Technology Review has an article on interest in underground coal gasification in China - Exploiting China's Coal While It's Still Underground.

China is pushing forward with a new strategy for expanding access to coal energy that could also reduce its environmental impact: turning coal into clean-burning gases in the ground.

At a U.K.-Chinese summit in Beijing late last month that included British prime minister David Cameron and Chinese premier Wen Jiabao, a $1.5-billion commercial partnership was launched to gasify six million tons of buried coal per year and generate 1,000 megawatts of power.

The project in Inner Mongolia's Yi He coal field is being advanced by the state-owned China Energy Conservation and Environmental Protection Group, and U.K.-based Seamwell International, a newly formed developer of underground coal gasification (UCG) technology. It is the most high-profile of several such proposed projects in China. More than a dozen similar large-scale projects are under development in other countries, including the U.S., Canada, Australia, and Hungary.

UCG is promoted as a relatively clean method of exploiting coal seams that are too deep or thin to be tapped economically using conventional mining. Such seams in Inner Mongolia hold an estimated 280 billion tons, according to Seamwell. That's more than double the tonnage of recoverable coal in China recognized by the London-based World Energy Council. UCG can also generate electricity from coal with less air pollution, greenhouse gas emissions, and water consumption than existing coal-fired power plants.

What remains to be proven, however, is whether UCG can operate at large scale without contaminating groundwater. Last week, Australian regulators laid charges against Melbourne-based UCG developer Cougar Energy for allegedly contaminating groundwater, and there are signs that this is a rising concern for Chinese regulators.

The chemistry of UCG-based power generation is akin to that of gasification power plants, such as the 250-megawatt GreenGen projected expected to start up late this year in Tianjin, China, in which heat and pressure turn coal into a combustible mixture of carbon monoxide and hydrogen known as syngas. UCG exploits drilling technology to engineer the coal seam itself into an underground gasification reactor. Wells drilled into the coal seam supply air or oxygen, and sometimes steam, to burn some of the coal, and generate heat and pressure to gasify more coal, and then deliver the resulting syngas to the surface.

China's largest pilot project suggests that UCG will be economically competitive, according to data presented this spring by Beijing-based energy giant ENN. Feng Chen, ENN's chief engineer for UCG, reported on 26 months of gasification at a CAN$1 billion ($155 million) UCG operation at Ulanchap, Inner Mongolia, which generates five megawatts of power. He projected that UCG can supply power 27 percent cheaper than plants such as GreenGen that gasify coal above-ground.

Small companies must think big, but I have never come across one that is thinking any bigger than oil and gas explorer Central Petroleum.

Last month, the company announced it would look for partners to convert a deep underground coal discovery into synthetic gas and then into synthetic oil. Its announcement in June said that if it was successful it would “help Australia become self-sufficient in liquid transport fuels, a national security imperative”. It also said “Australia could indeed become an exporter of liquid fuels”.

Using underground coal gasification (UCG) technology, Central Petroleum said that in five to six years it wanted to be in a joint venture that produces 60,000 barrels of oil equivalent a day, and then ramp that up to 3 million barrels a day. The proposed mine life would be (wait for it) 150 years – and all for a cost of $7.5 billion. Not much when you consider that, before costs, the ramped-up production rate would rake in more than $47 billion a year at the current oil price.

In the next five years Australia's oil import bill is expected to almost double from $16 billion to $30 billion, so it's possible Australia's many politicians and economists will be following this company's progress. Amazing stuff.

Let's look at where Central Petroleum (ASX: CTP) is today. Since it listed in 2006, this is a company that has constantly run out of money and now has almost a billion shares on issue. At 6 cents, its market cap is $61 million and it holds under $10 million in cash.

The company issues about two ASX announcements a week with more geological references than 99.9 per cent of punters' minds can handle. But it also happens to own the exploration rights over a massive amount of land in the centre of Australia - in the vicinity of 270,000 square kilometres.

While exploring, it stumbled onto an extraordinary amount of coal, which it thinks is in the region of 150 to 300 billion tonnes. The catch is it sits 150 metres or so under the ground.

