Underground Coal Gasification has been used for many years in...

Underground Coal Gasification has been used for many years in the former Soviet Union and the Unites States of America for accessing the energy in stranded coal reserves. However the methods used gave variable results.

Armed with 50 years worth of data from these early operations, the CSIRO set about refining the process to provide greater control over the burn and to improve the quality of the gas being recovered. This research came after attempts by this organisation in the 1970s to produce petrol from coal, an initiative that was in response to the oil shock of that decade. However after the oil shock ended, this project along with many other sustainable energy projects around the world, was put on the back burner.

During the 1980s the focus shifted to converting coal directly into gas underground. Before natural gas became the principle source of "town gas" for providing our cooking and heating fuel, gas was manufactured by heating coal in large ovens. The gas was then stored in large collapsable tanks that kept it under pressure and supplied our town gas networks.

So the jump to operating this process below ground was not such an unreasonable step to take.

Having analysed the data from the former Soviet Union and the USA, the CSIRO set about perfecting the process and after more than a decade of research, had developed and refined a method that is world class.

To bring this method to commercial viability, a public company, Carbon Energy Limited was registered and listed on the ASX. Initially the CSIRO was a major shareholder, but has since divested its holding, some of which went to the fertiliser and explosives manufacturer, IncItec Pivot Limited, which is also listed on the ASX as IPL. Incitec's interest in Carbon Energy is simple. They need hydrogen to manufacture fertiliser and explosives. Carbon Energy produces Syngas which contains a large portion of hydrogen in its makeup.

Incitec Pivot is currently the largest share holder in CNX. They plan to build a fertiliser production plant at the Bloodwood Creek lease of Carbon Energy and connect it by pipeline to the UCG operation.

So why is UCG so important to Australia?

The other source of gas that is currently being produced from coal deposits in Australia is Coal Seam Gas (CSG) which is accessed by pumping water from within the coal seam which bring gas up with the water. Only about 5% of the available energy is exploited with this method as opposed to up to 85% with UCG.

But the big problem with CSG is the damage that it does to the environment. The aquifers can be polluted with dangerous chemicals, prime farmland is put at risk and significant quantities of methane are released into the atmosphere. Methane is about 18 times as potent as CO2 in its greenhouse effect.

So UCG holds great promise for Australia, not only in its value as a fuel and a feedstock for many chemical processes and products. It is also allows us to utilise the energy with much less greenhouse gas impact.

Of particular value is the potential to earn export income from the intellectual property from the expertise that Australian companies own, that can be sold to the rest of the world.

A good example of this is an agreement that CNX has signed with Chile to exploit some of their marginal or uneconomic coal reserves to provide fuel for the generation of electricity. Chile has no petroleum deposits of its own and relies heavily on expensive imports of petroleum products. Much of the electricity in Chile is generated from petroleum products including diesel fuel. This has a negative impact on their balance of trade. By switching to syngas from UCG, they will not only reduce their reliance on fuel imports, but will reduce their carbon footprint as well.

Meanwhile, CNX will earn significant profits from the operation and the IP that it will supply. This is just the start of what could be a lucrative knowledge export industry for the company and for Australia.