Leigh Creek Energy achieves stable syngas production at South Australian plant

Leigh Creek Energy ASX LCK produces Syngas
Leigh Creek Energy is a step closer to achieving commercial rates of gas flow from its namesake synthesis gas project.

Leigh Creek Energy (ASX: LCK) has kicked off 2019 with a project milestone after reporting 13 days of continuous production of commercial quality syngas, and 89 days of continuous operation of its pre-commercial demonstration (PCD) at its namesake energy project in South Australia.

Updating the market today with the work at its syngas project, Leigh Creek Energy said continuous production had been reached within the gasification phase but with low flow rates.

Achieving continuous production status is a significant step in its path to achieving commercial rates of gas flow.

The Adelaide-based company will now work on increasing flow rates to inform the technical feasibility of in situ gasification (ISG).

Once this is achieved, the process of upgrading Leigh Creek Energy’s 2,964 petajoules of PRMS 2C gas resources to 2P status can begin. This is expected to be completed within the first quarter 2019.

Leigh Creek Energy managing director Phil Staveley said achieving commercial quality syngas production reflected the low technical risks associated with operating in-situ gasifiers at the Leigh Creek site.

“Once we achieve commercial rates of gas flow and associated data we will look forward to providing further detail on the pathway to commercialisation,” he added.

Production milestones underpin positive picture

Today’s update follows on from the recent release of positive environmental results which support the company’s claim the ISG process can be done in a “safe, regulated and controlled manner”. ISG a chemical process that converts coal from its solid state into a gaseous form, creating synthesis gas, or ‘syngas’.

At the end of December, Leigh Creek Energy said the PCD was producing all the gases required to make ammonia and urea, with the syngas now producing up to 20% methane.

The positive results generated from testing to-date demonstrate the generator is operating within the expected parameters.

The project sits within the Leigh Creek coalfields in northern SA, which the state government’s pre-trial Independent Assessment Report identified to be “ideally suited” for the ISG process.

Capital raising to advance production ambitions

In other news, Leigh Creek Energy announced a non-renounceable rights issue at $0.12 per share to existing eligible shareholders to raise approximately $3.86 million before costs.

Proceeds of the offer will be used for project development and general working capital.

The rights issue forms part of a broader $5.14 million capital raising aimed at meeting the company’s cash flow requirements.

The other component of the funding package consists of a placement of about 10.68 million shares to raise $1.28 million. This was completed in December 2018.

Fertiliser foray

Towards the end of last year, Leigh Creek Energy confirmed fertiliser production as the most “financially attractive” option to commercialise it’s vast 2C gas resource.

The process of making ammonia and urea is done by reforming natural gas into synthesis gas or syngas.

In Australia, this process requires fertiliser producers to purchase natural gas and then convert that gas at an extra cost to produce the syngas needed as the feedstock for ammonia and urea production.

With global demand for urea fertiliser said to be increasing due to factors associated with population growth and urbanisation, and Australia having to import more than 90% of its fertiliser, the company is confident in the underlying demand fundamentals for its chosen commercial pathway.

Leigh Creek Energy’s shares were trading 4.3% higher in early afternoon trade to $0.12.

Lauren has more than seven years’ experience as a business journalist and editor in Australia and Southeast Asia. With specialist knowledge of the resources sector, including oil and gas, she has covered publicly listed companies of all sizes. Lauren has reported across a range of industries including mining and property.