This is the kind of find that represents zero value to many because of its depth. But a newly formed group called Allied Resource Partners, run by ex-mining engineer-fund manager-Fat Prophets director David Shearwood, thinks otherwise. His firm has been engaged by Central to take charge of the project, which means finding the money ($300 million for a bank feasibility study and then $7.5 billion for the stage 1 development).

There are many risks in this process, but from Central's perspective, there are not many. It is simply granting a sort of “free option” on an asset that the market currently views as worth nothing. ...

Proponents of underground coal gasification cite its successful use in Uzbekistan and Chinchilla, Queensland by ASX listed Linc Energy (LNC), which has a market cap of $1.4 billion.

Historically, it has been used by groups cut off from oil supply, namely the Nazis in Germany and Apartheid South Africa. In these situations, the coal was liquefied after it was dug out of the ground.

These days, some (probably investors in the technology) are describing it as the next big thing in energy because there is no physical mining of coal, which reduces personnel, costs and the physical impact on the landscape. In short, it seems to tick a lot of environmental boxes and can be used for power generation, as well as chemical feed and liquid fuel.

In reality, the conversion of what could be described as a marginal coal deposit into gas, let alone a liquid form, is a “holy grail” for gas companies, according to Johan Hedstrom, an energy analyst with Bell Potter. “It's a nice concept, but has not been commercially proven,” he said.

Hedstrom said that there are specific conditions that need to be in place that cannot be controlled to make synthetic gas. That means the right mix of methane, nitrogen, carbon dioxide, and carbon monoxide. Clearly it is not a simple process.

This month, Queensland's Department of Environment and Resource Management (DERM) laid charges against Cougar Energy (ASX: CXY) after a gas well ruptured at a site south of Kingaroy where the company was trialling UCG technology. The company is alleged to have contaminated the ground water.

Cougar's shares now trade at less than 2 cents, having traded at 8 cents 12 months ago.

One small cap that has also been suffering a big decline in value is Carbon Energy (ASX: CNX) whose UCG operations in Australia are located in Queensland's Surat basin. At 23 cents its shares have declined almost 40 per cent in the past six months. Possibly its decline is more a reflection of being lumped in with Cougar.

But this company's prospects seem considerably brighter. Carbon Energy has survived an eight month investigation into its processes and its UCG plant has been running for three months. The company believes that its plant will be connected to the power grid by October (after several delays), which means it will be able to start generating revenues.

Bell Potter's valuation of 66 cents reflects that it is new technology, but also Carbon Energy's potential, which is what you are looking for in a small cap. It has six operations – one in Australia, one in Chile, two in the US, one in India and one in Turkey.

The ABC has a report on a proposed UCG (underground coal gasification) / coal to liquids project being promoted by Central Petroleum (whose pronouncements I tend to regard with a large degree of skepticism) - Company plans to tap world's biggest coal field.

An Australian company says a coal field discovered in the Simpson Desert could be the biggest in the world.

Central Petroleum Limited says it recently discovered the field in the south-east of the Northern Territory, about 300 kilometres from Alice Springs. It says the coal seam stretches across 400 kilometres.

The company has signed an agreement with Allied Resource Partners (ARP) to work towards setting up a coal production plant in the Great Artesian Basin area. ARP says the plan is to make liquid fuel without mining, by heating the coal underground, turning it into a gas, and then turning that gas into a liquid.

ARP spokesman David Shearwood says operations could last for 100 years because the field is so big. "It is an enormous quantity of coal," he said. "In our analysis, we can't find a bigger coal field on the planet."

He says the project would involve building a pipeline to Darwin and possibly one to South Australia.

The joint venture partners say they are seeking $300 million from investors to pay for a feasibility study that would include extensive exploration.

The SMH has a brief report on more obstacles for the underground coal gasification industry in Queensland - Cougar to meet with Qld govt.

Executives from embattled gas explorer Cougar Energy will meet with Queensland government officials this week to discuss getting their project back on track. The Department of Environment and Resource Management (DERM) has declined to accept an environmental report that Cougar provided on August 16.

Cougar Energy was forced to shut down its pilot underground coal gasificiation plant in July after the state government learned traces of the toxic chemicals benzene and toluene had been found in groundwater at the site and a neighbouring property. The department has yet to advise the ASX-listed company of what further regulatory action it wants Cougar to take.

