Fast forward ... it is early 2011 ... and don't fret about the...

Fast forward ... it is early 2011 ... and don't fret about the finer details ... just look at the bigger picture.

Cougar's Kingaroy pre-poduction burn was a great success ... the bankable feasibility study is completed and well received by the investment industry ... the sp is range bound between 27c and 35c ... there is a solid funding offer on good terms for 60% of Kingaroy 200MW subject to Govt approvals ... some softening of the Qld Govt's policy on UCG is evident.

Two major consortia have commited to LNG projects out of Gladstone Qld, one of them involving Shell who (succeeded in their takeover of Arrow), the other involving Santos/Petronas ... the 40,000 PJ or so of gas reserves to really ramp up these two projects and perhaps a third still aren't booked and only Stage 1 projects have the green light. There are more than occasional press articles on growing concerns for safe disposal of CSG drainage water and several current affairs programs just wont drop the bone.

China has surprised to the upside and produced yet another year of double digit growth and India had unsuccessful shots at obtaining equity in a couple of Australian coal projects and one gas project, indicating the expected rise in Indian demand cant be too far away.

Lo and behold, the USA books a quarter of +ve economic growth and their outlook is improving.

Further drilling at Cougar's Wandoan project has taken JORC to 575 mill tonnes (from the current 341 mill tonnes) which is equivalent to 10,000 PJ of gas ... initial studies have produced encouraging prospects for methanation and a trial burn and demo methanation trial has been given Qld Govt ministerial approval for late in 2011.

The terms sheet with Ignite Energy Resources in Victoria progressed to a full JV agreement, Cougar's drilling has confirmed a sizeable UCG resource and the Victorian Govt has given support to fast track planning for a trial burn based on the outcomes achieved at Kingaroy.

Linc's Gasifier No 4 shows promise, as does liquids production from the GTL demo plant ... Carbon got their 5MW plant going and have advanced plans for a 2nd stage 20MW plant. There was a successful UCG trial in NZ late in 2010, also involving Ergo's UCG technology and Cougar UK announced an IPO in London to raise $50mill pounds.

In short, UCG is on the ascendency and is oft discussed in board rooms here and abroad. Caltex weigh up the dismal picture of oil demand so far outstripping topped out and declining oil reserves and finally admit they have a pressing need to commit to alternative energies if they are to survive beyond the next few decades. Likewise Shell, who now project gas to account for 60% of their busness by 2020. Likewise Santos, Chevron and others feel the increased urgency to lock in long term reserves for their gas businesses. Direct Invest set up an investment vehicle to raise funds to fund their involvement in 4 potential Cougar powergen projects.

None of the above is yet true.

But how might corporate activity play out with an emerging UCG industry? Might UCG be considered by some as to be potentially the next "conventional gas"? Is UCG a scalable greener energy infill of 3 to 5 decades or more until renewables truly gain scale. Or is it an interesting, quirky way to produce power for a few isolated clients?

Certainly within the CSG industry, large corporates have shown a preference to pay multi billion dollar price tags to takeover a forgone conclusion once the likes of QGC and AOE and others have taken the early risks and proven their gas reserves beyond doubt, needing just licks of capital to get the gas to market.

Potential long term gains for getting early investment right in UCG look just great to me at this stage.


Cheers
Dex