LINC ENERGY LTD // 2009 ANNUAL REPORT

04 REVIEW OF
OPERATIONS AND
ACTIVITIES CONTINUED
United States
Linc Energy chose the Powder River Basin in the state
of Wyoming as its initial entry point into the United States
energy market. The Powder River Basin is the largest coal
producing area in the USA, with annual output in excess
of 450 million tonnes, about 38 per cent of total
US production.
The Powder River Basin is a well-established energy hub
with rail, pipeline and power distribution. A total of 14 active
surface mines operate in the Powder River Basin, with
many of the world’s leading mining companies represented
in the region. The largest mines produce more than 80
million tonnes per annum, making them the largest coal
mines in the world. Thick seams of low sulphur coal occur
close to the surface and provide a low cost energy product
which is transported by rail to nearly all parts of the USA.
In May 2009, Linc Energy signed a purchase agreement
to acquire 94 Wyoming state coal leases. These leases
contain more than 92,000 acres of Powder River Basin
tenements and are believed to hold a significant coal
deposit in the deeper, central parts of the basin. These can
not be mined economically using conventional methods.
The quality of coal in the Powder River Basin deposits is
favourable for UCG. Governor Dave Freudenthal welcomed
Linc Energy to Wyoming and offered the assistance of state
administrators as Linc Energy prepares its first UCG
permit application.
In the coming financial year, Linc Energy plans to establish
offices in the USA and assemble a team of technical,
professional and administrative employees based in the
USA. Linc Energy also plans to submit permit applications
as required to begin a UCG trial operation in the Powder
River Basin, with a view toward moving directly from the
trial to a commercial operation. Ultimately, Linc Energy
aims to evaluate and acquire additional key projects
for development using UCG technology.
Vietnam
Work continues on the trial UCG Tonkin Project, which
is a collaboration between VINACOMIN (Vietnam National
Coal Minerals Industries Group), Marubeni Corporation
(a Japanese company) and Linc Energy. The site for the
trial is about 60 kilometres south-east of Hanoi in the Red
River Delta. This region is in need of energy supply.
The last of the necessary Tonkin Project business contracts
was finalised on 21 April 2009 when VINACOMIN and
Marubeni Corporation attended the official opening of Linc
Energy’s Chinchilla Demonstration Facility. Linc Energy is
currently working with its partners to prepare and submit
the necessary documentation to the local Vietnamese
authorities to obtain an investment licence. It is expected that
project approvals will be in place by late September 2009.
Linc Energy’s Chief Operating Officer Stephen Dumble
attended the first management committee meeting in
Hanoi on 21 May 2009. The management committee has
one representative each from Linc Energy and Marubeni
Corporation, and two representatives from VINACOMIN.
The management committee meetings will play an
important role in guiding the execution and commissioning
of the stage 1 project in addition to overseeing the
governance and management control of the joint venture.
Linc Energy’s technical team continues to work on many
innovative ways to handle the unique challenges to be
confronted in the Red River Delta. This is seen as an
opportunity to develop portable, skid-mounted production
units to provide Linc Energy with a set of tools to routinely
and cost effectively undertake UCG trial projects in any
location in the future.
Stage 1 of the program, including 60 days of gas
production, is planned for completion within twelve months.
This stage will determine the suitability of the Red River
Delta for UCG. If successful, Stage 2 of the program will
start for the development of a commercial UCG field to
provide syngas for much needed power generation
in this region in Vietnam.
Yerostigaz
Linc Energy holds a 72.9 per cent majority controlling share
in the only commercial UCG plant in the world, Yerostigaz.
Based in Angren in the mountains of eastern Uzbekistan,
Yerostigaz produces 1,000,000m 3 of syngas each day to
supply the local state-owned 600 megawatt power station.
A regional city, Angren depends on the reliable consistency
of syngas from Yerostigaz to supply the dual fuel
(thermal coal and syngas) power station. The Uzbekistan
Government acknowledges Yerostigaz as the highest
performing energy asset in the country, using technology
that has consistently provided gas since it began
commercial operations in 1961.
The high quality syngas contains exceptional levels
of carbon monoxide, hydrogen and methane, delivering
a greater energy value above the requirements of Angren
Power Station. Syngas from Yerostigaz is a valuable
product and it compensates the power station when
its supply of coal is strained.
Yerostigaz is well ahead of its drilling program and hopes
to reach stretch targets to minimise the amount of drilling
required during the colder months. This will allow for
maintenance to be conducted during this time.
Current production levels and coal reserves indicate that
Yerostigaz has at least another 30 years of expected life.
A Linc Energy senior executive was recently appointed
to the Yerostigaz Supervisory Board to provide direct
involvement in the plant and its development. In a
modernisation program, older items of plant and equipment
are currently being replaced to further improve the
performance of Yerostigaz. This program will start with
the replacement of drilling equipment and will address
the continuous production aspects of the plant, including
air and gas flow considerations.
UCG technology at the Yerostigaz plant is highly valued.
Yerostigaz UCG exploits and extracts the energy potential
from unrecoverable coal, as an alternative to traditional mining
methods. There is significant interest in Yerostigaz from other
resource owners around the world. The high demand for this
technology demonstrates the significant value that Linc Energy
has and will further gain from this strategic asset, now
and in the future.
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