Cougar managing director Dr Len Walker said the company planned to respond to any request for further information "as quickly as possible". "Cougar Energy remains committed to recommencing operations at its Kingaroy project in Queensland and will continue to work with DERM to demonstrate that the company's underground coal gasification activities have not and will not harm the environment," Dr Walker said in a statement.

The SMH has an article on the slowly emerging UCG industry in Australia (making progress towards commercialisation despite resistance from the coal seam gas industry) - Technology to help fuel the future.

The coming of age for UCG has been lengthy. The technology was first developed in the 19th century and encouraged in Joseph Stalin's Soviet Union. The process works by injecting oxidants down a production well and over non-mined coal seams. The combustion results in gas that is transported up a second well, where it can then be used as a fuel, a chemical feedstock or for power generation.

Cougar Energy managing director Len Walker, one of the pioneers of UCG in Australia, says rising energy demand has put the technology in play.

''When I founded Linc Energy in 1996, or even when I founded Cougar more than two years ago, there was very limited interest in UCG,'' Dr Walker says. ''There was also very little going on overseas at the time. Apart from Linc Energy, Carbon Energy and ourselves, which are the big three in the space, I have counted six or seven other listed companies that have recently popped up and which are all promoting UCG in different ways.

''I have never seen anything like it in the 30 years that I have been involved in UCG. The genie is out of the bottle and it is unlikely to be put back in the bottle again.''

Walker says an important difference between UCG and coal seam gas is that the latter is produced for conversion into liquefied natural gas and the export market, while the former is aimed at domestic supply.

''It would take far too much effort to convert underground coal gasification for export,'' Walker says. ''Everyone can see energy prices going up but if we can bring this to market, and clearly I am a firm believer in that eventuating, then we will be underpinning the price of gas in Australia.''

Last month Cougar announced ignition of its flagship Kingaroy project in south-east Queensland and the successful production of synthetic gas (or syngas).

The company will soon undertake a series of trials, underground and on the surface, that will be used for a pre-feasibility study and a subsequent bankable feasibility.

The composition and variability of the gas will determine the final design for Cougar's planned 400-megawatt power station, producing enough energy to power 400,000 homes for at least 30 years. Walker is hopeful of securing $300 million in combined debt and equity funding by early next year. The proceeds will fund its 200-megawatt stage 1 project to be completed by 2013.

Travel about 125 kilometres south-west of Kingaroy and you will find Linc's Chinchilla project, which has a slightly different take on UCG. It uses the process to convert coal to liquids, which it has been doing for about 10 years, and its goal is to produce 20,000 barrels a day - 10 per cent of Australia's current fuel consumption.

Linc chief executive Peter Bond says the company is looking at branching into power generation. ''What UCG is eventually used for is really driven by geography. So in Vietnam, for instance, power is in short supply so you wouldn't do anything else but power,'' he says.

''We are hopeful of putting in a power station in South Australia, which is being pushed through at a rate of knots because South Australia is really short on power supply. That would be a 200 to 400-megawatt commitment, with construction to start by the end of next year.''

Neighbouring Linc's tenements in the Surat Basin is Carbon Energy. Having completed its pilot burn more than a year ago, Carbon Energy is targeting a five-megawatt plant, which will be operational by midyear and be the first of its kind in the world.

It looks like UCG schemes aren't just confined to Australia - Technology review has an article on a venture in Canada - Getting Power From Coal Without Digging It Up.

Converting coal in the ground directly into clean-burning gases could have huge environmental benefits--not the least of which would be the avoidance of destructive mining operations. The problem is, technology for underground coal gasification is still in its early stages.

Now the government of Alberta says it will give C$285 million ($271 million) to a coal gasification project by Calgary-based Swan Hills Synfuels that involves the deepest-ever operation to generate power from coal--without digging it up.

Previous demonstrations of the technology have turned coal seams as deep as 1,000 meters below the surface into clean-burning gas. In contrast, Swan Hills Synfuels' C$1.5 billion project proposes to reach down 1,400 meters. Working at that depth could lessen the threat of groundwater contamination from the smoldering decomposing coal. "We've got 800 meters of rock--a lot of it impermeable--between us and freshwater aquifers," says Swan Hills president Doug Shaigec.

