Cooper Basin hydrogen plan stalls


How it works:  Carbon Energy’s diagram of deep coal gasification.

PLANS TO PRODUCE HYDROGEN in the Cooper Basin for up to 50 years, strongly encouraged by the State Government, have stumbled badly for lack of finance.

The company behind the proposal, Carbon Energy Ltd, has been forced into receivership, following its failure to raise $1.5 mln funding through a share purchase plan.

The company’s shares have been suspended indefinitely on the stock exchange since Wednesday 28 November, when Korda Mentha were appoined voluntary administrators.  Less than a week later, the Sydney accountancy firm William Buck were appointed reeeivers and managers.

Carbon Energy’s CEO, Bryan O’Donnell, told the AIR in November: “ I do absolutely believe there is a case for deep coal to produce hydrogen in the Cooper Basin.

“Businesses with other priorities are beginning to think that maybe I am right.

“The SA government absolutely thinks it is a good idea.”

“State government financial support is likely to be worthwhile, but not material – about a million dollars or so. It would not be make-or-break for the project.

“At this stage, the SA government say they don’t want to back single horses, but they do want to facilitate the process.

“We have identified tenements in the Cooper and we have the ability to buy them when we want to do it. We have gone far enough in the negotiations.

“I have no doubt that in ten years’ time the production of hydrogen from coal will be quite significant, with CO2 capture and storage,” he said.

Carbon Energy, now a Chinese-controlled company using “keyseam” technology based on CSIRO research, was seeking just $1.5 mln.

Most of the money from the share purchase plan would have been earmarked for the Cooper Basin hydrogen.  Some was to finance technical services and support for proposed undergound coal gasification in South Africa, including a possible partnership with a private South African company. 

The company’s key  plan was – and still is – to gasify coal underground, at least 1,500 metres below the  surface, to produce up to 68.6 per cent hydrogen.

Carbon dioxide produced in the process would either be sequestered in old oil wells or liquified and sold to conventional oil and gas companies for use in boosting production from existing wells.

The company had hoped to begin exploration drilling in the second and third quarters of this year.  The aim was to begin commercial production as early as 2020, scaling up to full scale commercial production in 2030.  In theory, the coal in the basin could produce up to 20 mln tonnes of hydrogen a year for more than 50 years.

O’Donnell said he had hoped that the share purchase plan would broaden the shareholder base and bring in some signficant long term investors, but the Chinese interests, who control 80 per cent of the company, did not support it.

There was also very little support from shareholders holding the remaining 20 per cent.  The offer, of up to $15,000 worth of shares at eight cents each, was extended three times, but raised less than $281,000.

Those who did subscribe are now being given their money back.

“If things work out according to my plan, one thing in the future will be a share purchase plan that will be successful,” O’Donnell said.

“But when 80 per cent of the company is owned by Chinese investors it is difficult.”

O’Donnell, who has a background in major projects in the oil and gas industry, was brought in in January last year  to turn the company around.

“CNX is just a little tiny company but it can contribute to the environmental wellbeing of the world,” he said.

“I have a pretty strong belief that the massive consumption of petrocarbons and the emissions of CO2 is. ... putting the environment in a very precarious position.

“We have to do something about it.”

He said that although major gas companies such as Woodside were committed to sequestering their carbon dioxide, little was actually being done because it was a direct hit to their profits.  He did not think that that would change until there was a price on carbon.

Carbon Energy operated  an underground coal gasification (UCG) trial  using keyseam at Bloodwood in Queensland from 2010 until 2016, when the Queensland Government banned all UCG in response to the environmental disaster caused by Linc Energy's coal-to-diesel operation near Chinchilla.

UCG remains a highly controversial technology with numerous trials around the world having been abandoned for technical or environmental reasons.

Carbon Energy, however, maintains that its keyseam system produced a more consistent quality and composition of syngas than traditional UCG, and can be adjusted to produce commercial quantities of hydrogen at competitive prices.  It was given a clean bill of health by the Queensland government’s  independent scientific committee, but approval of any form of underground coal gasification had become politically unacceptable.

The keyseam technology was developed in conjunction with the CSIRO, which still owns just under half a per cent of the company. That stake was recently worth around $27,000, but may now be worthless.

The Queensland ban on UCG pushed Carbon Energy to the wall, but it was rescued by Chinese investors hoping to use its technology in Chinese coalfields.  It is understood, however, that the initial Chinese proposals have since run into difficulty, with a joint venture partner pulling out.

Disclaimer: The author owns shares in Carbon Energy (and has the losses to prove it).

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Updated January 14, 2019