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Miner wants to fire coal underground to extract gas

Fuseworks Media
Fuseworks Media

Wellington, June 2 NZPA - New Zealand's biggest coal seam gas explorer, L & M Energy, has applied for prospecting rights over 2000 square kilometres of the Waikato -- thought to contain over 2 billion tonnes of coal -- with plans to burn coal underground to produce gas that can by piped to Auckland.

It said today that the site, 120km south of Auckland, is the most prospective region in New Zealand for underground coal gasification (UCG) technology, in which wells are drilled from the surface and linked together in a coal seam.

Once linked, air or oxygen is injected into the wells and the coal set on fire: water in the coal seam flowing into the cavity formed by the combustion means the gasification process produces mainly hydrogen, carbon monoxide and carbon dioxide. The gases flow to the surface through a production well and can be cleaned for energy production or synthesising into liquid fuels.

Overseas, the technology is used because of lower capital costs with no need to haul coal or solid wastes to the surface -- the ash stays underground -- and there is no need for underground miners and relatively little disruption on the surface.

Potential problems include linking the injection and production wells, coal seams that are too thin, variations in the harvested gas, groundwater pollution, potential subsidence and a lower heating value for the gas compared to the original coal. There have also been accidents with uncontrolled underground coal fires, such as near the Pennsylvannia mining town of Centralia in the United States, which raised public concerns about potential loss of control over the UCG process.

LME said the Waikato had a large resource of available coal and gas pipelines already pass through the permit area to supply Auckland consumers. It has asked for permits bracketing the Huntly coal mines, which produce coal for supply to power generation and New Zealand Steel.

LME said that coal thickness of up to 15m had been documented by mining and exploration, with more than 250 holes having been drilled in various programmes, including its own eight wells for the extraction of coal seam gas.

A pioneer UCG project was undertaken in 1994 in the Huntly coal reserve, when about 80 tonnes of coal were gasified, and state-owned miner Solid Energy has previously said it has exclusive rights to apply Ergo Energy's UCG technology here as a way of working coal deposits in geologically complex sites.

LME said New Zealand was experiencing declining gas production from existing fields with inadequate supplies to feed fertiliser and methanol plants, and forward contracts for local gas were currently about $8 per gigajoule delivered to the pipeline "and future upward price pressure is expected to continue".

The LME project is part of a longterm strategy to secure substantial energy resources in New Zealand, according to the company. It was formed earlier this year from a merger of L&M Energy (LME) -- formerly L&M Petroleum -- with L&M Coal Seam Gas, then owned by high-profile Australian miner Geoff Loudon and his Swiss (Werner Muller) and Hong Kong (Kwok Wai Chiu) partners through Weaver Holdings, which also owned 43 percent of L&M Petroleum.

The three big shareholders own nearly 84 percent of the company, and during the merger it was estimated that LME would spend almost all of its remaining cash reserves this year, doubling the cost of its capital programme from $3.1m to almost $6m, and would have to raise fresh capital.

LME shares closed at 17c today.

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