What's more, if the technology can get at deeper layers of coal, it could allow access to much more of the fossil fuel, says Julio Friedmann, who is carbon management project leader for Lawrence Livermore National Laboratory in California.

When the project starts up in 2015, Swan Hills hopes to generate 300 megawatts of power from its coal gas while selling over 1.3 million tons of carbon dioxide per year. The CO2 could be used by oil producers and ultimately stored in oil wells. This could result in the storage of 10 to 20 million tons of carbon dioxide per year by 2020. That would help Alberta meet its 2020 goal for carbon capture of 25 to30 million tons per year, according to a report last month from an alliance of Canadian industrial firms.

Vast coal deposits lying deep beneath the North Sea will be burnt in situ to generate up to 5 per cent of Britain’s energy needs, under new plans approved by the Government last week.

The UK Coal Authority has awarded licences to Clean Coal, an Anglo-American company, to develop five offshore sites for a technology called Underground Coal Gasification (UGC).

The method, which has not been used on a commercial scale in the UK, although it is widely used in Australia [BG: this is a gross exaggeration], taps the high energy content of coal while doing away with the costly and labour-intensive need to mine it first.

Rohan Courtney, a former director of Tullow Oil who is chairman of Clean Coal, said that the potential for the technology was enormous. “There are enormous amounts of coal lying beneath the North Sea which have never been accessed,” he said. “This technology is going to open up the industry again in the UK.”

The sites approved for use stretch up to 10km offshore from Sunderland, Grimsby and Cromer on the shores of the North Sea, Canonbie, near Annan in Dumfries and Galloway on the other side of Scotland, and Swansea Bay, outside the entrance to the Bristol Channel. The combined coal reserves are estimated to be at least one billion tonnes, equivalent to more than one sixth of all the coal consumed in an average year around the world. Global consumption of coal is about 5.8 billion tonnes a year. Total consumption in the UK is about 80 million tonnes a year.

Technology Review has a somewhat skeptical article on the prospects for UCG - Underground Coal Gasification (covered here previously in articles on coal to liquids and coal seam gas) - Fire in the Holes.

Turning coal into clean-burning gases in the ground can avoid the environmental impact of mining coal and halve the cost of managing its carbon-dioxide emissions. But while a few pilot tests of such underground coal gasification (UCG) are moving towards small-scale commercial operations in Australia, China, and South Africa, much research is needed to improve the control of UCG operations and to prove their environmental safety, according to a report issued last month by the Clean Air Task Force, a nonprofit environmental consulting firm based in Boston. "It's tricky business--you don't just go out and drill a well and declare victory," says report author Julio Friedmann, who is carbon management project leader for Lawrence Livermore National Laboratory in California. ...

Friedmann says interest was resparked worldwide when natural-gas prices peaked a few years ago. Pilot projects in South Africa, for example, prompted state power company Eskom to plan a 2,100-megawatt power plant fuelled with UCG syngas, starting with an initial 375-megawatt unit by 2011. Several pilots are being planned in the United States, including one in Wyoming backed by BP.

Following a 100-day run this spring at Bloodwood Creek test site in Queensland, Australian UCG developer Carbon Energy estimated that it could generate syngas for A$1.25 (US$1.10) per gigajoule of energy, at a time when Australian natural gas was fetching A$3.50 to A$7 per gigajoule. Those economics enabled Carbon Energy to raise A$32 million in June, which the firm is using to install a small five-megawatt generator this winter and engineer a 20-megawatt power plant for late 2010. Ultimately it plans to build a 300-megawatt power plant at the site.

What UCG still needs, however, is research to demonstrate that it is environmentally friendly. On its face, UCG looks like a big improvement over mountaintop removal and other forms of coal mining, but it comes with its own set of environmental risks.

Energy Minister Martin Ferguson reports that Linc Energy's coal to liquids (or more accurately UCG - underground coal gasification - then GTL - gas to liquids) demonstration plant has opened in Queensland - Coal-to-liquids demonstration plant opens.

The Minister for Resources and Energy, Martin Ferguson AM MP, has launched the world's first coal-to-liquids demonstration plant to use Underground Coal Gasification (UCG) technology.

