Inner Mongolia, China

Carbon Energy's first commercial UCG project is located at Haoqin Coal Field in Xiwuqi in Inner Mongolia, China.  The Company received the trigger payment for the project on 11 November 2013 which represents the first ever commercialisation of its keyseam® UCG technology. Carbon Energy will receive a total of  $8.25 million in Stage One for Service and Technology fees which will be received in instalments as project milestones are met.

Carbon Energy entered in to a Master Technology Licence Agreement (TLA) with Zhengzhou Coal Industry Group Co Ltd (Zhengzhou Group) on 17 June 2013 to be the exclusive underground coal gasification (UCG) technology partner for the project in China.

The Commercial Scale Project is to produce at least 30PJ per annum and is to be completed in 3 stages over the next 2 years and will be fully funded by the Zhengzhou Group.

The payment received on 11 November triggers the commencement of technical services and engineering works by Carbon Energy for the delivery of the Process Characterisation Panel (PCP) in accordance with the scope of works agreed with project partners. A PCP is required at each potential UCG site to confirm the modelled process variables prior to the design and construction of the commercial UCG facility.

The project will deliver to Carbon Energy:
  • A Technology Fee of $10 million, payable on achieving certain milestones;
  • The payment for technical and engineering services to implement Carbon Energy’s UCG keyseam technology; and
  • An ongoing royalty stream once revenue is generated from the commercial project.
The three stages of the project are:

Stage 1 – Construct and operate one PCP of which the results will be used to confirm the site characterisation before finalisation of the commercial scale under- and aboveground designs;
Stage 2 – Construct and operate two additional panels to confirm the results from the PCP; and
Stage 3 – Construct and operate a commercial scale production facility producing at least 30 PJ per annum.

Carbon Energy had ealier announced the results of a site characterisation study which confirmed favourable conditions for keyseam UCG and three possible project areas. The study estimated sufficient resources to support the potential to power a 1,000MW power station or produce 50 PJ/annum SNG plant for over 30 years (see ASX Announcememnt 20 June 2013).

Zhengzhou Group is noted among China’s top 500 Enterprises and owns the Haoqin Coal Field in Xiwuqi, Inner Mongolia, China. The project has already received a Mineral Resources Exploration Licence and UCG Project approval from the Ministry of Land and Resources, P.R.C. and the Inner Mongolian Government.

The Haoqin Coal Field has more than seven years of drilling and seismic data available and 3.1 billion tonnes of China Ministry of Land and Resources approved coal resource, covering 184 square kilometres.

Cube Gas, a private technical services company specialising in the oil and gas industry and based in Brisbane, was engaged by its Chinese partners including the Zhengzhou Group to complete an extensive 6 month review of available UCG technologies worldwide.

Carbon Energy was selected as the preferred partner after an extensive global search for a suitable UCG technology provider, because of the Company’s independent verification of its keyseam UCG technology, its technical results, technical competency and a willingness to work collaboratively with its Chinese partners.