Leigh Creek Energy reveals hydrogen option for syngas project

Leigh Creek Energy ASX LCK hydrogen
Leigh Creek Energy has demonstrated it can produce 200 million kg of hydrogen per year at its South Australian energy project.

Leigh Creek Energy (ASX: LCK) has announced hydrogen production as a commercialisation option for its namesake project in South Australia, claiming it could be the lowest cost producer in Australia at less than $1 per kg.

The move will make the most of a process that is already part of the company’s strategy to produce fertiliser products from the remnant Leigh Creek coal resources in the state’s north using in-situ gasification (ISG) technology.

According to Leigh Creek Energy, its pilot plant demonstrated the project can produce 200 million kg of hydrogen per annum at less than $1/kg, which is “much lower than current production costs” and “cheaper than potential competitors”.

The company has been monitoring the hydrogen market and governmental desire to encourage this development and said while the market has seemed “too immature” in Australia, “things are changing rapidly and the business for hydrogen now warrants further analysis”.

Hydrogen already in production process

Leigh Creek Energy validated its ISG technology in early 2019 following the successful production of commercial synthesis gas (syngas) from its demonstration plant and announced its commercialisation plan to produce ammonia for urea manufacture.

ISG is the chemical process of converting underground coal into a gaseous form known as syngas, which is made up of high concentrations of hydrogen, as well as methane, carbon monoxide and other gases and condensate.

The syngas can then be processed into hydrogen, then ammonia, and ultimately, into nitrogen-rich urea fertiliser products.

Leigh Creek Energy has estimated it can produce 2 million tonnes of urea from 200Mkg of hydrogen at under $1/kg. The company claims this is cheaper than its potential customers because it simultaneously develops a cheap production cost and provides an end use.

“If the market exists in Australia or an export market exists for hydrogen, we can divert excess hydrogen for sale as a standalone product,” it stated.

Strategic partners

In April, Leigh Creek Energy signed a binding term sheet with its major shareholder China New Energy (CNE) for a proposed joint venture for ISG operations in China.

The duo aims to take advantage of China’s rapid transition to a hydrogen economy with 50,000 hydrogen-powered cars expected on the country’s roads by 2025.

Leigh Creek Energy said it is also currently in talks with CNE’s parent company, Shanghai-listed Shaanxi Meijin about bringing its technology to Australia.

Shannxi Meijin constructs hydrogen vehicles, hydrogen fuel cells and hydrogen charging stations. It is already well placed in the Chinese hydrogen market and has the ability to expand internationally.

“Partnering with Shaanxi Meijin provides Leigh Creek Energy with significant advantage in developing a hydrogen fuel market within Australia,” the company stated.

The hydrogen market

Leigh Creek Energy managing director Phil Staveley said the company would be remiss if it did not also focus on the alternatives for commercialising the hydrogen it can produce.

“Hydrogen may prove to be an area of rapid growth in Australia and globally,” he said.

According to a recent corporate presentation by Leigh Creek Energy, the global hydrogen market is now estimated to be worth $105 billion and is growing at an annual rate of 6-8%.

The company regards hydrogen production as an “attractive” pathway because, being an interim product in producing fertiliser, it “costs nothing for the optionality”.

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