Linc Energy's demonstration plant near Chinchilla in Queensland is producing clean synthetic diesel and jet fuel from gas sourced from deep underground coal reserves. First production was achieved on 14 October 2008.|

Minister Ferguson said: " Australia is coal and gas rich, with hundreds of years of reserves. Technologies that convert coal and gas to ultra-clean diesel and jet fuel have the potential to replace Australia's declining oil reserves and make us self-sufficient in liquid transport fuels once again.

"A domestic synthetic fuels industry would reduce - and maybe even one day remove - our growing trade deficit in petroleum products which last year grew to almost $15 billion."

Minister Ferguson said: "This technology unlocks energy from Australia's significant stranded and uneconomic coal reserves and has the potential to dramatically reduce Australia's dependence upon imported oil and refined products." ...

Minister Ferguson said: " Australia has enormous potential as a coal-to-liquids producer and an economically viable and environmentally sustainable coal-to-liquids industry would not only increase Australia's energy security, but also provide jobs, exports, revenue and economic growth, particularly in regional communities.

"Similarly, gas-to-liquids could open up new opportunities for development of Australia's vast northwest gas resources and east coast coal seam methane resources, complementing the potential of Australia's well-established LNG industry."

The ABC reports that one UCG hopeful has apparently prevailed over the coal seam gas juggernaut and won some acreage in Queensland - Metrocoal secures Surat Basin exploration rights.

Energy company Metrocoal says it has secured exclusive exploration rights over a coal seam deposit in the Surat Basin.

There have been disputes between companies that conduct underground coal gasification (UCG) and those that build coal seam gas fields, because their mining permits often overlap each other.

Metrocoal says a coal seam gas company has withdrawn its application over the 60 square kilometre site, which will allow it to test whether the coal deposit is suitable for the UCG process.

Bloomberg reports that Linc Energy is trying to fuel from its planned coal-to-liquids plant in South Australia to BP - Linc Extends Diesel Option With BP From Australian GTL Plant.

Linc Energy Ltd., an Australian energy company planning to convert coal into diesel, extended an option to sell fuel to BP Plc from its planned gas-to-liquids plant in southern Australia. ... The company plans to develop the so-called gas-to-liquids, or GTL, project in the Arckaringa Basin in southern Australia. The company acquired rights to explore the region, which may yield coal-seam gas, in June when it agreed to buy Sapex Ltd.

UCG hopeful Linc has fled to South Australia but seems to be leaving a cloud of litigation behind, with the Curious Snail reporting that they are alleging the CSG industry has formed a cartel - Origin, Queensland Gas, Santos accused of coal seam gas cartel.

THE rich coal seam resources of Queensland's Surat Basin have ignited a bitter feud, with claims of collusion between our biggest energy players. The Courier-Mail has learnt three of the biggest players in coal seam gas (CSG), Origin Energy, Queensland Gas and Santos, are the subject of a complaint to Australia's competition watchdog.

The trio are accused of acting as a cartel to freeze out a fledgling competitor for central Queensland's coal seam resources - the underground coal gasification (UCG) industry.

The State Government has also been implicated with claims the CSG companies acted after being secretly informed about a looming decision in their favour. It is alleged the corporate giants of CSG moved simultaneously recently to stymie negotiations with their UCG contemporaries.

The two industries have tenements over the same resources but are required to negotiate because they are licensed under different legislation - CSG requires a petroleum licence while UCG requires a mining licence.

ARROW Energy has signed an agreement with China's Bin Chang Mining to develop a coal bed methane project in Shaanxi Province.
Under the terms of the deal, if commercial volumes of gas are produced from the pilot program, the parties will enter into a formal joint venture to develop the area, the Australian coal seam gas producer said.

Arrow recently announced a joint venture with the Geological Survey of Xinjiang Autonomous Region, where first drilling is targeted for the second quarter of 2009.

The Courier Mail reports that Queensland's coal seam gas producers have succeeded in chasing underground coal gasification hopeful Linc Energy out of the state, with Linc deciding its coal to liquids technology might find the going easier in South Australia - Linc pulls out of Queensland $1b liquids plan, heads to SA. More at Bloomberg.

UNDERGROUND coal gasification hopeful Linc Energy has seen the writing on the wall in Queensland and will transfer plans for its $1 billion gas-to-liquids plant to South Australia.

