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Linc energy: developing oil, gas and coal.

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Although Linc Energy has only been active in Alaska for the past two years, the Australian company is already making inroads in the oil and gas industry. A world leader in underground coal gasification technology, it is also on the cusp of bringing a new industry to the state which could affect Alaska's long-term energy future.

Headquartered in Brisbane, Queensland, Australia, Linc Energy was incorporated in 1996, and began operations in Alaska in 2010. The company has 450 employees worldwide and a team of 15 people in the 49th state. There are two divisions within Linc Energy, both of which operate in Alaska: the Clean Energy Division, which is comprised of UCG exploration and development, and the Oil and Gas Division.

Using UCG to Harvest Stranded Resources

According to Linc Energy Alaska General Manager Corri Feige, the amount and quality of Alaska's coal resource was a huge draw for the company, which specializes in converting underground resources into energy and synthetic fuels. As the owner of Yerostigaz, the world's only commercial UCG operation, Linc Energy produces commercial UCG synthesis for power generation in Uzbekistan. The company has also constructed and commissioned the world's only UCG to GTL (gas to liquids) demonstration facility, which is located in Queensland, Australia.

"Alaska is the Saudi Arabia of coal, so considering that Linc Energy's business is converting underground coal gas to power, synthetic diesel and synthetic jet fuel, it makes the state very very attractive to us," Feige says. "The resource position is very advantageous--the depth of burial and the rank of coal are at the 'sweet spot' for UCG processing using Linc's technology."

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Linc Energy holds exploration licenses on 167,000 acres of Alaska Mental Health Trust Authority lands, two of which are located on the western shores of Cook Inlet and one in Interior Alaska near Healy. According to Feige, all three areas are currently being explored for depth and characterization of coals for UCG development.

"There has been a lot of offset drilling done in the region, so Cook Inlet coals are well known," Feige says of the estimated resource. "There are 20- to 30-foot thick coal seams, and we know that these are pervasive throughout the region. The rank is sub-bituminous, which is perfect for gasification.

"On the west side of the inlet in just one small area, we have calculated that there is enough coal to run a power plant or liquids facility for more than 50 years," she says.

Global Leader

Considered a global leader in the UCG industry, Linc uses proprietary technology to recover stranded resources, such as those found in the Cook Inlet area. UCG transforms underground coal into a high quality synthesis gas of carbon monoxide, hydrogen and methane as heat and oxygen are introduced. All of the company's technologies were developed at its Chinchilla facility in Queensland.

"We drill an injection well and a production well, and after we drill to the coal seam, we connect the two wells mechanically with a horizontal bore hole," Feige explains. "Using proprietary technology, we are then able to gasify the coal in place, harvest the product (known as syngas), and use it to generate power or to produce synthetic diesel or synthetic jet fuel."

According to Feige, bringing UCG technology to Alaska will not only provide benefits to the company, but to the state as a whole. "With UCG development, we're bringing a new industry to the state, which will positively impact Alaska's energy future," she says. "We are able to harvest a stranded resource that is too deep to mine with conventional methods and to convert it to power and transportation liquids, which Alaska very much needs in large quantities."

The UCG exploration program will continue year-round. The company's upcoming plans include the drilling of additional holes on the west side of Cook Inlet and in the Interior. Linc recently commissioned and had constructed a fit-for-purpose rig for UCG drilling in Alaska to make its exploration program more effective.

"We could contract small core rigs, but for the kind of UCG drilling we do to be efficient, we needed a fit-for-purpose rig built," Feige says. "This rig, which will be the only one of its kind in Alaska, is specifically built to handle drilling conditions in basins, where the thick top layer of glacial gravel creates a very challenging drilling scenario."

The rig is being constructed by Buffalo Custom Manufacturing in Abbotsford, British Columbia. Modules are being transported from Canada and the Lower 48 to Wasilla, where the final assembly was to be completed before the rig was commissioned in early August.

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Exploring for Oil and Gas

On July 6 last year, Linc Energy purchased a controlling interest in 19,358 acres of federal and state oil and gas leases at Umiat, located in the National Petroleum Reserve-Alaska on the North Slope. "We have very aggressive plans for this area, which include producing gas and oil in five to seven years," says Feige of the site, which is estimated to have 200 million barrels of recoverable reserves.

While the company originally planned to begin exploratory drilling in the winter of 2011, they instead decided to defer drilling until 2012. "Last year, snow levels on the tundra were very low, which meant a very late tundra opening," Feige says. "We needed to build a 100-mile snow pack access road, which we were not able to construct in time for the season.

"By the time Linc purchased Umiat in July, the majority of suitable rigs were also already under contract," she adds. "The combination of no rigs and reduced snow levels would have delayed construction of the road and would have prevented us from drilling until close to the end of the season, so we decided that it was better to defer the project for a year."

On Jan. 4, Linc Energy signed a rig, the Kupik 5, which will be used to drill up to five holes at the Umiat site. "We will install a disposal well and drill a series of vertical holes and one horizontal hole, and perform float tests on those," Feige says. "We will also be drilling an exploration hole deeper than the known reserve to see what's there."

Linc Energy is also working on developing the Angel Unit in Cook Inlet; plans are currently out for public comment. "The Angel Unit is just under 2,000 acres of conventional natural gas play, and once approved, our plan is to collect 2D and 3D seismic this November and December," Feige says. "We hope to drill in year two, and develop the resource in year three."

While Linc Energy doesn't have firm budgets in place for each project, in total, the company plans to spend in excess of $40 million in FY2013 for all gas, oil and UCG projects. "Between the Umiat development, oil and gas in Cook Inlet and our UCG program, Linc Energy is absolutely committed to Alaska for the long haul," Feige says.

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Moving Forward

While many other natural resource companies are expressing concern that their investment in Alaska is being limited by the state's unresolved oil and gas tax issues, Feige says that this is not as large a concern for Linc Energy.

"As a small, independent operator with nothing in production yet, what the Legislature is doing is not really impacting our immediate near-term plans," she says. "But we are being affected by the loss of services and a skilled labor pool. Because of the investment climate, people are moving to more competitive regions in the Lower 48, which is driving our costs up. Companies have to increase wages to keep workers here to compete with markets in Texas, North Dakota and Oklahoma.

"What's most important to us is to see Alaska with a stable, competitive, investment-friendly business climate," she says.

As Linc continues to move forward in the 49th state, Feige says that they will continue to promote the company ideals that have made them so successful. "Linc Energy is a very innovative company--it encourages out-of-the-box thinking in its approach to projects, technology and problem-solving. This dynamic is driven from the board and CEO level through the operations level and the project level. As a result, we have created technologies on the UCG gas-to-liquid side that have made us a world leader.

"Our corporate culture demands technical excellence and innovation, which is a positive thing for any state where Linc sets up operations," she adds. "We are very bullish on Alaska, and on the effect that we can have on the state's energy future. Our innovation sets us apart, and sets us up for success."

Vanessa Orr is a writer living in western Pennsylvania.
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Title Annotation:OIL & GAS
Comment:Linc energy: developing oil, gas and coal.(OIL & GAS)
Author:Orr, Vanessa
Publication:Alaska Business Monthly
Geographic Code:1U9AK
Date:Sep 1, 2012
Words:1456
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