Syngas Has Ambitious Plans For Its Coal-To-Liquids Projects In South Australia
By Alastair Ford
Syngas’s Merrill Gray cuts an interesting figure sitting across from Minesite in a Cheapside Starbucks. She’s just delivered the news that her company, Syngas, currently capitalized on the ASX at around A$10 million, will need of the order of US$2.26 billion to get its coal projects in South Australia into production. That’s some funding gap she’s going to have to cover, and some disparity in valuation, but she doesn’t break her stride.
The idea is simple. The 558 million tonnes of coal on Syngas’s Clinton licence doesn’t quite cut it in quality terms as far as selling it for use in a conventional power station because of its high salt content, and low calorific content. But all is not lost, because the technology exists that will allow Syngas’s coal to be converted into a liquid fuel predominantly comprised of a high quality diesel. The plan is to deploy that technology on Clinton, and on other of Syngas’s lookalike properties in the region, and to produce 5.2 million barrels per year of the liquid fuel at an operating cost of around US$30 per barrel of oil equivalent.
And in case there’s any temptation out there to consider that a number plucked out of the air, a pre-feasibility study conducted under the auspices, among others, of SRK, showed that production at US$33 per barrel was eminently possible. Merrill’s simply shaved a couple of dollars off that number to allow for efficiency savings she’s found since that report came out. With oil currently at just under US$80 per barrel at the moment, there’s a fat margin to be made once you’ve found your initial US$2.26 billion.
Clearly, though, there’s a long way to go. Merrill’s been on a little bit of a globetrotting fact-finding mission recently, partly with the aim of gauging interest, and partly with the aim of soliciting feedback on the perceived viability of Syngas’s plans. The response, she says, has been upbeat. “The fundamentals in crude oil are changing and we’re pretty confident that over time we’ll see an increase in the overall average price”, she says. Added to that, she continues, “We’re particularly confident about high premium diesel. It costs less to build a diesel motor, which burns more efficiently and produces less CO2”. So, the wider economic context is working in Syngas’s favour and allowing it to gain a hearing. Plans to add biomass to the coal to create a blended fuel product add to the company’s green credentials, and may indeed bring in interest from those seeking carbon credits or some such future equivalent. At the recent World Gasification Conference, held in Colorado, 750 people met to swap ideas and contacts, and Merrill was in the thick of the action.
Now it’s back to Australia to bed down the ongoing A$10 million fundraising which will take the company a long way through the feasibility stage. The money’s not yet in, so anyone wavering over an investment decision might be interested to hear that the company is currently also considering plans to develop a smaller-scale intermediate project to bridge the gap between now and the delivery of the required US$2.26 billion, and to demonstrate to the market that Syngas is capable of developing such projects. It’s also not necessarily part of the company’s current plans to run all the way with this asset into production, and it certainly won’t be doing it alone. “We’ve got a few exit points”, says Merrill. “We want to get to bankable feasibility, at which point we will be attractive to potential funders from an off-take perspective.”
It’ll be interesting to see how much interest the current fundraising actually pulls in, but it’s worth noting in the meantime that this isn’t actually a new technology that’s being deployed here. Back in the days of South African economic isolation Sasol, the South African oil champion, developed a considerable capability in this space. Interesting to note, too, that despite the hefty price tag, Syngas’s mooted projects are currently too small to for Sasol to be able to take a real interest. So we’re not off the scale here. As the company hits development milestones there’ll be further fundraisings, and so the market valuation, in theory will grow. That’s the idea at least. Watch this space to see what happens next.
SYS Price at posting:
4.0¢ Sentiment: None Disclosure: Not Held
