Alter NRG Corp (C-NRG) - News Release
Alter NRG expounds on gasification project in Alberta
2008-07-22 08:12 MT - News Release
Shares issued 56,061,218
NRG Close 2008-07-21 C$ 4.39
Mr. Mark Montemurro reports
ALTER NRG ANNOUNCES CANADA'S FIRST COAL TO LIQUIDS PROJECT
Alter NRG Corp. has filed a public disclosure document outlining further project details on the proposed development of Alter NRG's coal reserves in the Fox Creek area of Alberta into diesel fuel and naphtha. The company is excited to be advancing Canada's first coal to liquids (CTL) with carbon dioxide (CO2) capture project that will provide a clean energy solution for alternative oil production and will use proven processes that have been in commercial operation worldwide for more than 30 years.
The Alberta Energy Research Institute has stated, "Gasification is, by far, the cleanest coal/coke conversion technology." Combined with the planned carbon dioxide capture for use in enhanced oil recovery, the company believes this project is an environmentally attractive energy solution for the province. The company has initiated the regulatory process and a strategic partner selection process, and the project is expected to be operational as early as 2014.
"By filing this public disclosure document, we take an important step toward making this initiative a reality," said Mark Montemurro, president and chief executive officer of Alter NRG. "Alter NRG is concerned about reducing the energy industry's carbon footprint. As the first coal-to-liquids project in Canada, the project will be a significant, long-term contributor to Alberta's economy as well as set a precedent for clean energy solutions."
Further details on the project are outlined below and a copy of the public disclosure document in its entirety can be found on the Alter NRG website or on SEDAR.
About the project
The project will involve the extraction of Alter NRG's Fox Creek coal resource, and through gasification and other processes, will produce diesel fuel and naphtha. Alter NRG's coal reserve contains enough coal to produce 40,000 barrels per day of liquid fuels, such as diesel, for over 50 years.
Alter NRG holds the lease to four Crown coal resources located to the north of Fox Creek township. The project is located approximately 27 kilometres northeast of the town of Fox Creek, Alta., approximately midway between Edmonton and Grande Prairie. The company has ownership of 468 million tonnes of proven plus probable coal reserves and 876 million tonnes of coal resource (both reports have been previously reported in Stockwatch on Dec. 17, 2007, and are filed on SEDAR). The company proposes to mine two blocks of Alter NRG's coal (approximately 301 million tonnes of coal reserve) using established surface mining technology, and then through commercially proven gasification and other processes, to produce high-quality diesel fuel and naphtha.
Alter NRG anticipates that capital investment for a 40,000 bbl/d project will be approximately $4.5-billion (2007 dollars) with an eventual operational work force of 400 or more full-time jobs, excluding added employment in support services. Alter NRG intends to develop the project in at least two stages, with the first stage potentially producing upward of 20,000 bbl/d. Alter NRG believes the project will have a significant, long-term positive effect on the local, regional and provincial economies. The capital cost and mine life have been provided for the purpose of the public disclosure document and a feasibility study has not been completed, and there is not yet certainty that proposed operations will be economically viable.
Alter NRG's Fox Creek coal asset was partly chosen for its proximity to infrastructure and mature oil fields that would benefit from enhanced oil recovery (EOR) by the injection of CO2. The project intends to seek sales opportunities for produced CO2 into the anticipated EOR market. In the event that not all CO2 can be disposed of in this way, the project plans to sequester remaining CO2 in deep saline aquifers or in depleted oil or gas pools. More than 85 per cent of the CO2 produced in the proposed project will be captured for sequestration.
The coal can be mined at a rate of 9.2 million for over 50 years to produce 40,000 bbl/day. The gasifier will convert solid coal feedstock into synthesis gas (primarily a mixture of carbon monoxide and hydrogen, commonly referred to as "syngas"). The syngas will be further processed into liquids, with a planned emphasis on low-sulphur, high-cetane diesel, but also co-produce naphtha. This part of the project will also use established technology which is commonly referred to as coal to liquids, or CTL, and has been commercially employed in this way for more than 30 years.
Gasification allows for the removal of harmful contaminants from the coal, which makes this an environmentally responsible process for producing cleaner energy. The Alberta Energy Research Institute has stated, "Gasification is, by far, the cleanest coal/coke conversion technology." With gasification combined with CO2 sequestration, this project becomes an environmentally attractive energy solution for the province.
The markets for the key outputs, diesel, naphtha and CO2, located within the province of Alberta, are well developed, and are expected to experience continued growth.
The high-cetane, low-sulphur diesel provides Edmonton area or other upgraders and refineries with an opportunity to blend the Fox Creek diesel product with lower-quality diesel thereby increasing the volume and average value of diesel products.
Naphtha is used in the oil sands industry as a diluent for bitumen. Addition of diluent assists in making the bitumen transportable in common-carrier pipelines. The current tight supply of this commodity is already fostering plans for offshore imports, and demand for naphtha will continue to grow as oil sands production increases.
The gasification process also has the ability to capture a relatively pure stream of CO2 suitable for sequestration or EOR opportunities in the local area.
The electrical power produced from the project is expected to meet the power requirements needed to run the coal mine and CTL operations. Surplus power, if any generated, will be marketed in Alberta through the existing electrical grid system.
The project is expected to meet or exceed all applicable existing Alberta and federal environmental standards. Progressive land reclamation activities will be carried out closely behind active mine operations to ensure that surface disturbance associated with the development is kept to a minimum.
Carbon dioxide sequestration
One of the main advantages of the gasification process is the ability to capture the CO2 produced in a relatively pure, sometimes called "capture ready" form, and Alter NRG intends to capture approximately 85 per cent of the project CO2 produced. Alberta has undertaken a number of studies to further understand how industries can capture and store CO2 in deep saline aquifers or use it in enhanced oil recovery (EOR). EOR has been identified as a means to not only store CO2 emissions but also as a potential value-added product. Recently, the Alberta government has announced a $2-billion fund to advance projects that include CO2 capture and EOR which illustrates the government initiative behind this type of project.
Alter NRG has undertaken an assessment of oil pools that would be amenable to use CO2 for EOR within a 100 km (65-mile) radius of the project. The criteria used in the assessment to determine EOR amenable pools included specific reservoir characteristics such as depth and original oil in place (OOIP). The 100 km (65-mile) radius was used to reduce the scope and cost of pipelining to suitable sites.
Based on these criteria, a total of 30 pools was identified that are suitable for EOR, with OOIP of 7,642 million barrels of oil, and ability to store over 228 million tonnes of CO2. Alter NRG estimates that total CO2 required for EOR in these 30 pools will amount to an average demand of approximately 27,000 tonnes/day over the economic life of the pools (around 20 to 30 years). This is somewhat more than the project will produce during that period, and the project can provide a preferred source of CO2 to the oil producers in the area.
Project time frame
Engineering and environmental studies are planned to be carried out for the remainder of 2008 and all of 2009. These studies will form the basis of the environmental impact assessment for the project. Submission of the project regulatory application is targeted for the end of 2009. It is anticipated that submission of the application will be followed by an 18-month regulatory review period. Construction will begin soon after receipt of all necessary approvals.
Alter NRG plans to start up mining operations by the fall of 2013 to prebuild coal supply for start-up of the CTL plant in early 2014. The CTL plant will require a longer engineering design and construction period than the mine.
The company initiated a strategic partner selection process in early 2008 and expects to provide further details on the development pathway and financing plans at the conclusion of the process in the later part of 2008.
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