a refresher for anyone interested

Thought I might take advantage of the advanced search functions available to me to pull some early posts I made on Cougar when "scoping" ucg ... since Cougar are entering what should be an interesting phase with the trial burn aproaching, I thought it may be useful for some.

Cheers
Dex
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Post #: 1852774 (Start of thread)


Here's my executive summary of the ucg advantage ... .

1) Ucg has been around for over 100 yrs and is an induced sub combustion oxidation of insitu coal to produce hydrogen rich syngas to fire gas turbines for electricity generation or for conversion to high grade low sulphur diesel. Hitler fuelled his armed services by surface gasification to diesel during the war and South Africa produced diesel the same way during apartied trade embargos.

2) Unlike conventional coal mining, ucg requires no significant energy expenditure to remove and stockpile overburden, mine and transport coal and manage surface wastes including significant CO2 emissions. Its no help that expensive hydrocarbon fuels are a significant proportion of this energy expenditure. Ucg can utilise up to about 80% of the calorific content within a coal seam, whereas the net calorific utilisation of a coal seam by conventional mining may only be 30-40% considering the above energy expenditures and subsequent firing losses. I understand that CO2 produced in the ucg process attaches itself to the oxidised coal in what amounts to insitu geosequestration. Incidently, coal bed methane extraction only utilises about 5% of the calorific value of a gassy coal seam.

3) Russians, Canadians and South Africans are reasonably au fait with ucg and are often technology partners with corporates in other countries. Ergo Exergy of Canada are ASX listed Cougar Energy's technology partner.

4) Ucg for electricity generation can suite remote locations close to a transmission grid. Similarly, ucg for electricity generation or conversion to diesel can be used for seams too gassy to mine and/or to seams extending beyond a coastline and/or for other marginal or stranded coal deposits.

5) In Australia, ucg is a nascent industry in which there are only 4 ASX listed companies with active projects that I am aware of. These include Linc (LNC), Cougar Energy (CXY), Metex (MEE) and newcomer Sapex (SPX). Linc is the most advanced and appears to be concentrating on syngas to diesel. Cougar is probably second runner and for the moment is concentrating on syngas for electricity generation. Cougar is a recent turnaround story (formerly Pinnacle PCE, a supplier of long life deep charge batteries for remote area electricity storage) formed when CEO Dr Len Walker left a similar role in Linc to bring ucg to PCE/CXY and Linc's technology partner at the time came too.

6) Recently RIO and BP announced a $2bill 1200MW surface gasification generation project for Kwinana in WA. Such a project suits existing infrastructure and mining processes and the status quo. In my opinion more nimble corporates will wake up to the advantages of ucg rather than surface gasificatiion sooner rather than later. Ucg has fared well in recent press if you know where to look. Kevin Rudd has promised a $2bill clean coal research fund if Labor wins goverment, in which he nominated gasification as one of four competing technologies.

7) Climate change has increased public and political awareness of the need for clean, green scalable energy options and in my opinion ucg fits the bill, as does hotrocks and as does coal bed methane (CBM) because it offers an immmediate 30% reduction in CO2 emissions compared to electricity generated from coal. An interesting common thread betwen ucg, hotrocks and CBM is that all three require technical drilling. According to the following web link I posted recently on the Cougar forum

http://72.14.253.104/search?q=cache:IdZKancfLyUJ:www.ias.ac.in/currsci/may102007/1242.pdf+m+b+green+underground+coal+gasification&hl=en&ct=clnk&cd=8&gl=au

there are synergies between CBM projects that utilise substantial horizontal drilling and ucg projects which require the same to aid movement of injected oxidants and extraction of the resultant syngas.

8) The above web link goes as far as to say that a ucg project could feasibly be considered as a second stage development of a depleted CBM wellfield.

9) If ucg can utilise up to about 80% of the calorific content of a gassy coal seam and CBM utilises just 5%, a further 16x the energy output (albeit a different gas) is theoretically possible with a second phase ucg development program within a depleted coal bed methane project. Alternatively, you need only find a suitable area 1/16th that of your depleted coal bed methane field for a ucg project to effectively double the energy producing period.

10) In my opinion the political climate is receptive to clean, green scalable energy options. The article in the web link suggests that two such energy options (ucg/CBM) can be linked as a two stage project. Most of you reading this thread will already appreciate that value of coal bed methane, but how would you feel if a ucg project could extend the economic life of your favourite CBM producer by a factor of say 2 to 4 times?

