Carbon Energy Limited (Carbon Energy) has signed a contract with Ergon Energy, a Queensland Government owned electricity provider, related to energy generated from the underground coal gasification (UCG) process. The contract is worth around $2 million per year and is for electricity produced at Carbon Energy's 5 megawatt (MW) syngas-powered electricity production facility, currently being constructed at Bloodwood Creek in the Surat Basin.

The first electricity is expected to flow into the local grid by the end of this calendar year. The planned facility will generate enough power to supply around 4,000 homes per year. Carbon Energy sees this contract as a major step forward in the company’s commercialization plans as it enables the company to monetize a very small part (0.5 PJ per annum) of its massive 7,750 PJ (syngas) recoverable energy.

“The establishment of the 5MW station is a major step towards full commercial production, said Managing Director Andrew Dash. However, it`s really only the first step. We intend to move forward quickly with plans for an additional 20 MW power station at the Bloodwood Creek location in 2010.The 5 MW we see as mainly a proof of concept for power generation, and the experience gained will assist with the planned 20 MW expansion. Carbon Energy will utilise its experience from the delivery of the planned 5 MW and 20 MW stations in Queensland for US.

Carbon Capture and Storage (CCS):

Carbon Energy is currently evaluating a number of alternatives for CCS and plans for the additional 20 MW power station will allow the company to demonstrate carbon capture and potentially carbon storage (CCS).

The UCG process can reduce clean coal power generation costs by between around 30 % and 50% and deliver a more environmentally friendly method of power generation than the traditional coal fired plants currently in operation.

Dash noted “the reason we have such a competitive advantage in this space is that clean or low emission coal technologies typically depend on digging coal out of the ground, transporting it ,then gasifying it above-ground prior to carbon capture. The UCG process eliminates the first 3 steps, including all the associated costs, because it already converts the coal into a gas underground.”

Carbon Energy expects to conclude its discussions with potential Partners within the next few months. It is proposed that these Partners will provide both technology expertise and access to market opportunities. This together with positive support from Government (both State and Federal), offers the very real prospect that Carbon Energy will be among the first Australian companies to deliver a` clean coal project.

“This is an exciting time for Carbon Energy,” said Managing Director Andrew Dash.

“The establishment of the 5 MW station is a major step towards full commercial production.

“However, it’s really only the first step. We intend to move forward quickly with plans for an additional 20 MW power station at the Bloodwood Creek location in 2010.”

“We see the 5 MW as a proof of concept for power generation, and the experience gained will assist with the planned 20 MW expansion.

“Importantly, our plans for the 20MW station will allow Carbon Energy to demonstrate Carbon Capture and potentially CCS.”

Dash explained that Carbon Energy is currently evaluating a number of alternatives for CCS.

“Clean or low emission coal technologies typically depend on digging coal out of the ground, transporting it, then gasifying it above-ground prior to Carbon Capture, so our major advantage is that as the UCG process already converts the coal into a gas, it eliminates the need for the first three steps,” said Dash.

“The result is that the UCG process can reduce clean coal production costs by between approximately 30-50% and deliver a more environmentally friendly method of power generation than the traditional coal fired plants currently in operation.

“Subject to successfully concluding our current partnering discussions and positive support from Government (both State and Federal), Carbon Energy could be among the first Australian companies to deliver a low emissions Coal Project”.

The completion of the 5 and 20 MW power facilities are key steps to the realisation of the companies vision for regional south east Queensland. The vision will see Carbon Energy and our partners build a large scale low emission power generation plant, plus a gas processing facility to produce synthetic natural gas and chemicals such as ammonia as well as transport fuels.

“From a Queensland point of view, our power generation project supports the State Government’s aim of additional generation capacity being provided by the private sector. Additionally we will be creating jobs which will help the local economy.”

Dash said that Carbon Energy will utilise its experience from the delivery of the planned 5 MW and 20 MW stations in Queensland for future projects both in Australia and overseas in key markets such as the US.