ucg going to be used by ergon

A QUEENSLAND government power company is planning to take synthetic gas produced from the controversial underground coal gasification process for the power grid, but the government has yet to decide on the future of the technique.

Carbon Energy yesterday announced that it had produced electricity from the syngas process at its operation near Chinchilla in western Queensland and planned to make "its first revenue milestone" by connecting into Ergon Energy's local electricity grid in October.

The nascent coal seam gas industry has come under strong public attack, but underground gasification involves burning coal in situ to make power.

The state government allowed three companies -- one of them ASX-listed Carbon Energy -- to undertake trials before it decided on widespread use of the technique. The government has said it will not decide on the use of underground gasification until the end of next year.

But the Carbon-Ergon plan calls for electricity produced from syngas technique to flow into the electricity grid from October.

The state government has halted the operations of Cougar Energy, another company licensed to trial underground gasification, after a political outcry following leaks of poisonous material from its Kingaroy pilot plant. Carbon Energy chief executive Andrew Dart said the government allowed the Ergon deal to assess the commercial viability of the underground process.

"Selling this power into the grid is entirely consistent with the early commercial demonstration of the technology," he said.

The contract calls for production of 30 megawatts of electricity per hour -- enough to power about 4000 homes, mostly in the western Darling Downs.