South African mining group Exxaro Resources has agreed to pay Linc Energy a A$20-million licence fee in return for the right to deploy the ASX-listed company’s underground coal gasification (UCG) technologies across sub-Saharan Africa.
Formal agreements, which are still subject to several conditions, also give Linc Energy the option to secure equity positions of up to 49% in all of Exxaro’s UCG projects. Linc Energy will hold a minimum of 15% in the first project, which could combine power generation and gas-to-liquids (GTL) production.
CEO Sipho Nkosi says the tie-up with Linc Energy opens the way for the start of detailed project work “to monetise the inherent value we believe is contained in this clean-coal technology”.
The company cannot be drawn on the location, nor on the size of the initial plant, but growth, technology and services executive head Ernst Venter tells Engineering News Online that suitable resources have been identified.
Should it be pursued, the electricity-generating potential of the first plant will not be smaller than 200 MW. Any GTL facility will have a capacity of greater than 10 000 bbl/d.
The bankable feasibility study will be completed by mid-2015, with commissioning of the first gasifier scheduled for mid-2016, subject to regulatory and commercial viability.
In a joint statement, the companies said a further fee of A$7-million would be payable to Linc Energy on the initial project passing agreed performance tests, probably in 2017. Royalties would also be payable for any synthesis gas (syngas) produced and sold.
“The focus of the first project will be to first demonstrate that UCG works in a controlled fashion on our resource, and to optimise the gasifier’s technical parameters,” Venter explains.
Once the quantity and quality of the syngas is determined a decision would be made on the power generation/GTL mix.
Linc Energy already owns and operates a commercial UCG operation in Uzbekistan, which supplies syngas to the nearby Angren power station. It has also commissioned the world’s only combined gas-to-liquids and UCG demonstration facility, in Queensland, Australia.
The agreement follows n from initial joint concept studies conducted over the past 18 months and will seek to blend Exxaro’s aspiration to pursue coal beneficiation with Linc Energy’s UCG know-how. Exxaro, which is South Africa’s second-largest coal producer, with current production of 40-million tons a year, also has business interests in Botswana and the Republic of Congo.
Linc Energy CEO Peter Bond says the deal will add Africa to its plans for a global roll-out of the alternative and complementary energy solution.
All the other African projects, besides the initial development, are still at a concept stage, with further exploration drilling required to firm up the reserves. Because UCG involves sustained underground combustion, the resources being appraised are those seams with a high enough static pressure above them to facilitate a controlled burn. Such coal seams are typically 200 m to 500 m below surface and need to be relatively homogeneous, with minimum faulting and horizontal deviation.
Venter cautions that UCG is a new concept for South Africa and the region, which means that the regulatory environment does not currently make specific provision for its deployment. In addition, the current determinations for the procurement of baseload power from independent power producers do not set aside allocations for UCG.
However, electricity utility Eskom is also pursuing a UCG demonstration plant and Exxaro has initiated discussions with government on the solution. Venter is, thus, confident that the Department of Energy will accommodate the introduction, into the power mix, of what he describes as a clean-coal energy source.
“We are excited about this venture … which can really be a game changer for fossil fuels, and is very much in line with Exxaro’s vision of becoming a low-carbon-footprint company, utilising clean-coal technologies,” he concludes.