We believe that demand has been driven by the growing investor interest in cleaner, alternative petroleum products. Our technology initiatives have the potential to deliver significant commercial quantities of gas for the production of ultra-clean, sulphur free diesel and jet fuels. This has been a compelling business case for investors.

—Peter Bond, Linc Energy CEO

Underground Coal Gasification (UCG) is a process through which coal is converted in-situ to a syngas that can be used as a fuel for power generation or as a chemical feedstock—e.g., to feed into a Fischer-Tropsch process for the generation of synthetic diesel.

In UCG, two or more boreholes are drilled into a coal seam, at more than 100m depth and about 30m apart. The operator ignites the coal at the bottom of the first borehole, and then begins injecting compressed air. The heat produced by the combustion produces the syngas. The syngas moves under pressure to the second borehole, which becomes the production well.

UCG has been used in the Former Soviet Union for some 40 years.

A Life Cycle Analysis of UCG electricity production by BHP Billiton Newcastle Technology Center in Australia concluded that while UCG-CCGT (Underground Coal Gasification-Combined Cycle Gas Turbine) has the potential to be one of the lowest greenhouse gas (GGE) coal-based technologies, it emits more GGE than does a natural-gas-fired CCGT process due primarily to the higher carbon to hydrogen ratio of the gasified coal product.

Aside from emissions, the other potential major environmental factors with a UGC process are groundwater quantity and quality; and subsidence.

The Linc Energy Chinchilla project has demonstrated that a UCG process can be operated without uncontrolled impacts on groundwater, as long as the pressure in the in-seam gasifier is maintained at significantly less than groundwater pressure.

Identified issues for the conversion of the project to full-scale commercial production include:

• The rate of groundwater inflow to the active gasification zone;

• The rate at which the gasifier chamber will fill with water as gasification is completed and the zone of active gasification moves forward;

• The extent of flushing that will take place by groundwater flow towards the zone of active gasification, through previously gasified areas;

• The extent of pumping that may be required to continue flushing zones that have been previously gasified;

• The extent of in-situ treatment such as air sparging that may be required to reduce non-dissolved sources of benzene in the previously gasified areas; and

• The potential long term impacts of solid residue remaining in the gasifier.

Resources:

• Linc Energy Prospectus