The oil and gas industry has been kicking its heels up in Brisbane this week at the annual four-day bash of the Australian Petroleum Production and Exploration Association (APPEA).

Apart from the well-oiled bonhomie of the delegates at various black-tie and not so black-tie events around town, there has been lots of discussion about the big issues confronting the industry.

The standout issue has been the gas crisis in the eastern states.

And so it should be given energy intensive industrial users of gas up and down the east coast reckon the viability of their operations is threatened by the high cost of gas, and an inability to secure long-term supplies.

They have a point. Gas prices in the eastern states have surged to a record $10 a gigajoule (GJ) compared with $3.50/GJ in Western Australia.

It is scandalous stuff and will only be resolved if new supplies are developed, or if LNG import terminals are developed, which is truly ironic given Australia now vies to be the biggest LNG exporter in the world from projects in WA, Queensland and Northern Territory.

While the arguments go back and forth at APPEA, and the heat is turned up on the Federal and State governments to fix the problem, in-situ gasification (ISG) specialist Leigh Creek Energy (ASX: LCK) has set out to become part of the solution at its namesake project in South Australia.

LCK was a 12c stock at the start of the year but has since moved to 29c – after touching 41c in March – for a market value of $160m.

The rising interest in the stock is a response to some key milestones being achieved earlier in the year, and last week’s strong hint from the company that it was close to securing the all-important gas purchase agreement needed to underpin a development, as well as securing a strategic partner.

Syngas is go

The shift for LCK came in late March when the Leigh Creek gas resource was independently certified at 1,153 petajoules of gas on a proven and probable basis, making it one of biggest uncontracted gas resources in the eastern states gas market.

The certification followed Leigh Creek’s successful operation of a pre-commercial demonstration plant that confirmed that a sufficient quantity and quality of synthesis gas (syngas) could be produced at the project to support commercial production.

The demonstration facility achieved a peak flow rate of 7.5 million cubic feet a day, one of the highest for air-blown syngas projects achieved anywhere in the world.

It was also well ahead of the 1mcf a day rate the company deemed necessary to have a commercial proposition on its hands.

The energy project is based on the underground gasification of coal at depths below 500m at the now closed Leigh Creek coal mine, 550km north of Adelaide.

Also referred to as underground coal gasification (UCG), ISG converts coal into syngas which contains methane, hydrogen, carbon monoxide and nitrogen.

Syngas can be used to produce electricity directly or it can be refined further into a variety of products including natural gas, ammonia, urea or methanol.

Problems with earlier high-profile ISG projects in Queensland have raised environmental concerns about the process.

But in an assessment report on the Leigh Creek project released by the SA government, it was stated that “it was unreasonable to draw an association between the Queensland projects due to material differences related to the site suitability, operational practices, and the level of regulatory oversight.’’

The report concluded that the Leigh Creek site was one of strongest opportunities for low risk commercial UCG anywhere in the world.

The company’s focus since the scale of ISG resource at Leigh Creek was confirmed has been to move towards its commercialisation. The market is now hanging out for advances on that front in the months ahead.