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UGC another opportunity for North Sea

UGC another opportunity for North Sea
As this column was being written, world leaders were meeting in Copenhagen to try to agree targets for reduction in greenhouse-gas emissions.

As this column was being written, world leaders were meeting in Copenhagen to try to agree targets for reduction in greenhouse-gas emissions.

Irrespective of the outcome, however, it is clear that even complying with the targets the UK Government has already set itself will require some major changes in the way we generate energy.

One of the many clean technologies currently attracting attention is underground coal gasification (UGC), which is the gasification of coal in situ, which is achieved by drilling bore holes into the coal and injecting water/air or water/oxygen mixtures.

This produces a high-quality synthetic gas which can be further processed to provide fuels for power generation, industrial heating, transport, fertilisers and chemical feedstocks.

The UK still has large reserves of indigenous coal, both onshore and offshore beneath the North Sea, which has the potential to provide significant energy supplies.

However, traditional mining methods are unsuitable for offshore extraction, with onshore mining attracting the wrath of many an environmentalist.

Combining extraction and gasification in a single process is said to result in 25% less carbon emissions than traditional coal-mining techniques and avoids much of the environmental impact of traditional mining as all the solid wastes remain underground – only clean gas is extracted and coal-bed methane is captured at the same time.

More importantly, the gas is “carbon-capture ready”, with the advantage that CO can be stripped out relatively easily. And when the operations are offshore, they may be conveniently located for storage in depleted oil reservoirs or saline aquifers.

As a result, CO sequestration is likely to be considerably cheaper than estimated for traditional coal-fired power stations. It may also be possible to re-inject the gas back down into the coal seams, which is thought to be easier, potentially, than a full-scale carbon-capture and storage model. This technology has not yet been proved, although initial testing in Australia, China Japan, the US and Poland has provided some promising results.

The Coal Authority (under the Coal Industry Act 1994) has recently licensed Clean Coal Limited (a UK/US company) to drill some experimental wells at five offshore sites: Canonbie, Dumfriesshire, Cromer, Sunderland and Swansea.

The work is expected to take 12-18 months and, according to a statement by Clean Coal, commercial operations could begin by 2014-15. The company estimates that UCG technology could provide 3-5% of the UK’s total future energy requirements.

Despite Clean Coal’s projections, there are some significant challenges to be overcome.

Firstly, it is clear that, in order for UCG to be truly “clean”, CO capture and storage, either into the coal seam itself or into an alternative site, will form a significant part of the process.

The regulation of CO storage is still being developed and there remain a lot of questions about how this will operate in practice, particularly around its interaction with ongoing oil&gas production. New infrastructure will need to be constructed as the nature of the gas means that it is unlikely to be possible to transport it using the existing offshore pipeline network while this remains in use for natural gas (although redundant pipelines could potentially be reused).

In addition, careful environmental management will form a key part of any project to ensure that leakage does not occur into surrounding groundwater. Moreover, all groundwater surrounding the process must be permanently declared unsuitable for future irrigation or animal consumption.

Considerable investment in infrastructure will be needed to bring these projects onstream, with Clean Coal itself estimating that each project could cost circa $250million.

This could present a major opportunity for the offshore industry as much of the work involved will use oil&gas skills such as directional drilling and pipeline construction.

However, if this is to be brought to fruition, it will require the development of an appropriate regulatory regime for extensive offshore UGC operations – while the licensing regime under the Coal Industry Act 1994 applies to the Continental Shelf, it is not clear whether the Coal Authority has the expertise and processes in place which would be necessary for the grant of licences for significant offshore operations.

Nor is it clear whether Crown Estate leases will be required, as with gas storage and CCS operations. In addition, it will need a clearly understood CO storage regime and the development of an appetite among oil&gas companies to get involved in CO storage – which, so far, has seemed slow in coming.

However, there is plenty of scope for optimism as 2010 starts to unfold.

Penelope Warne is head of energy at CMS Cameron McKenna, which has 55 offices in 24 countries

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