Carbon Energy (ASX:CNX, OTCQX:CNXAY) is pleased to announce the Company has received the first milestone payment from its UCG project in Inner Mongolia, China, which represents the first ever commercialisation of its keyseam Underground Coal Gasification (UCG) technology.
The $725,000 received today is the first instalment of a series of payments totalling $8.25 million in Service and Technology fees relating to Stage 1 of the project.
The payment has triggered the commencement of technical services and engineering works by the Carbon Energy team for the delivery of the PCP in accordance with the scope of works agreed with project partners Zhengzhou Group(refer ASX Announcement 19 August 2013). A PCP is required at each potential UCG site to confirm the modelled process variables prior to the design and construction of the commercial UCG facility. Carbon Energy CEO Morné Engelbrecht said: "Receiving this payment is a significant milestone for Carbon Energy. It represents the start of the first steady income stream for the Company and the first ever commercialisation of our keyseam UCG technology. It demonstrates that Carbon Energy’s UCG technology is considered a viable and environmentally safe solution to energy security concerns."
In addition to the $8.25 million to be generated through Engineering Services and Technology License Fees for Stage 1, Carbon Energy will also receive an additional $7 million in Technology Licence Fees paid on achievement of milestones over Stages 2 and 3 and further Engineering Services fees (amount to be agreed). Once first revenues from the sales of project syngas are generated, Carbon Energy will also receive an ongoing royalty revenue stream.
Carbon Energy geologists and engineers have been on-site in Inner Mongolia to oversee drilling and test work for characterisation of the PCP site. A drill rig is operating at the site and coal characterisation drilling is underway. The resulting data will provide input into panel design by the Carbon Energy team.
Carbon Energy CEO Morné Engelbrecht said: "It is vital to the success of the PCP that Carbon Energy geologist and engineers are on the ground to oversee site characterisation activities. Site specific characteristics will be identified through our unique panel design criteria to ensure the integrity of the panel design and so ensure the most efficient, consistent and safe conversion of coal to syngas."
"We can be confident about the future of a global UCG industry and Carbon Energy’s technology as a global leader in that industry. We are underpinning that leadership role by moving into the delivery phase for this project with revenues having commenced. At the same time we are developing a rehabilitation plan for our Bloodwood Creek UCG site in Queensland and developing a plan for the delivery of our UCG project in Mulpun, Chile."