For many years Linc has been planning a large UCG-GTL plant at Chinchilla in Queensland, where it has spent close to $50 million on a pilot liquids plant and a coal exploration program.

It was hoping to begin detailed designs next year on a commercial facility, eventually producing 20,000 barrels of diesel and aviation fuel a day just down the road from the pilot plant.

But Linc, which recently took over Adelaide-based energy hopeful Sapex to get access to its large coal exploration areas in SA's Arckaringa Basin, yesterday announced that instead it would "focus on developing its first commercial UCG-GTL operation in South Australia".

The announcement came a day after BG Group, which has just taken over coal seam gas group Queensland Gas Company, called on the Queensland Government to give coal seam gas companies, rather than UCG groups, priority over coal exploration areas in Queensland.

At present, coal exploration licences (used by UCG groups) and petroleum licences (which govern CSG development) can exist over the same resource.

BG chief executive Frank Chapman said his group's plans to spend as much as $15 billion on CSG development and LNG processing at Gladstone -- where Santos, Origin Energy and Arrow Energy and their international partners are also planning large multibillion-dollar LNG developments -- would have to be delayed unless BG could get guaranteed resource security.

Linc, QGC and Arrow Energy, have competing petroleum interests over part of the coal areas Linc holds near Chinchilla.

There was no news from the Queensland Government yesterday on BG's demands. A spokeswoman for Mines and Energy Minister Geoff Wilson said there had been no formal or informal contact recently with Linc about its UCG plans.

But CSG groups have lobbied the Government hard, raising questions about UCG's commercial credentials and its safety, particularly as it relates to potential water table pollution, with rural interests also chipping in on the latter question.

And in an August statement the department had no intention of granting production tenures for underground coal gasification for at least three years.

THE boom in eastern Australia's coal-seam gas industry will accelerate a rise in NSW gas prices, the national energy regulator says.

The State of the Energy Market 2008 report, to be published today, says the rush of projects to develop Queensland's coal-seam gas into an exportable liquidate form has already nudged up prices along the east coast, as producers seek higher returns.

A gigajoule of gas fetched $2.50-$2.90 two years ago but the report's lead essay by forecasters ACIL Tasman said recent sales in Queensland had peaked at $7.

Unlike electricity, gas markets outside of Victoria's are opaque and allow deals to be settled privately, leaving forecasts hazy. But the report said gas was regularly selling for above $4 a gigajoule, as producers seek "significantly higher prices".

Global oil powers have been attracted to converting Queensland's extensive reserves into liquefied natural gas (LNG), which can fetch much higher prices on global markets. No LNG plants have been suggested for NSW but prices are being forced up regardless.

Oil has fallen more than 60 per cent from its peak but the companies behind the multibillion-dollar LNG projects are confident of getting high prices despite the downturn.

"The fact that most of the major [coal-seam gas] producers are currently looking to boost reserves and production capacity to underpin proposed LNG facilities means that the supply surplus which had prevailed in the Queensland market for several years has now been reversed," it said.

Historically, Australians have had the world's cheapest gas. In the US, it costs about $US6.70 per million British thermal units, slightly less than a gigajoule. ...

Gas companies have long argued that prices are set to rise towards "export parity'. The report confirms the Queensland LNG plans are accelerating the process. Australia is the fifth largest LNG exporter. The coal-seam gas bonanza has seen the likes of ConocoPhillips in the US, Britain's BG Group and Malaysia's Petronas pay well above previous prices.

The ABC has a confused article on calls for a moratorium on "coal seam gas" production in Queensland - though the calls are actually for a moratorium on UCG (underground coal gasification) - Moratorium on coal-seam gas proposed. This seems to be another case of the competition between the CSG and UCG industries for the same coal seams, along with confusion on the part of environmental groups (though obviously there are environmental issues with both processes).

he Queensland Government is being urged to put a temporary halt to exploration of coal-seam gas conversion. At least three companies in the Surat Basin - involved in converting coal underground into gas - are hoping to get production leases.

