Sydney, Feb 2, 2010 (ABN Newswire) - This is Brian Carlton for ABN Newswire. Linc Energy Limited (ASX:LNC) is a leader in Underground Coal Gasification (UCG). They produce a synthetic gas which can be used either for power generation or turned back into a liquid for synthetic fuel production. The company objective is to commercialize underground coal gasification first in South Australia. It is very exciting stuff and we are here at the "Limelight" series cocktail event at the Stamford in Circular Quay, CEO and recent TV star Peter Bond joins me now. The technology first, what is underground coal gasification?

Peter: Underground coal gasification is where you are literally gasifying coal beneath the surface. We concentrate on a strand of coal. That is coal at more than 200 metres depth, more than say three hours from the marketplace, so it is not where most people are going to mine it. It is coal that won't in our generation be exploited or probably forever.

What is gasification is a great question, if you take a lump of coal and put it in a box and heat up the box to 1200 degrees centigrade in the absence of atmosphere, what would happen is that solid coal would turn into a gas. The fixed carbon would turn into carbon monoxide, the water would turn to hydrogen and so on. It is just a standard solid to gaseous state, standard physics and chemistry. What you need for that is a high carbon environment, confined space, high temperature up to 1200 degrees and you need to put just a bit of oxygen down there to make sure it all happens the way it needs to away from the atmosphere.

So the perfect place to do that is underground where you can create a cavity the size of this room, it's glowing red hot at 1200 degrees centigrade and what happens is in a confined space you put two wells down, get the gasification process going, it consumes the coal and the gas comes up the second well.

Brian: Now crucially you are not burning the coal are you?

Peter: You're not burning the coal, you are gasifying the coal.

Brian: OK so, it's a chemical process?

Peter: It's basically a physical chemical reaction, but you are left a void, there is no coal left, it's like coal mining without the effort and environmental issues.

Brian: Obviously you are not digging massive holes at the surface, that's got to be a benefit?

Peter: No you are not, environmentally you are miles ahead, all you have got is a series of wells, half a dozen or so wells with a pipe running down to your commercial application, power station or gas to liquids plant and on the surface you have a series of wells. You've got no mining, no stock piles, no dust , no emissions, it's a very, very clean way of doing it.

Brian: Let's talk about the "Gas to Liquid" technology because the resulting processes dovetail off into two areas. One is using the gas and the other is converting the gas back into a liquid for use in things like diesel fuels. How does that process work?

Peter: Well, there are two different processes. You have the taking of the coal and making a gas where it is coming up through a pipe. So that's the first process, making the gas, and cheap gas. We own a lot of acerage, billions of tonnes of coal in South Australia and North America and that is a large part of the company's business plan, and the fact that we control billions of tonnes at a cost effective price means that we can convert that coal into cheap gas in a very cost effective way. So you are talking about $1.00 to $1.50 per gigajoule gas which is very cheap synthetic gas. That gas coming out of a pipe at that sort of price in your backyard is a huge economic advantage. Taking that gas and then turning it into liquids is basically running it through what is called a Fischer-Tropsch plant which the South Africans have been using for 55 years and all it is, is a reactor that is full of catalyst. You pump the gas through the catalyst, and the catalyst joins the carbon chains in a row. It starts at the top, and by the time it gets to the bottom it turns into a liquid. You are turning the gas back into a liquid by doing that.

Brian: Now, it is a very pure process, isn't it? The resulting diesel fuel doesn't contain the impurities that normal diesel fuel contains and therefore burns cleaner and more efficiently, more environmentally friendly?

Peter: Yes, absolutely, it is a bit like synthetic oil, which is a high quality oil, it's exactly the same thing. You are producing a homogenous product. It does not have the contaminates that mineral diesel has, it is just a very clean, very high cetane, very high octane type product and it's an amazing outcome because no matter what you do, as long as you put gas in one end you will get clean liquids out the other.

Brian: What percentage would be used say for gas that goes into a power station to generate electricity as opposed to making diesel fuel on the other side?

