SOURCE: Zeus Development Corp.

June 19, 2007 11:52 ET

China Begins Building First Industrial Underground Coal Gasification Project

HOUSTON, TX--(Marketwire - June 19, 2007) - Construction began in May on China's first industrial-pilot underground coal gasification (UCG) project in the Northern Inner Mongolia Autonomous Region. Seven ignition and production wells reached the coalbed 200 meters below ground by May 23 in the project's $112 million first phase. The project consists of underground drilling and ignition, aboveground coal-gasification power generation, and chemical production.

The plant is located at the Gonggou Coal Mine in Wulanchabu City and by 2010 will produce 1.5 million cu. m/d of syngas, 100,000 mty of methanol and methane and generate 32.4 million kwh/y of power. The city is developing a coal-chemical industry with its more than 15 billion tons in coal reserves. Methane isolated from the syngas will be used to produce town gas and generate electricity.

The project is a joint venture between China University of Mining and Technology and Hebei Xin'ao Group, which was founded in 1989 and has now become an energy distribution/equipment manufacturing, as well as chemical and biochemistry conglomerate. The group has a total asset of $2.35 billion and offices in over 60 Chinese cities and the UK, USA and Australia.

Xin'ao has been very active in producing and marketing coal-derived methanol and DME and is also moving into the design and construction of DME plants. The initial estimation of the project's profit ratio is 9.37% and its annual revenue will reach $41 million. The local government will receive $3.4 million in taxes annually.

China will also obtain six patents and two initial patent packages. The patents include: well-less UCG mining; ignition of an underground gasifier furnace; and parameter control in the oxygen-steam continuous gasification process. During the oxygen-steam continuous gasification process, syngas with over 40% hydrogen content will be generated and used to produce methanol.

UCG is a coal mining technology that first appeared in the 1990s. Coal is regulated and burned underground. Through the burning process, flammable gases are produced and collected. It is said to be the second generation of the mining method, according to Industrial Info Resources research. It turns physical mining to chemical mining.

Therefore it is safer, more cost effective, and more environmentally friendly. UCG provides a good alternative to those areas that are not suitable for physical coal excavation. It also minimizes the risk of surface collapse, and better protects the land resources around the mining area.