Junior gas developer Leigh Creek Energy (ASX: LCK) announced through a media release that it has elected fertiliser production as the commercial pathway for its namesake synthesis gas project in South Australia.
The company has been weighing up downstream options for the project and today confirmed that fertiliser products would be the most “financially attractive” option to utilise the Leigh Creek coalfields’ estimated 2,964 petajoules of 2C gas resources.
Following this decision, the company is moving ahead with full feasibility study processes to justify funding for a large-scale commercial fertiliser project.
Turning syngas into fertiliser
Synthesis gas, or ‘syngas’, is generated via in situ gasification, which is a chemical process that converts coal from its solid state into its gaseous form.
Syngas can be used to produce electricity or natural gas directly, or further refined into a variety of products including ammonia to be used in fertiliser and industrial explosives.
Leigh Creek Energy has been evaluating these three different commercial pathways for its syngas project: electricity, natural gas or petrochemical products such as urea fertiliser.
According to the company, the first two options are no longer being considered, with sovereign risk with both the electricity and natural gas markets in Australia being a major factor in the decision.
On the other hand, urea demand is relatively stable at 2.5 million tonnes per annum, with about 90% of this demand being currently serviced by imports.
Global demand for urea fertiliser is also increasing due to factors associated with population growth and urbanisation, rising living standards in emerging economies and GDP growth in stable economies.
In addition, the project has the geological advantage of being close and connected to Port Augusta through the existing rail network.
“Factors influential in this decision include existing transport infrastructure which enables LCK to access markets for the product mix, demand for the product with stable pricing, and LCK’s natural advantage in having a large feedstock resource that can be used in production at a very low price,” Leigh Creek Energy managing director Phil Staveley said.
The company has engaged international industrial engineering group ThyssenKrupp to conduct a concept selection study on the fertiliser business case.
This study will advise Leigh Creek Energy on capacity constraints and economic feasibility, capital and operating expenditure as well as provide sensitivity and preliminary options analysis.
The information contained in ThyssenKrupp’s final report is expected to inform Leigh Creek Energy’s feasibility study.
Pre-commercial demonstration project
Last month, Leigh Creek Energy announced the maiden production of synthesis gas from its pre-commercial demonstration at the Leigh Creek coalfields.
Today, it provided an update on the demonstration, which has now been continuously flowing gas for 39 days.
According to the company, the process of developing the gasifier is continuing, with key indicators being injected air flow rates, rising temperature in the gasifier and decreasing oxygen levels in the outlet gas.
The company told the market last week that it was adjusting the operating parameters of the pre-commercial demonstration and planned to accelerate gasifier development in the “very near future”.