SES to Expand Hai Hua Coal Gasification Project

19 August 2008

Synthesis Energy Systems’s (SES) 95%-owned joint venture project with Shandong Hai Hua Coal & Chemical Company Ltd. (SHHCCC) obtained government approvals for the expansion of its existing Hai Hua project in Zaozhuang City, Shandong Province, China.

The Phase II expansion will result in additional production capacity of approximately 17,000 standard cubic meters per hour (scm/hr) (a 15 MW equivalent) of high grade syngas at this site. After completion of the expansion, the plant will have a design capacity of approximately 45,000 scm/hr (a 40 MW equivalent). The project approvals were issued by divisions of the State Environmental Protection Administration and the National Development and Reform Commission.

The Hai Hua Plant is utilizing SES’ U-GAS gasification technology to convert local low-rank coal, with approximately 40% ash content, into high grade syngas. The additional capacity from the Phase II expansion is expected to support approximately 100,000 tonnes/year of methanol production as well as other gas demands in the Xuecheng Industrial Park.

SES is currently negotiating agreements, including ownership in the methanol facility, with SHHCCC as well as other customers for the additional syngas capacity. SES expects to finalize project terms and begin work on the Phase II expansion later this year.

SES builds, owns and operates coal gasification plants that utilize its proprietary U-GAS fluidized bed gasification technology licensed from the Gas Technology Institute (GTI) to convert low rank coal and coal wastes into higher value energy products, such as transportation fuel and ammonia. Relative to other gasification technologies, U-GAS offers (a) greater fuel flexibility provided by the ability to use all ranks of coal (including low rank, high ash and high moisture coals, which are significantly cheaper than higher grade coals), many coal waste products and biomass feed stocks; and (b)the our ability to operate efficiently on a smaller scale, which enables us to construct plants more quickly, at a lower capital cost, and, in many cases, in closer proximity to coal sources. SES currently has offices in Houston, Texas and Shanghai, China.