Mid-West deal revives hopes for local coal-gasification

WHEN energy giant BP and miner Rio Tinto quietly shelved a joint $2 billion 'clean coal' power initiative at Kwinana in May last year, many pundits considered it the death knell for the state's nascent coal-gasification sector.

The vaunted 'Hydrogen Energy' project was to be a showcase for clean coal technology, producing clean hydrogen gas from coal to power a 500-megawatt power station, and injecting the resulting carbon dioxide into deep saline reservoirs nearby for permanent storage.

But the project unravelled when technical studies found that naturally occurring chimneys in the targeted geological formations meant it was doubtful that the injected carbon dioxide would remain trapped underground.

Yet a year later, an innovative deal to power Eneabba Gas's proposed 168MW Centauri-1 power station near Dongara with coal-seam gas has given the sector a timely boost.

Although Centauri-1 was first predicated on conventional natural gas supplies, Eneabba has long hoped to generate its own gas supplies at its nearby Sargon coal tenements.

Enter Carbon Energy, an underground coal gasification (UCG) specialist that has developed its own UCG power plant at Bloodwood Creek in Queensland's Surat Basin (pictured above).

Subject to drilling results, Carbon Energy will buy the Sargon leases and supply Eneabba with at least 15 terajoules of syngas per day from underground gasification at the tenements.

With UCG, vertical holes are drilled at either end of a seam and connected by a horizontal hole drilled along the seam. Oxygen and water are then pumped in at one end to heat the coal and generate gas, which then flows out the other end and is collected at the surface for processing.

This significantly reduces emissions by trapping a significant portion of the resulting carbon dioxide underground, leaving the remainder to be collected at the surface.

Greenhouse emissions are therefore about 20 per cent lower for UCG-fired power plants than conventional coal plants, and could potentially be cut by almost 90 per cent if geosequestration is also possible. To that end, Carbon Energy last week struck a deal to undertake a CO2 injection and sequestration trial near Springsure in Queensland.

Eneabba Gas has estimated syngas from Sargon will cut its annual fuel bill by around $30 million over conventional gas supplies.

Its proximity to several depleted gas reservoirs means geosequestration may also be a realistic option, unlike BP's aborted Kwinana project.

Meanwhile, Carbon Energy is looking way beyond Centauri-1 in commercialising the Sargon coalfield, which it estimates will cost about $100 million to commission.

"We are targeting 300 million tonnes in that resource, and Eneabba will require only 10-15 per cent of that," managing director Andrew Dash said. "So we will then start turning our attention to the broader market ... because we are right on top of both the Parmelia pipeline and the Dampier-Bunbury pipeline, and there is a fair bit of headroom between our cost and the market price for gas."

The implications of establishing a viable UCG industry in WA are huge. In the eastern states, coal seam gas production has soared from 1.4 billion cubic feet to more than 140bcf in just 10 years. Coal seam gas now accounts for 13 per cent of Australia's domestic gas output and has sparked a multi-billion dollar race to establish an onshore LNG export industry.