Clean Global Energy (ASX: CGV) has a new management focus on stronger revenue opportunities in the short term. It plans to focus on conventional coal tenement assets in first half of 2012.
Clean Global Energy making major energy moves with Oklahoma UCG project with AES Corporation
Clean Global Energy (ASX: CGV) is at the forefront of commercialising Underground Coal Gasification (UCG) technology to produce Syngas for use in heating, power generation and the production of chemicals, fertilizers, ultra clean diesel, and aviation fuels.
This could provide the first commercial UCG to power generation project, using coal in a cleaner process benefitting Oklahoma and the U.S.A.
Recently, Clean Global inked a $6 million capital raising via a placement and underwritten rights issue at $0.07 per share to progress its UCG project in Oklahoma USA.
Over the last 120 days significant progress has been made on the project.
Progress includes identifying a site for Clean Global’s UCG plant, identifying various routes for a pipeline between the UCG plant and the AES Shady Point Power Station in the U.S.
Recently, Clean Global entered into Memoranda of Understanding with the owner of a significant coal resource, and with AES Corporation, (NYSE: AES), a $10 billion global power company.
The agreement will allow the company to acquire a minimum resource of 20 million tonnes of coal at the permitted Cavanaugh coal mine site in Oklahoma for $20 million, along with an option to acquire significant coal resources on adjoining property.
Cavanaugh is located 24 kilometres from the Shady Point coal fired power station that is owned by the AES Corporation, which has agreed to initially purchase sufficient Syngas for Shady Point to maintain continuous production of 25MW of electrical power by mid to late 2012.
Significantly, this is sufficient electrical power to supply 25,000 homes.
The project would use coal in a cleaner way to produce a significant commercial benefit for AES Corporation and Clean Global, as well as maximising benefits to the local community and environment.
The Oklahoma Energy Project provides a tangible opportunity to demonstrate both the economic viability and the environmental benefits of Clean Global’s UCG Syngas technology.
Clean Global's business model entails potential cash flows in the short term from licence fees, service fees and partial sale of traditional coal assets not needed for UCG Syngas projects. In the longer term, it could derive cash flows from UCG Syngas production, licence fees, services fees and royalties from new projects.
The second stage capital costs are estimated at US$76 million, to produce an annualized cash flow of US$20.31 million in the first year of operation.
Progress
Clean Global’s executive chairman and chief executive officer, John Harkins, said that, “significant positive progress has been made towards a project that will not only benefit the interests of Clean Global and the AES Corporation, but also the community of Oklahoma in the United States.”
A formal and binding agreement with AES Corporation within 120 days from the date of the agreement, was subject to Clean Global obtaining approvals for use of the Cavanaugh mine site for UCG production.
As well as subject to gaining easement access for the gas pipeline and achieving funding commitments.
Importantly, Clean Global and AES have today agreed "to allow the necessary time for required regulatory approvals, pipeline easement access and funding commitments to be in place to ensure that the project not only proceeds, but is ultimately successful."
Significant progress has also been made in the last 120 days including identifying a site for Clean Global’s UCG plant, identifying various routes for a pipeline between the UCG plant and the AES Shady Point Power Station.
Farrell Cooper Mining has provided Clean Global with data on its coal and geology of the Cavanaugh mine site where Clean Global intends to build its UCG plant.
The data, detailing coal composition from Farrell Cooper existing works, initial coal geological data, hydrology, infrastructure, and other relevant information, has indicated that the Cavanaugh mine site may be suited to Clean Global’s Linear CRIP UCG process.
The company uses a proprietary process called CRIP (Controlled Retractable Injection Points) that reduces capital and operating costs when compared with other UCG technologies.
Clean Global has planned a focused seven-hole drilling program to obtain base line soil and water data, coal core samples for analysis, and data for the design of the UCG reactors on the Cavanaugh mine site.
Clean Global has shortlisted potential drilling contractors to undertake the drilling program and expects to let the tender in early May. Drilling will likely start in mid-June.
Funding raised from the recent placement and the rights issue will pay for the drill program.
Clean Global has identified potential routes for a pipeline from the Cavanaugh UCG site to the AES Shady Point Power Plant, 15 miles from the Cavanaugh UCG site.
Land holder impacts and issues surrounding underground road crossings and other deviations are being assessed to arrive at a solution that provides minimal impact to land holders and minimise any potential environmental impacts.
Clean Global has shortlisted two engineering firms for the pre FEED (Front End Engineering and Design) work for the gas treatment plant delivery and integration of Syngas into the AES Shady Point power generation facility.
Clean Global expects to let the FEED tender in late May-early June, with work to commence contemporaneously with the drilling of the Cavanaugh mine site.
Preliminary work has commenced for the UCG reactors, including the injection and production well configuration, and oxidant injection plant, on the Cavanaugh site.
It is proposed to use an enriched air gas (a mixture of air and oxygen) as the gasification agent for the UCG reactor which will produce a high quality Syngas suitable for use at the AES Shady Point Power Station.
Construction of the injection and production wells and the connection of those wells to start the UCG process and create the reactor utilises specialised directional drilling to make these connections and no fraccing is involved.
Initial hydrological data provided by Farrell Cooper Mining suggests that the water table is more than 200 feet vertically away from the coal seam in which Clean Global will be establishing the UCG reactor. Clean Global is focused on ensuring any risk to the water table at the Cavanaugh mine site is minimal.
Clean Global has completed an initial co-firing combustion analysis undertaken by Colorado based EO Combustion Solutions LLC. The analysis was to look at the efficiency variation of co-firing the existing boilers at the AES Shady Point Power Station with coal and UCG Syngas for Stage 1 of the project. Initial results indicate an efficiency increase of between 2% – 4%.
Early development of US project – possible North American listing
Approximately 20% - 25% of the funds raised in the placement and rights issue in Australia will be committed to the early development of the US project. Further funding will be derived from project funding or a possible listing of the US entity, Clean Global Energy Inc. on a North American Stock Exchange.
Clean Global has been in discussions with brokers and corporate advisers in Australia, the US and the UK regarding the US project, resulting in indicative strong support from a number of sources for funding and funding options for the US project.
Clean Global will appoint a lead broker/corporate advisory firm following completion of drilling in the US. Stage 1 of Clean Global's US UCG project, estimated at $45m - $50 million, includes the following:
- acquisition of the Cavanaugh coal site from Farrell Cooper Mining,
- the development and conversion of the Cavanaugh mine site to a UCG Syngas production site,
- the construction and commissioning of the UCG and gas treatment plants, associated infrastructure together with the pipeline and
- integration into the AES Shady Point Power Station
Clean Global will deliver Syngas to generate 25 megawatts of electricity from coal firing the AES Shady Point Power Station.
Stage 2 of the project will include the expansion to supply Syngas to produce 100mw of electricity, and Stage 3 will deliver further expansion to 300mw of electricity.
The project marks the start of the first commercial UCG to power generation project worldwide.
John Harkins said, “it is the road map to future UCG power projects in other markets where domestic, commercial and industrial energy users rely on coal for most of its energy needs. Clean Global intends to unfold similar projects like the one in Oklahoma, globally, for the next 10 to 15 years.”
Clean Global is focused on low capital expenditure to bring UCG Syngas to handpicked global markets which is a differentiating factor. It is well positioned globally in UCG Syngas activities in Australia, U.S, India and China. With potential earlier cash flows from projects than a number of its peers from potential licence fees, service fees and partial sale of traditional coal assets not needed for UCG Syngas projects.
In the longer term, it could derive cash flows from UCG Syngas production, licence fees and royalties from new projects. This is a company to watch as it ticks off milestones in 2011.
