Port Stephens north of Newcastle. Yep – a coal project is planned just off Bondi Beach.
Unsurprisingly, such a notion has drawn startled criticism from environmental groups and the Greens. The first image that jumped into my own head was also of a bespoiled coastline and I saw little chance of such a project ever getting the nod. However, the reality is that the surface infrastructure of a UCG operation is relatively unassuming, and in this case would be far enough from any beach as to be well over the horizon. The UCG process would then be carried out deep under the ocean floor.
And of course all the relevant environmental impact studies would need to be carried out, and a shocked electorate assuaged. Such a project is far from beyond the realms. The Greens have described the project as a “large offshore mining venture” which of course it’s not, given no coal will ever see the light of day, and an “unproven method of offshore coal mining”, which would ultimately be wrong on two counts given a UCG project off Sydney (which will be a long time coming) would not go ahead until UCG technology is indeed commercially proven.
There is also a slight irony in that UCG is a “clean coal” technology that should have environmental groups at least interested, assuming they admit to the impossibility of ever ending all forms of coal mining in the near future, which they would of course prefer.
Regardless, whatever controversy will no doubt continue to shroud Energie Future’s NSW plans the fact remains it is the Wyoming project in focus at present – located in another country in which the government has pledged budget allocations for assistance in the development of clean coal technology. In the past few weeks I have met with Rick Somerton, managing director of Energie Future, Raymond Pilcher, president of Raven Ridge Resources, members of the board and management of East Coast Minerals, and as noted in Part I, Julie Lauder, marketing director of the global UCG Partnership. All are very excited about Energie Future’s future.
Somerton’s background includes twenty years of investment banking experience with particular focus on facilitation of mining, energy, industrial and infrastructure projects. (He is also a keen Sydney beach-goer and surfer.) Pilcher boasts over thirty years of experience in energy project development and is considered a world authority on CSM and UCG.
Some time in the “first third” of 2010, East Coast Minerals intends to launch an Initial Public Offering of shares in Energie Future. East Coast will retain a stake but allow the IPO to dilute its share. Plans have not yet been formalised, but existing East Coast shareholders will receive some form of preference in the Energie Future IPO, perhaps on an allocation basis.
East Coast Minerals is a base metal and, more specifically, a silver explorer with two promising sites located, despite its name, in Western Australia. ECM shares last traded at 8c.
So concludes this two-part series on underground coal gasification and an introduction to Energie Future. As the Australian political battle surrounding our country’s carbon future heats up, and world leaders prepare to descend on Copenhagen in some hope of improving on the Kyoto Protocol, one can only conclude – personal climate change views aside – that carbon trading in some form will eventually become a reality and that alternative and “clean” fuel sources and projects will benefit as a result, including the potential for government rebates and/or grants.