Monica Richter from the Australian Conservation Foundation told Stateline the technology is still too unknown for production to go ahead. "Well just as the Queensland Government put a moratorium on the oil shale development industry of 20 years, I think a moratorium should be put on the development of coal to liquid, underground gasification," he said. "All of these technologies that are not necessarily yet proven, that do have a horrendous green house impact."

Paul Zealand from Origin Energy says a total moratorium would be unwise. "I've got nothing against underground coal gasification I just don't understand it yet, I don't think the state understands it yet," he said. "It's got a lot of development to do. But we shouldn't sterilize a large areas of what are some of the best coal seam prospects in the world for future experiments. We should contain that to a relatively small area."

Linc Energy says the process can be environmentally sustainable. Spokesman Stephan Dumble says his company is working towards a plant at Chinchilla that will convert underground coal into 20,000 barrels of liquid fuel a day.

Energy Minister Geoff Wilson says the Government is doing a lot of work examining how underground coal gasification companies might affect the profitable coal-seam gas sector. "Once the coal seam is burnt underground then the coal seam gas embedded in it is also burnt," he said. "So the challenge for both sectors of the coal industry is to work out an acceptable way for both sectors to be able to co-exist."

Mining Era has a post on another UCG hopeful in Queensland - Carbon Energy Plans To Set The World On Fire.

Underground conversion of coal to gas, in a safe and profitable way, has been one of the mining world’s “Holy Grail” pursuits for the past 70 years, without much success. In the next few weeks the latest attempt to prove the commercial viability of underground coal gasification (UCG) will reach a critical point as a small Australian company, with impeccable connections, “fires” its first substantial trial. In theory, Carbon Energy will burn a deeply-buried coal seam to liberate a range of gases at its Bloodwood Creek test site in Queensland, some gas will be suitable for power generation and some suitable as a feedstock for ammonia production. If successful, investors in the company will be delighted, especially the two biggest shareholders, the Australian Government’s science agency and the country’s biggest fertiliser producer, Incitec Pivot.

It’s the presence of the Commonwealth Scientific and Industrial Research Organisation (CSRIO) with its 18.6 per cent stake in Carbon Energy, and Incitec with its 11.2 per cent, which adds credibility to a process which has its fair share of doubters, and sets the company apart from two other UCG experiments in Australia. Common objections to UCG includes fears of groundwater contamination from burning coal underground, high levels of carbon dioxide being released and the conventional concerns about risks associated with all forms of new technology.

Carbon Energy, chief executive, Andrew Dash, dismisses those concerns as inaccurate and misinformed. He told an investment conference in Queensland last week that rising energy prices and environmental concerns created a perfect climate for UCG. “Our aim is to produce clean energy and chemical feedstock from UCG syngas (synthetic gas).” he said. “We are able to extract the energy in coal without the environmental effects associated with coal mining.” He told the conference that the technology had been developed by the CSIRO, and acquired from the science agency, which emerged from the deal as the biggest single shareholder in Carbon Energy.

Dash used a graph to claim that the energy extraction from UCG is close to double that from actually mining the coal and more than 10 times the energy from coal-seam gas with the added energy coming from the way UCG used the methane, hydrogen and carbon monoxide in the coal rather than the coal itself, or the coal-seam gas on its own. “What we’re doing is based on 10 years of research,” Dash said. “That has enabled us to choose the perfect site for our first major trial.”

Bloodwood Creek is located approximately 150 kilometres west of Brisbane in the coal-rich Surat Basin. Costing around A$20 million the project consists of drilling a series of boreholes down to coal seams 200 metres beneath the surface. The holes start vertically and then run horizontally along the coal seam. Going down one borehole is a mix of oxygen and steam. This is ignited at one end of the coal panel and allowed to burn in a controlled manner, giving off hydrogen, carbon monoxide, methane and carbon dioxide, which are returned to the surface for collection and separation. Incitec Pivot is keen to get its hands on some of the gases to make ammonia which will be used to make fertiliser and explosives for the coal-mining industry. Nearby power plants are interested in the methane to generate electricity and a speciality chemical firm, LyondellBasell Industries is interested in building a methanol plant using UCG products.

Investors have remained strong supporters of Carbon Energy in a tricky market. The company, which is the reincarnated shell of a once well-known gold explorer, Metex, snatched its first UCG headline on April 8 when (as Metex) it reported receipt of Queensland Government approvals to conduct the 100-day Bloodwood Creek trial burn with the aim of producing one petajoule of “syngas” a year.