11) Cougar is a young company at the start of a potentially exciting turnaround story. If the potential synergies between ucg and CBM are there, why not consider it? If I am right, there should be value to reflect in the share price of any CBM producer or nascent producer with an integrated CBM/ucg project, in which companies like Cougar become farm in partners.
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Post #: 1860711 (Start of thread)


I have been hankering for some hard numbers on energy efficiency associated with underground coal gasification (ucg) for some time now and happened apon the following link the other day ...

http://www.carbonenergy.com.au/images/Carbon%20Energy%20PL.ppt

In a nutshell it is saying that ...-

1) Underground Coal Mining with IGCC (conventional?) coal fired electricity generation ... 1MW of mined coal produces 0.25MW of coal wastes and 0.75MW of product coal which when run through a coal fired power station produces 0.415MW of waste heat and just 0.335MW of electricity.

2) Underground Coal Gasification with gas fired electricity generation ... 1MW of coal oxidised within an insitu seam produces 0.1MW of wastes underground and 0.9MW of product gas which when run though a gas turbine generating station produces 0.135?MW of liquid wastes, 0.38MW of waste heat and 0.385MW of electricity.

At first glance it appears that ucg produces only a disappointing 15% efficiency increase over conventional coal mining and coal fired power generation, plus some handy waste management efficiencies.

BUT ... the real efficiency increase is in the proportion of coal that can be utilised in the two processes. Underground coal mining can only utilise on average just under 50% of the coal in a seam and there are a further 5% losses associated with mining and transporting the coal. On the other hand, ucg utilises on average 80% of the coal in a seam and there are effectively no mining and transport losses.

SO ... considering the 15% process efficiency increase in electrical production by ucg over underground mining AND given that ucg utlises almost twice as much coal than does underground coal mining (ie 80%/(47.5%-5%), the ACTUAL EFFICIENCY INCREASE of ucg over underground mining for electricity generation from coal utilisation to electricity generation is 1.15 x 80/(47.5-5) = 2.16 ie on average ucg is more than twice as productive/efficient.

And because ucg can utilise remote, deep and otherwise stranded or unmineable coal, ucg can (after Friedland) extend coal reserves in America by 300% to 400%.

Poyndexter says SELL YOUR URANIUM SHARES because Nuclear Power wont be needed for several hundreds of years once corporates wake up to the ucg advantage lol.

Cheers all
Poyndexter

PS ... by the way, the nascent Australian ucg industry has the smarts and is well regarded internationally from what I can tell. The above article is produced by the CSIRO offshoot Carbon Energy P/L of which ASX listed MEE has a 50% interest. Cougar's technology partner Energy Exergy of Canada seems to have its fingers in many international pies and is everywhere on any relevant google search. Dr Len Walker's (Cougar CEO)work at Chinchilla is an internationally renowned piece of pioneering ucg development work.
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Post #: 1860939


... to continue in theme and after a lot of rabbiting around I have some figures to throw out there for discussion.

1) 1PJ = 1.1bill ft3 of gas (as in say coal bed methane)
2) 1PJ = 169,825 barrels of oil equivalent (boe)
3) 1PJ = 22,926 tons of oil equivalent (toe)
4) 1PJ = 34,218 tons of coal equivalent (tce)
5) 1PJ = 31,107 m3 of coal (ie 1 hectare x 3.11m seam)

At Cougar's Kingaroy project, the recent ASX announcement claims a resource of at least 2.5km2 with coal seam(s) averaging say 13m thickness.

Therefore, 2.5km2 x 100hectares/km2 x 13/3.11 x 1PJ/hectare/3.11m = 1048 PJ. Allowing for 80% coal utilisation per my last post and 38.5% energy conversion via syngas to electricity the project could yield 322PJ of energy as electricity which is 322 x 30x10E6 kwh = 9,660,000 mwh. Divide by 30yrs by 365days x 24hrs and you get about 37mw/hr which I guess is pretty close to Cougar's claim of a 40mw/hr power station.

As a sanity check, if the project only supported a coal bed methane well field extracted methane may be 1/16 of 1048 PJ = 65 PJ. This could provide a valuation basis as a going coal bed methane concern (for only 2.5km2), remembering that 80% of 16 times that energy is syngas feed for the 40mw ucg power station.

Why not value this project based on an equivalent coal bed methane resource of about 830PJ? I know my coal bed methane and it isnt hard to work out what that would be worth as a market capitalisation for Cougar!!

It the up to 16 times the energy density recovery per unit area that makes ucg very attractive imo.
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Post #: 1862348


... and to continue the trilogy lol ... a valuation attempt.

