Leigh Creek Energy began eight years ago as a private company with the specific goal of establishing an underground coal gasification (UCG) project in Australia. After careful evaluation of the viability of such a project in each state, the company’s board unanimously decided that South Australia (SA) would be the best location for an UCG site. In SA, this type of process is called in situ gasification (ISG) and essentially converts coal, often deep lying and difficult to obtain, from its solid state into a gaseous form, which can then be utilised in several industries.
After beginning the search for a suitable ISG site in SA, the company discovered a disused coal mine in the town of Leigh Creek, 550 kilometres north of Adelaide. The company listed the project in 2015 through a reverse takeover of the then Marathon Resources Limited.
Since going public, the firm has been focused on building the share price, growing a highly-skilled team, and preparing the Leigh Creek site for an ISG facility that has been christened the Leigh Creek Energy Project.
Speaking to RGN, Leigh Creek’s executive chairman Justyn Peters says: “I have absolutely no doubt the company has expertise in this type of process. There are very few people in the world that have expertise in this [ISG] and we have probably the best in the world working with us at the moment.”
Justin Haines is the company’s manager of technology, having previously worked in Queensland with Carbon Energy Limited – an ISG technology developer that successfully operated a demonstration facility under the state government’s UCG policy.
Haines has now successfully managed two ISG operations in two different locations and more importantly, two different geologies.
“We have a very experienced managing director in Phil Staveley, who used to be CFO and then CEO of another listed company in Australia, and I’ve had about seven years’ experience in Queensland’s UCG industry. I am also an environmental and commercial lawyer,” Peters reveals.
From an environmental perspective, the type of energy produced at Leigh Creek will carry a carbon footprint when the end product is utilised, as it is derived from deep coal resources. However, its carbon footprint will be significantly less than that of a typical open cut coal mine.
Coal mining, and the subsequent heating of coal to provide energy for industries such as electricity and heating produces greenhouse gases, but the process of ISG and the subsequent usage of synthesis gas (syngas) as energy produces far fewer harmful emissions.
“Overall, ISG is cleaner, easier and much cheaper than traditional coal mining. One of the great things about the process is it economically unlocks coal that is stranded and unviable. For instance, at the moment you will find that thermal coal around the world is not viable unless it is open cut or has a low strip ratio.
“Deep coal is really not viable via longwall or underground mining, so the only way you can unlock value there is through this particular process of ISG, which has been around for a long time.” Today, there are several ISG operations running across Asia, according to Peters.
An ideal location
After the former Leigh Creek coal field was quickly identified as a favourable location for an ISG project by the company, the SA government had a group of independent experts conduct a report on the viability of the site. This report strongly concurred with Leigh Creek’s convictions that the area was one of very best in the world for an ISG project.
There are several contributing factors to this conclusion. Firstly, the Leigh Creek coal field is in a very remote region of SA, 550 km North of capital city Adelaide and not near any cropping land, thus mitigating any risks associated with competing land uses.
“Another point is that this is an old coal mining town, that was set up purely to serve the Leigh Creek mine. That mine closed down a couple of years ago, which saw the population decrease from 2,000 people down to about 100 at the moment. We saw the opportunity to have people live here and help grow the town, rather than looking at fly-in fly-out.”
Plus, high quality infrastructure remains in place from the days of the coal mine, including a commercial airport, road and rail networks, as well as ample water and power supply. “We looked at all the different boxes that need to be ticked in order for a project to work and Leigh Creek trumped just about anywhere else in Australia.”
Despite the strengths of the location, the company’s progress with a demonstration plant was checked by a recent attempted legal injunction from a local traditional owners group. Representatives from the Adnyamathanha people opposed the development on grounds that the area is culturally significant, before submitting an injunction case to the Supreme Court of SA.
However, this injunction bid was rejected by the Supreme Court in September after the level of consultation between Leigh Creek and the traditional owners regarding the pilot plant was deemed sufficient by the court.
High level consultation
Outlining the consultation process that took place with representatives of the traditional owners in the lead up to the demonstration plant, Peters says that the company had between 30 and 40 meetings with them over the last few years and met with the board of the traditional owners on two occasions.
Leigh Creek hosted workshops with the traditional owners, which outlined the major processes that would take place at the site, stressing how the company would work with the traditional owners.