The Australian somewhat misleadingly reports that Linc Energy's UCG plant has started producing fuel, using what it calls a GTL (gas to liquids) process instead of the CTL (coal to liquids) process that it actually is - Linc shares spike on GTL news.

LINC Energy has started producing fuel at its gas-to-liquids project in Queensland, a world first according to the company. The project at Chinchilla involves the introduction of underground coal gasification (UCG) synthesis gas into a reactor that then produces high quality synthetic fuel.

Chief executive Peter Bond said his team had been working towards the gas-to-liquids (GTL) goal for the past two years. “Linc Energy has now proven that it can produce liquid fuels from UCG gas. This process provides the potential for billions of tonnes of stranded coal resources to be converted into transport fuels in an environmentally acceptable way,” he said. “And when you think that each tonne of coal equates to approximately 1.5 barrels of fuel, the potential of what Linc Energy has achieved today is simply enormous.” ...

Linc will continue to operate its GTL demonstration facility and use the experience gained to assist with finalising the engineering scope for the company’s proposed 20,000 barrel per day commercial facility, which is planned for commencement of construction in the next 12 months.

The company’s quest to spread its UCG technology around the world has also gained momentum. Vietnam's largest coal producer, Vinacomin, has signed a business cooperation contract with the Queensland gas-to-liquids hopeful and Japan's Marubeni Corp to extract gas from Vietnam's Red River Delta Basin The companies will start gas production on a trial basis from early 2009 using Linc Energy’s UCG process.

I noted a little while back that UCG is losing out to CSM in Queensland. The SMH reports that a company is considering the idea of performing UCG (underground coal gasification - a coal to liquids process) on offshore coal deposits in New South Wales - Coal trial submerged in debate. Usually I'm all for ocean energy, but this isn't what I've got in mind.

UNTAPPED coal reserves under the Pacific Ocean could provide enough energy to power every house in NSW for about 13,000 years, a company that wants to explore a massive area under the seabed says. Energie Future is seeking leave to conduct tests under 5940 quare kilometres of the ocean floor between Newcastle and Wollongong.

If successful, the company would be the first in the world to use coal gasification - extreme heat to turn underground coal into gas - under the ocean floor.

The proposal has outraged Greens MP Lee Rhiannon, who said that even the exploratory work, centring on seismic testing, would endanger whales and other marine life. It would almost be inevitable that the Government would grant a mining licence to a company that had spent hundreds of millions of dollars on mining exploration, she said.

The MP, who is organising a protest at Bondi on Friday, said there was a "real threat of unforseen damage to the seabed and pollution and degradation to our coastal waters and beaches. Mining always follows exploration if the mining company wishes it, so this proposal should be ruled out now. The answer to climate change is investing in proven sustainable solutions like solar energy, not dangerous experiments that threaten our oceans and beaches," she said.

While UCG may lose out to CSM in Queensland's coal fields, the unhealthy Chinese interest in coal to liquids (and plastics) continues unabated, with their latest move being an interest in taking Linc Energy's UCG technology to the Chinese coal fields - Linc inks UCG deal in China.

Linc Energy Ltd has signed a deal with Xinwen Mining Group to develop underground coal gasification (UCG) and gas to liquids (GTL) projects in China. The Queensland-based group has signed a letter of intent with Xinwen, the same company which agreed to acquire a package of Linc's Australian coal exploration permits for $1.5 billion.

The two companies have agreed to form a joint company to develop UCG fields to produce gas for transport to Shanghai through the west to east pipeline project, which is under construction. The joint company will also provide feedstock for a GTL facility to produce liquids that will be transported by pipeline to the Dushanzi oil refinery.

"This is an exciting development as Xinwen already has government approval for underground coal gasification," Linc chief executive Peter Bond said in a statement.

UCG is the process of extracting coal from the ground through its transformation into a combustible gas for power generation, or as a feedstock in the production of diesel or fertilisers.

Xinwen owns the Yinan and Yibei coal fields in the Yining mining area of China, which cover over 479 square kilometres and have a reported 15.37 billion tonnes of coal.