In the previous post I was reassured to produce calcs confirming that Cougar's Kingaroy project would support 37MW generating capacity for 30 yrs (close enough to the ASX announced 40MW projection), allowing for process losses.

Further calcs based on info in the original post in this thread indicates the Kingaroy ucg resource to be equivalent to 830PJ of coal bed methane (CBM) gas. This is plausible for such a small area of 2.5km2 as ucg converts up to 80% of the coal resource to hydrogen rich syngas, wheras CBM only utilises about 5% of the energy content within a gassy coal seam and leaves the coal itself in place. This "energy density" is the ucg advantage imo.

As I know squat about how to value ucg as a going concern, as a first look I am doing so based on what I think may be a coal bed methane equivalency ... which for Kingaroy I estimate to be 830PJ.

So, what does 830PJ of coal bed methane get you? As I recall, Queensland Gas (QGC) has an initial Gas in Place (GiP) estimate of about 17,000PJ. To date, most value in that company is attributable to 2P reserves currenly at about 850PJ I think and claimed soon to surpass the targeted 1000PJ mark. QGC has something like 1 bill shares on issue and a market capitalisation of about $2.5 bill. European Gas (EPG) has an initial GiP of 980PJ for just 15% (64km2) of the area of their Lorraine permit in France and management are on record as expecting just under 500PJ to be recoverable. EPG has about 200 mill shares on issue and a market capitalisation of about $180 mill.

Coal reserves are pretty easy to quantify as its just an area x seam thickness calculation, with issues of coal quality thrown in. CBM, found within most coal seams, is somewhat harder to prove up as reserves as gas content and coal permeability complicate things. Conventional petroleum and natural gas are the most difficult to prove up as reserves as geological structures, expensive drilling and other factors are also introduced.

The point of the above paragraph is that imo, a ucg resource calculation is relatively straight forward and reliable ... and given its relatively high energy density, a reasonable sized ucg project covers only a fraction of the area required for a CBM project of similar reserves. Given the relatively "compact" nature of a ucg project, the search to find favourable coal quality/properties and suitable environmental conditions should be all the more feasible.

So, I feel that my conversion of the Kingaroy ucg potential to an equivalent CBM resource is reasonable. Whilst I am not comparing apples with apples, consider the following:

1) Cougar 830PJ / 380 mill shares / mkt cap $34 mill.
2) Qld Gas 1000PJ / 1 bill shares / mkt cap $2.5 bill.
3) Euro gas say 450?PJ / 200 mill shares / mkt cap $180 mill.

The most obvious shortcoming comparing Cougar/ucg to CBM is that CBM is a proven, acceptable, relatively green energy source that attracts a lot of conventional investment dollars whereas ucg is a long way off mainstream. My opinion is that economic/ scientific/political and now corporate factors are aligned and market conditions are increasingly receptive to clean, green, scalable energy projects such as the ucg story.
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Post #: 1862666

Andy

My apologies, there is an error in my Post #: 1860939 in that 1 PJ = 277,800MWh not the 30,000 MWh I used (no idea how that happened).

Therefore, 2.5km2 at Cougar's Kingaroy project theoretically supports 389MW of electricity generation for 30 yrs, not 40MW as I previously posted. The ASX announcement covering this project actually says 40MW only requires 0.5km2 and implies 200MW requires 2.5km2 which my calcs indicate can be achieved with nearly a factor of safety of 2.

Therefore a 3.6kmx3.6km area could theoretically support a 2000MW project for 30 yrs based on my calculations.

These economics may look more appealing eh Andy lol?

Sorry for the goof up.

Poyndexter
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Post #: 1864991


Blackgold

You can have you cake and eat it too with an enhanced ucg project.

The ucg process oxidises coal insitu to simultaneously (at the same time lol) produce hrydogen rich syngas and CO2.

Some of the produced CO2 remains attached to the oxidised coal but the significant proportion has to be separated from syngas at the surface for reinjection to the sequester strata.

In a complementary ucg/CBM project for example, captured CO2 from the ucg operation can be piped elsewhere in the permit to a producing CBM well field to preferentially attach to coal cleats and displace a higher proportion of methane for CBM extraction. Doesnt that sound like a win win?

Because of the typical 16x energy density recovery from ucg compared to CBM for the same coal strata, it seems to me that you only have to find 1/16 of the area within your CBM permit with suitable geological, hydrogeological and environmental factors for a ucg project to say double the productive life/capacity of your asset.

