Following on from the stir caused by the article in The Australian newspaper on 7th August there still appears to be little in the way of clarification from the Queensland government on its attitude towards Underground Coal Gasification (UCG). Just to reiterate, from our point of view, although tacit approval from the Queensland government would be useful, in the long term it does not alter our fundamental stance for recommending the company as an investment.
A couple of weeks ago we updated you on the progress of the completion of the Pilot GTL facility at Chinchilla in Queensland. Well, the good news is that this week Linc announced that “the official handover occurred from the Construction & Engineering team to the Gas to Liquids (GTL)/Fischer Tropsch (FT) reactor team.”
What does that mean to you? It simply means that the reactors are almost ready to begin converting underground coal gas to liquid fuel. A major accomplishment. More important than that is that this demonstration facility will prove to institutional investors that Linc has the technology and the expertise to build a commercially viable facility. Whether this is in Queensland or elsewhere is not so important.
Although, with news that a South Australian project owned by London based Altona Resources has received financial backing from Chinese oil company CNOOC, the Queensland government may soon change its tune if it doesn’t want a Queensland company to miss out on the action.
The very fact that GTL fuel has already been used by Shell International Petroleum for a test flight of the Airbus A380 demonstrates the potential commercial demand for the product.
Linc Energy remains a BUY recommendation.
LNC Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
