JOHANNESBURG (miningweekly.com) – A project that will supply underground coal gas from a deep, stranded coal deposit in the Free State to an independent power producer (IPP) is at an advanced stage of planning.

Former Sasol executives Johan Brand and Eliphus Monkoe, who bought 1.4-billion tons of coal near Theunissen from BHP Billiton, have teamed up as African Carbon Energy (Africary), which has been operating since 2007.

A memorandum of understanding has been signed with a still-to-be-named IPP, which will build, own and operate a 50 MW combined-cycle gas turbine (CCGT) power plant and buy the underground coal gasification- (UCG-) produced syngas as a fuel gas from Africary.

“We will be transforming the face of coal mining and electricity production in South Africa,” Brand told Mining Weekly Online in an interview on the sidelines of the Fossil Fuel Foundation UCG workshop on Wednesday.

The UCG process, which State-owned power utility Eskom has been researching for six years at Majuba, unlocks the energy potential of deep coal that would otherwise go unmined.

Africary, which is aligning itself to take advantage of Eskom’s next request for proposals from IPPs for baseload power supply, may become the world’s first commercial UCG operator of a moderately sized venture.

The two entrepreneurs have self-funded current activities and expect a bankable feasibility study to be in place by year-end for what could be a R1-billion project.

“We are able to compete with coal-fired power generation without the need for any rebates,” Brand told Mining Weekly Online.

The average annual selling price of Eskom electricity has risen from 12.98c/kWh in 2001 to 60.66c/kWh in 2012.

“With the increase in tariffs, electricity generation by CCGT is cost competitive,” said Brand, who has brought back environmental solutions from Europe, where he also serves as technical director for a company that is involved with UCG technology in Hungary.

Africary has bought farms within the large 300 km² Theunissen concession for the siting of the proposed CCGT plant.

The coal seams are at depths of 350 m and 450 m in an area where subsidence is legally permissible.

“We have the perfect storm. The South African electricity price has doubled in the last three or four years to the right pitch for us implement this technology and hopefully we can make UCG far cheaper in the future. But for now, the economics looks great for us, even at this small scale,” said Brand, adding that the potential to use UCG was prevalent across Southern Africa in countries including Botswana, Zimbabwe, Mozambique and Namibia.

The region’s lack of a gas economy was a constraint, however.

“There’s no pipeline for me to feed gas into and get paid at the other end. One of the low hanging fruits in South Africa is electricity supply, for which there are high prices and strong demand.”

In countries where electricity was in adequate supply, UCG could be taken along the Sasol-type gas-to-liquids and chemicals route.

“I believe that once UCG is seen to be commercial, opportunities will arise for poly-generation, using the gases conducive to making diesel, petrol and chemicals and generating electricity with the rest,” Brand said, cautioning that UCG gas should not be confused with shale gas or coal-bed methane.

Oxidants are delivered through an injection well for in-situ conversion of the coal to synthesis gas, which is a fuel feedstock for power generation.

This method makes use of directional drilling techniques proven in the oil and gas industry and has numerous environmental, safety and financial benefits.

It does not require the scale of infrastructure usually associated with mines and replaces mechanical mining with chemical mining, changing coalfields into gasfields.

Africary's mineral rights include all coal exploration licences previously owned by BHP Billiton.

The rights cover a 7 km² northern coal resource area, a 173 km² southern coal resource area and a 122 km² western section.

The occurrence of the Theunissen deposit is well known, as numerous boreholes have intersected coal during exploration for gold over the years.

The former Gencor company, Trans-Natal Coal, sunk 534 boreholes, which have been partially electronically captured to enable the preliminary modelling of the coalfield.

Prospecting for coal started in 1980 and a drilling programme at a borehole spacing of one borehole for every 100 ha was completed.

Malatleng Mining conducted a drilling programme on behalf of BHP Billiton during 2008 and 76 boreholes were drilled, logged and sampled on the tenements.

The coal tonnage in the target area is estimated to be about 100-million tons.

“If we’re successful with the next Eskom power purchase agreements for baseload, we should see electricity coming out of this project some 18 months later.

“The barrier is not making gas, Eskom has been doing that at Majuba for six years. We don’t have to prove the technology of syngas because Sasol has been doing that for 50 years.

“It is now a question of how to turn that syngas into money and being commercially viable,” Brand said.

At one stage he believed that Hungary might implement commercial UCG, but found a lack of appetite for European investment.

A mechanical engineering graduate from Pretoria University, Brand stumbled on UCG when investigating safer coal mining methods.

“UCG not only turned out to be safer, but also more economical and more efficient,” he told Mining Weekly Online.

Unlike Eskom at Majuba, Africary plans to incinerate its waste condensate, which is made up of 90% water and 10% hydrocarbons.