Take a CBM permit of say about 200km2. A 1/16 area would be 12.5km2, which is close enough to 3.6km by 3.6km. At Cougar's Kingaroy site, such an area could theoretically support a 2000MW power station for 30 years. Ideally, the CO2 produced from the ucg operation would be sequestered into deep (say >1000m) gassy coal seams to enhance CBM extraction and safely store the CO2 (and any carbonic acid if holymagicman is reading).

Nothing too greedy or rapacious with such an enhanced ucg/CBM project I would think. Staging may possibly be that ucg wouldnt start until initial wells within the permit were near depleted.

As far as I am aware, the ucg process is initialised with steam and oxygen injection and in the long run requires only oxygen injection to maintain the oxidation. I am pretty sure that no nasty chemicals need to be injected. However, precision is required in the placement of injection points and air flows to control temperature and oxidation as the reaction front migtrates along the coal seam, dealing with variable issues like water inflow and cavity collapse.

In your NW Australia scenario, perhaps collected CO2 from a ucg project could be piped to a nearby conventional hydrocrbon (oil or natural gas) project for win win yield increasing sequestering.
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Post #: 1862864


Glitters

Caution required ... the 830PJ I estimate to be the equivalent energy value of the coal expressed as coal bed methane. Coal bed methane, being a widely accepted energy source, would be valued a lot higher than a nascent ucg project. Remember also that there is likely to be dilution in CXY to achieve good commercial goals. My "nutshell" valuation attempt simply shows me that CXY is a worthwhile high rsk value investment for a portion of my funds per my disclosure statement below.
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Post #: 1876071



Ergo Exergy is in the thick of it ... in South Africa ... and they should be able to deliver some early mover advantages to CXY's Kingaroy project with reduced lead in times imo.
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Eskom’s project revolutionises clean coal technology

Saturday 20th January 2007 marked the first flaring of gas from the Underground Coal Gasification (UCG) Pilot Project at Majuba Power Station near Volksrust in Mpumalanga. The pilot is capable of producing enough gas for the cooking and heating requirements of approximately 1000 medium sized houses.

The UCG technology application is a first for Africa and the frontrunner in terms of Eskom’s research and development of clean coal technologies.

UCG is a process where coal is converted underground into a synthetic gas, which can be used as fuel for power generation or a raw material for chemicals. A network of wells is drilled into the coal seam, and the coal is ignited with air that is pumped underground. Fire is essentially used to “mine” the coal, which Eskom plans to use initially as a fuel for Majuba power station’s boilers.

The technology opens the door to the next generation of power generating technologies, which combines high efficiency gasification technology with gas turbines to yield one of the cleanest coal technologies presently available. It holds promise for significantly reducing carbon dioxide emissions, which has significant implications for global warming.

The UCG technology provider is Ergo Exergy Inc. (Canada), who has worked with Eskom for four years to develop the technology for South African application. The scope, scale, quality and pioneering nature of this UCG project hold no parallels anywhere in the world.

UCG technology is comparable to conventional longwall underground mining in concept, but very different in execution. UCG technology has been proven to provide very high coal extraction efficiencies of greater than 95%. The overall resource extraction efficiency shows potential to far exceed that of conventional underground mining.

The Eskom Pilot Project will be expanded in a staged manner, based on the success of the each preceding phase. The aim is evaluate process parameters, and analyse the resulting gas, byproducts and possible environmental impacts at a 6 MWth scale over a six-month period.

The ultimate objective of the project is to fully evaluate the technology and produce a business case for co-firing of 1 200 MW of electricity at Majuba by 2010, at an anticipated cost considerably less than current coal prices. The project will be developed in a phased manner, with gas production at each phase increasing progressively.

Gas production and supply using UCG will assist in alleviating coal supply problems presently experienced at Majuba. The spin-off environmental benefits are also significant.

The natural progression for UCG proceeds into Integrated Gasification Combined Cycle (UCG-IGCC), and into other unminable coal resources in South Africa. Eskom‘s preliminary estimates show that there is 45 billion tons of coal in South Africa that is presently regarded as unminable with currently available technologies, but is still suitable for UCG. This will create a new energy source for Eskom that will enable the present generating capacity of 41 GW to be increased nine fold.

Says Dr Steve Lennon, Managing Director (Resources & Strategy): “The Eskom pilot project is a first for Africa. The gas produced enables Eskom to leap-frog existing coal technologies, placing it amongst the leaders in the world in the implementation of the next generation of clean coal technologies. As such it plays a key role in Eskom’s sustainability programme.”
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