“Finally, we signed a cultural heritage agreement with the traditional owners. Under the agreement we were required to have the demonstration plant passed for cultural heritage issues. The elders of the traditional owners and their anthropologist walked the site and gave it a cultural heritage clearance.
“We had to provide that consultation information to the government and in addition to that, the government also consulted with the traditional owners.” On October 10th, the company reported to the ASX that it had produced first syngas from the project, a major milestone by any account.
Building a demonstration facility brings a whole range of benefits to Leigh Creek, not least demonstrating to regulators and the government that the process can be conducted in an environmentally sound way.
In order to do this, Leigh Creek conducted comprehensive baseline studies of the water, air and soil before committing to any construction of the demonstration plant. After monitoring the results from each of the studies, the company shared the data with the government to maintain full transparency from a regulatory point of view.
Also, from an investors point of view the demonstration facility proves the company has the technical capability to produce gas from the remaining coal resources at Leigh Creek. “It gives our investors comfort,” Peters asserts.
“If we are going to progress to a large commercial project with a significant capex, then the investors need to be comfortable that first gas can be made and second the quality of that gas is such that it can be used in whatever product option we go to.”
Regional and international impact
The impact of seeing the project through to a full-scale commercial model would be wide-reaching, not just in the local community but for the state of SA and on the international energy stage. The project is likely to have an immense regenerative effect on the town of Leigh Creek, which has been in a state of decline since the closure of the coal mine.
With the population steadily declining in the wake of the mine closure, a critical mass problem has taken shape in Leigh Creek where there is simply not enough people to sustain key community pillars such as service stations, supermarkets and even schools.
“The advantage of us being there is we are already the biggest employer in Leigh Creek. We are already renting more houses in the town than any other employer, and that’s only the demonstration phase.
“Once we go to the construction phase and then the commercial phase, we are looking at anything between 300-400 people moving back into the town, and then you get the flow on effect from that.”
From a regional perspective, the impact of this project could also be dramatic. It would provide a new source of energy to a state that has well documented struggles with power supply, which incidentally is strange given Australia is the world’s largest exporter of uranium, gas and coal.
Finally, from an international point of view, the Leigh Creek Energy Project could become the blueprint for unlocking energy that cannot currently be put to good use. “There is deep coal that has previously been unviable, in interesting locations all around the world – India, Bangladesh, China, Canada, Indonesia and Philippines.
“We are contacted on a regular basis from international companies keeping a close eye on our success. We have spoken to around 10 companies about developing this process overseas for them,” reveals Peters.
A versatile form of energy
Furthermore, one of the biggest advantages of producing syngas is its versatility. It’s not just used to generate electricity, but also in petroleum and ammonia products and pipeline gas. However, it is the amount of hydrogen that can be produced at Leigh Creek that is currently generating the most excitement from potential end markets.
Peters reveals that interest from the hydrogen economy in the Leigh Creek Energy Project has been bubbling for the last two years, before making a bold claim that the company can produce hydrogen cheaper than anyone else in the industry.
“We have this lovely opportunity to use our process to produce hydrogen. It’s a bit ironic that we are using a fossil fuel to make hydrogen – one of the cleanest forms of energy there is. Between 20-50% of our gas could be hydrogen.
“Hydrogen itself wasn’t the driving factor two or three years ago, but the level of interest in us purely as a hydrogen producer has actually become quite interesting.”
As Leigh Creek Energy prepares to begin work on the full-scale plant at Leigh Creek, Peters notes how the company has primarily used companies in SA throughout its work on the demonstration facility, including Silver City Drilling, who had a large camp set up for several weeks at the site. “The guys at Silver City have been wonderful,” he says.
Other notable partners on the project were Ottoway Engineering, who completed fabricating at the plant, before Ferretti International came in to complete the work. ABB also took over work on electrics and Geoconsult were used for JORCs. “We’ve spent 90% of our money in SA which is what we always wanted to do.”
After achieving first syngas at the demonstration plant, Leigh Creek is commencing the approvals process for the full-scale plant, which could take anywhere between 12 months and two years to come back.
Therefore, Peters puts a maximum time frame of four years on commercial production at the full-scale plant, but with a product as good as Leigh Creek’s, the wait will be undoubtedly worthwhile.