Confirmation of the timetable follows the successful start-up of a $2 million UCG plant at Chinchilla in Queensland, where one of the state’s government-owned power companies, CS Energy, and private firm Linc Energy have produced more than 3 million cubic metres of gas since December last year.

They propose to use gas produced from a large coal seam in the Surat Basin in a $40-50 million demonstration power plant the partners say could be commissioned by January 2002.

Based on the success of the demonstration plant, CS Energy and Linc may look to establish a larger-scale operation by 2006-2007.

CS Energy project manager Mark Schafer said the partners had verified that gas from the 10m coal seam could be used in commercially available turbines. Estimated carbon dioxide emissions from gas and power production — using combined cycle gas turbines — were 10-15% less than modern coal fired power stations.

Schafer said feasibility work by CS Energy and Linc had also confirmed UCG gas could be used to produce power at less than $30/MW hour. “The price of the coal gas could be half that of natural gas because the UCG process uses simple technology which minimises production costs,” he said.

“Although the reduction in CO2 emissions is significant, it is still higher than the emissions for natural gas. The joint venture is looking at ways of achieving further reductions while maintaining the financial benefits of low-cost UCG gas.”

Schafer said from a technical viewpoint, site characterisation and testing of the coal seams and surrounding layers of rock required prior to UCG operations, were similar to the processes used to define suitability of the coal seam to CO2 separation.

“There is the potential that CO2 could be removed from the gas, and sequestered in the geological formation,” he said. “We’re working with CSIRO to investigate carbon sequestration opportunities presented by this technology.”

Originally developed in the former Soviet Union and used commercially in Uzbekistan for 40 years, the UCG technology has been the focus of research and development projects around the world. According to Schafer, the many projects have recorded “varying degrees of success”. However, the Australian project is the first in the western world to produce a reliable supply of gas from UCG.

“The main reason the technology has not been used more extensively is that all UCG operations outside the former Soviet Union have been done as research and development exercises without access to the Russian technology and expertise,” Schafer said.

“The [Chinchilla] joint venture has been able to use UCG experts who, collectively, have over 50 years practical experience in running the UCG operation in Uzbekistan.”

At the start of a UCG project, at least two boreholes are drilled into the coal seam. Coal is ignited and combustion is maintained by injecting air through one of the boreholes, producing gas which is collected and brought to the surface via a second borehole.

Following treatment, the gas can be used as a fuel gas for power generation. Schafer said UCG offered access to energy from coal seams that would otherwise be uneconomic to recover using traditional mining methods.

“It is also a more elegant, simple and efficient means of converting energy from coal as compared to conventional underground and surface mining operations,” he said.

Further feasibility work and final costings still need to be completed before a decision is made to proceed with the 30-50MW demonstration plant. According to Schafer, current gas flow rates from the Chinchilla site are low and gas produced is being flared.

He said gas from the joint venture partners’ coal lease at Chinchilla would be sufficient to power a 400MW combined cycle gas turbine for more than 400 years.

The proposed demonstration plant would be located close to the existing UCG operation. As it has lower calorific value than natural gas, UCG gas cannot be exported via Queensland’s natural gas pipeline network.

Schafer said CS Energy and Linc were holding discussions with the Queensland Department of Mines and Energy to determine whether gas from the Chinchilla project qualified as an eligible gas-fired source of power under the State Government’s energy policy, which required electricity retailers to source at least 13% of their power from gas-fired generation from January 1, 2005.