Homer Alaska - Business

Story last updated at 8:05 PM on Wednesday, March 30, 2011

New player in coal industry: Australian firm looks at coal gasification

By Tim Bradner
Morris News Service - Alaska

An Australian company, Linc Energy Alaska, will conduct test drilling on coal leases in Alaska this year for an underground coal gasification project, company officials told a business group in Anchorage March 17.

The company also is testing an Alaska conventional gas exploration well that discovered gas last fall, Paul Ludwig, manager of stakeholder relations for Linc Energy USA told the Resource Development Council.

Linc Energy acquired leases in Southcentral Alaska in February 2010 and completed its first exploration well in October.

"Our analysis confirms three significant sand formation intervals that appear to be gas charged. We are now bringing equipment back to the site for phase two," which is to confirm whether gas can be commercially produced, Ludwig told the group.

The well location is near existing gas pipelines operated by Enstar Natural Gas Co., a regional gas utility.

Ludwig also said Linc Energy recently acquired coal exploration leases on 181,000 acres of state land in Southcentral and Interior Alaska.

Linc Energy will be the second company working on underground coal gasification in Alaska. Cook Inlet Region Inc., an Alaska Native regional corporation with extensive coal properties, has test drilling underway at a prospective project site about 60 miles west of Anchorage.

Corri Feige, Linc Energy's Alaska project manager, told the Alaska business group her company will begin test drilling into coal seams late next summer in a program to define a location for a possible project.

Ludwig said Linc Energy also has acquired coal and oil and gas leases in Wyoming and Montana, and has similar programs under way to develop similar coal gasification projects in those states.

The company has been operating a demonstration underground coal gasification project at Chinchilla, west of Brisbane, Australia, for about 10 years using a method developed in Uzbekistan when it was part of the Soviet Union.

Linc Energy's corporate headquarters is in Brisbane.

Underground coal gasification involves injection of air or air mixed with oxygen into coal seams and an underground combustion process to produce a synthesis gas, which is then brought to the surface in a second well.

"We convert the coal to gas while the coal is still underground. The process involves two wells, one injection and one production drilled horizontally into the coal seam. A third service well is usually drilled to support operations," Ludwig said.

"Oxygen and air are injected, heat and steam are generated, creating a chemical reaction. The syngas produced is mainly hydrogen and carbon monoxide."

The process Linc Energy is using relies on keeping groundwater levels intact in the coal to maintain hydrostatic conditions in the coal seams. This is different than other methods of extracting energy from coal seams, like coal-bed methane production, which require the coal to be de-watered, a process that requires the produced water to be safely disposed of, Ludwig said.

In the underground coal gasification process Linc Energy is using, the air, or air and oxygen combination depending of the type of coal, is heated and injected at 2,500 degrees Fahrenheit.

"The coal is consumed in the combustion at a surprisingly slow pace. With two wells spaced a kilometer apart in a coal seam, it would take three to five years to consume the coal," Ludwig said.

The goal is for 80 percent to 90 percent of the coal to be consumed, he said.

Ludwig said Linc Energy will consider using the synthesis gas either to produce power or to produce liquid products with a Fischer Tropsch plant.

Linc Energy's Alaska coal leases are relatively near existing power transmission lines, which is favorable for the power generation option.

The company is operating a demonstration Fischer Tropsch plant at the Chinchilla site, making fuel products from synthesis gas produced in the underground gasification project.

Ludwig said the company believes it can operate a 20,000 barrel-per-day Fischer Tropsch plant on a commercial scale and compete against products made with conventional oil at crude prices of $28 per barrel.

Linc Energy also believes a Fischer Tropsch plant can be built in smaller modules of 5,000 barrels a day to make products from synthesis gas at smaller underground coal gasification projects, Ludwig said.

Jim Jager, a spokesman for CIRI, said his company has not decided on a commercial use of synthesis gas produced at a gasification project. Power generation and options for liquids manufacture also are being considered.

Linc Energy was formed in Australian 1996. The company now has 380 staff in seven offices worldwide, including 30 in its U.S. division, which was formed in 2009. The Alaska office was opened recently.

The company is one of largest coal reserve holders globally with more than 700 million tons of coal available for underground coal gasification.

Tim Bradner is a reporter for the Alaska Journal of Commerce.