Leigh Creek edges into China’s energy market, gains invite to Shanghai International Energy Exchange

At the same time it has been invited to apply for admission on the Shanghai International Energy Exchange, Leigh Creek Energy (ASX: LCK) has collared a heads of agreement to begin in-situ gasification operations in China – producing hydrogen and potentially fertiliser.

The agreement follows Leigh Creek’s success with its pre-commercial demonstration plant at its namesake project in South Australia, which produced synthesis gas (syngas) via its in-situ gasification process – resulting in 2P reserve designation of 1,153PJ.

Under the HoA with its largest shareholder China New Energy Ltd, Leigh Creek will develop in-situ coal gasification in China with the duo looking to generate syngas together in the region, which contains 33% hydrogen and can be optimised to comprise 45% hydrogen.

The duo plans to formalise the agreement by establishing a joint venture company to commercially generate hydrogen and fertiliser using the in-situ gasification process, which can be sold into China’s domestic market and abroad.

“The HoA with China New Energy is exciting as it presents a huge opportunity for Leigh Creek to move into such as a large energy market as China’s and is my pleasure to be able to share this news with our shareholders,” Leigh Creek executive chairman Justyn Peters said, pointing out the agreement offers the company a “quicker path to revenue”.

Mr Peters explained that China was a coal rich company with its material suited to Leigh Creek’s in-situ gasification process.

“China is also rapidly moving to a hydrogen economy and is spending billions of dollars on that new energy strategy.”

“Leigh Creek’s in-situ gasification process has proven that it has the potential to produce massive amounts of hydrogen as a standalone commodity or to be used in the manufacture of fertiliser,” he added.

China’s hydrogen economy

It is predicted that 72 billion cubic metres of hydrogen will be required for energy in China by 2020.

The Blue Book on the Infrastructure Development of the Hydrogen Energy Industry of China 2016 anticipates the value of this industry will reach RMB300 billion (US$44.4 billion) in the same period.

Underpinning this industry is the rise in hydrogen-powered vehicles with an expected 50,000 of these vehicles to be running around China by 2025.

Powering the hydrogen vehicles will be 200 refilling stations.

The China Hydrogen Alliance predicts that by 2050, hydrogen will account for 10% of the country’s energy with demand hitting 60 million tonnes.

Shanghai International Energy Exchange

As part of the duo’s plan to produce and sell hydrogen, Leigh Creek has been invited to apply for admission to the Shanghai International Energy Exchange, which will allow the company to trade its gas on the platform.

Leigh Creek said admission would make it one of a “only a select few gas producers on the exchange”.

This would afford Leigh Creek with credibility and “significant recognition” throughout the country.