Chinese delegation visiting Leigh Creek to learn more about ambitious gas project

EXECUTIVES of a major Chinese company are in South Australia to explore opportunities in the energy sector.

The final coal train from Alinta’s Leigh Creek operations arrived in Port Augusta on Wednesday. (Picture: Dean Martin)

REPRESENTATIVES from a major Chinese energy and manufacturing company will travel to Leigh Creek today to learn more about one of the most ambitious power generation projects ever proposed for South Australia.

The two-day visit by seven Shanghai Electric executives follows a “very encouraging” meeting with Treasurer Tom Koutsantonis yesterday, and a non-binding heads of agreement the company signed with ASX-listed Leigh Creek Energy earlier this month. That agreement laid out plans for the construction of a $400-500 million gas fired power station in Leigh Creek, 550km north of Adelaide.

In the second half of 2015, soon after Alinta Energy announced it would cease operations at its Leigh Creek coal mine and associated Port Augusta power stations, LCE outlined its underground — or in-situ — coal gasification (UCG) project. This would see coal converted to a synthesised gas by burning it underground and bringing it to the surface.

While conceding many issues still need to be worked through, LCE executive chairman Justyn Peters believes UCG presents a unique opportunity for baseload power generation in SA.

“We’re in discussions with some of the big mining companies in the area — BHP, OZ Minerals, Archer Exploration — about supplying power to them. They’re telling us they need baseload power,” he said.

“We expect a gas flare to occur by the end of the year, which is crucial in letting them (Shanghai Electric) know we can do it — it closes the credibility gap.”

LCE is in discussions with Shanghai Electric, which has annual revenue of $US12 billion, about the payment structure of the power station, if it were to become a reality. It is estimated that 500 jobs would be created over a two-year construction phase, including related UCG infrastructure.

Leigh Creek Energy executive chairman Justyn Peters.

Mr Peters played down concerns about the environmental impact of UCG trials, which will see it outlawed in Queensland by the end of this year.

“The scientists involved (in the Queensland trials) recommended that they continue,” he said.

In announcing the Queensland ban, Natural Resources and Mines Minister Dr Anthony Lynham said the potential environmental risks outweigh any potential economic benefits.

One of the companies involved in Queenland’s UCG trials, Linc Energy, has been committed for trial on five counts of causing serious environmental harm. Two weeks ago Linc was placed into administration.

Mr Koutsantonis said the Leigh Creek project remains subject to rigorous environmental impact assessments before it can progress further.

“We have a very effective regulatory framework in SA and the merits of the LCE project will be assessed against that framework, not a political decision in Queensland,” he said.

At this stage, LCE has not applied to undertake any UCG testing and when it does, approval will depend on the results from an exploration drilling program.

LCE shares were trading at 35 cents before being put in a trading halt earlier this week while a capital raising effort was embarked on. This cash injection will likely fund a pilot facility.

On Wednesday, Alinta’s last ever coal train travelled from Leigh Creek to Port Augusta, with its cargo fuelling the company’s Northern power station through to its May 9 closing date.

Representatives from Shanghai Electric were unavailable for comment.

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