Peter: If you have a gas to liquids plant, a large UCG operation that is making the gas from the underground coal and you have committed to a very large gas to liquids plant, which is the plant that makes it into diesel, that is like the size of an oil refinery, that takes your priority. So what you do is feed most of the gas through that. About 75% - 80% of the gas you put through that will turn into a liquids product. There is a percentage of gas left over that you would feed into the power station. So, it's about somewhere in the 75-80% would go to gas to liquids and 20-25% would go to power generation.

Brian: Given both the cost savings and environmental benefits, I would imagine that politicians would not be knocking your doors down because it is so obvious. Politicians "obviously miss the obvious". Have they been knocking on your door? Have you had to go to them and explain that these are the kind of environmental benefits, these are the kind of cost benefits and this is the kind of coal we are using, otherwise it would be sitting in the ground doing nothing? Are they open to the argument, are they on-board?

Peter: Well, politicians are like most human beings. Look, yes, particularly at Federal level, the Minister of Mines and Energy is a great supporter of Linc and what we are doing with coal to liquids and how we are doing it. And he is quite visionary in how he gets it. And there are a number of other players in politics we have taken to the site and they get it. The Minister in South Australia, Paul Hollaway, again he is very good, has been to the site, he gets it, and there are many others. Most people who come to the site and see it join the dots. It is self evident, it is a great concept, it has to be part of the energy solution. I guess it is the ones that don't get there and don't join the dots that we need to keep working on to win over.

Brian: With the government looking at a fixed reduction of CO2 reduction of 5% by 2020 at the moment, the use of this sort of technology has the potential for Australia as a nation to push that number way higher. It's pretty significant, isn't it?

Peter: There is a number of ways, if you started to use our gasification process to feed gas fired turbines and using some of the other technology that we have access to, by using gas turbines, you are going to drop the CO2 footprint by 25-35% straight away. If you are using fuel cells in some of those applications you are going to drop by 85-90% because there is still some footprint and then you have the synthetic fuels production where the great benefit for that is because Australia has gone past "peak oil", every year that goes past we are importing more oil, and we have to pay for that , we have to physically write the cheque to the overseas countries to buy that oil. So the coal we export, the wheat we export, the iron ore that we export, etc. that is going towards paying for the oil we consume, and some of the other commodities, but every year that goes past we are basically just exporting our wealth to pay for the right to drive our cars. Now if you can produce the oil in this country and retain the wealth in this country, by doing something like we are doing with gas to liquids, then you don't have to write that cheque, the wealth stays in the country.

Brian: And in terms of environment, again if I am not mistaken once you put that synthetic diesel fuel in a diesel car and run the car, the emissions are what, 35% of what they are currently?

Peter: That's right, and so again, it's a lower CO2 footprint and it's not just lower CO2, its lower aromatics, it's zero sulphur, it's amazingly beneficial and far cleaner than current fuels.

Brian: So not only reduce the CO2 emissions but a cleaner atmosphere generally?

Peter: Absolutely, and it's a better fuel. You can take synthetic fuel, it's like synthetic oil, and it's a better product. So, you can put synthetic diesel in your car and it has more power, it is like a premium diesel. You can put it straight into your vehicle, there is no mixing. It is not bio-diesel, it's not like ethanol, it's the "malt scotch" of diesel. It's the best product you can get.

Brian: CEO Peter Bond, appreciate your time, thanks for joining us here at ABN.

Peter: Thanks Brian.

Contact

Information for Media:
Mr Peter Bond
Chief Executive Officer
Tel: +61-7-3229-0800
Email: pab@lincenergy.com.au

ASX Contact:
Mr Craig Ricato
Company Secretary
Tel: +61-7-3229-0800
Email: craig.ricato@lincenergy.com.au

Information for investors:
Ms Janelle van de Velde
Manager, Investor Relations & Corporate Communications
Tel: +61-7-3229-0800
Email: janelle.vandevelde@lincenergy.com.au


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