Underground coal gasification (UCG) has been around for a very long time, but just as it was about to surface as a potentially commercially viable alternative to traditional coal mining, the shale revolution stole the limelight.
But now we’re back to coal gasification again, because the new drilling technology that brought us the shale boom can be applied to UCG as well. Some even think it could outpace coal-bed methane in 2015 and have a palpable impact on global oil prices if it were to replace oil significantly in the US and China.
Underground coal gasification—also known as in-situ coal gasification or ISCG--is the process of converting raw coal that is still in the ground into a combustible gas that can be used for high value products like industrial heating, power generation, fertilizers or other chemical feedstocks, and manufacturing of syngas (synthetic natural gas or diesel fuel) or hydrogen.
Syngas—a mixture of hydrogen, carbon monoxide, carbon dioxide and methane--contains about 80% of coal’s initial energy content.
How It Works
As opposed to surface gasification, underground coal gasification uses the coal cavity itself as the reactor for the process. This involves the drilling of two wells into the coal bed. The first well is for injecting oxidants such as water or oxygen mixtures. The coal left at the base of the first well is heated and separated into syngas, which is drawn out of the second well.…
Underground coal gasification (UCG) has been around for a very long time, but just as it was about to surface as a potentially commercially viable alternative to traditional coal mining, the shale revolution stole the limelight.
But now we’re back to coal gasification again, because the new drilling technology that brought us the shale boom can be applied to UCG as well. Some even think it could outpace coal-bed methane in 2015 and have a palpable impact on global oil prices if it were to replace oil significantly in the US and China.
Underground coal gasification—also known as in-situ coal gasification or ISCG--is the process of converting raw coal that is still in the ground into a combustible gas that can be used for high value products like industrial heating, power generation, fertilizers or other chemical feedstocks, and manufacturing of syngas (synthetic natural gas or diesel fuel) or hydrogen.
Syngas—a mixture of hydrogen, carbon monoxide, carbon dioxide and methane--contains about 80% of coal’s initial energy content.
How It Works

As opposed to surface gasification, underground coal gasification uses the coal cavity itself as the reactor for the process. This involves the drilling of two wells into the coal bed. The first well is for injecting oxidants such as water or oxygen mixtures. The coal left at the base of the first well is heated and separated into syngas, which is drawn out of the second well.
There are two different UCG methods that have shown promise so far and appear to be commercially viable. The first involves the drilling of two vertical wells with pathways between them. The second method involves the creation of inseam boreholes using oil and gas technology that allows for a mobile injection point throughout the process.
The process of coal gasification removes the sulfur dioxide, mercury and carbon dioxide from the "syngas" before it is combusted. For each unit of coal input, 60% of it is rendered into pure energy. The dirtiest parts of the coal—mercury, arsenic and lead—remain underground. The process is compatible with carbon capture. The greenhouse gases captured in the process can be piped back into the coal seam and either stored there or sold to oil producers who inject it into wells to boost enhanced oil recovery (EOR) rates. Carbon dioxide (CO2) can also be stored in the cavity after the gasification process.
It sounds good; so what do environmentalists think? The jury is still out on this, there is some cautious support for the idea, but an equal amount of negative sentiment. Certainly, the environmental footprint is smaller than traditional coal mining, and syngas is definitely cleaner than raw coal. This is the less dirty side of coal, but it’s still comparable to hydraulic fracturing because the process uses similar horizontal drilling methods and usually relies on chemical injections that could contaminate water supplies. The ability to capture carbon will be the key: without this the sheer amount of carbon emitted in the UCG process would be catastrophic.
And there have been a few scares with UCG. In 2010, UCG experiments in Australia saw two of three coal gasification plants shut down, with one in Queensland actually exploding after five days of operation. Reports also say they found carcinogens in the ground water.
The general consensus among environmentalists is that large-scale UCB has not been tested enough, and the greatest concern is that some of the new projects coming on line are too close to urban areas.
Real Potential
Does it really have the potential to rival natural gas and conventional crude oil, thereby heralding in the resurgence of coal? Duke Energy thinks so, and it just started operations at a massive coal gasification plant in Indiana (see more below).
First, some background: UCG was first employed in London in the 1860s to light the city’s streets, courtesy of Sir William Siemens. But it was an expensive process that didn’t catch on anywhere else. It’s resurfacing now because of higher oil and gas prices and the belief that new technology that led to the fracking revolution and the shale boom in the US could reignite coal gasification as well.
Because oil and gas prices are so much higher today, it’s more economically viable to extract energy from underground coal gasification. And as renewable energy avenues are struggling to be competitive, syngas has a chance. Basically, the playing field has been leveled.
The key here, though, is commercial viability, and it will work best in countries with massive coal reserves and limited oil and gas reserves. It will also work best in countries that are already realizing new technologies like carbon capture and carbon storage, enhanced oil recovery (EOR) and gas-to-liquids. Coal gasification works with all of these new processes.
Who’s Doing It?
China
Some estimates hold that China could invest up to $160 billion in coal gasification by 2020, with state-run companies Sinopec and PetroChina leading the way. For the past two years, they’ve been working to increase production of syngas from coal. Right now, Sinopec is working on two massive cross-country pipelines to transport syngas. By 2015, China could be producing 16 billion cubic meters of syngas per year, and 55 billion cubic meters by 2020 (6% and 14%, respectively of China’s gas demand).
China is also investing in coal gasification in Ukraine, with a $3.65 billion deal with China Development Bank Corporation.
The US

In the US, investment in coal gasification isn’t expected to reach the levels of Chinese estimates, but there is still significant interest in the process. Here, Duke Energy (DUK) is the present-day pioneer, and has recently finished construction on a massive coal gasification plant in Indiana.
Duke’s integrated gasification combined-cycle (IGCC) Edwardsport Generating Station in Knox County, Indiana, began commercial operation on 10 June. The plant has a 618-megawatt capacity and is being touted as one of the world’s cleanest coal-fired power generating facilities.
This is the first time the technology has been used on this scale, so the plant is expected to build up to its long-term level of availability over the next 15 months. It will provide Indiana customers with power for decades.
Another major player on this scene is Peabody Energy (BTU), which is the largest coal producer in the US. Two years ago, BTU shelled out $2.5 million to acquire 29 coal leases in Wyoming where the coal is too deep for traditional mining so is ripe for UCG.
A third venue is Illinois, where the US Department of Energy is pitching in $1.1 billion (80% of the project cost) for a coal gasification project that would use oxygen to burn the coal to eliminate greenhouse gas emissions.
Other companies are also jumping on the syngas bandwagon, including Honeywell, Shell and General Electric.
The UK
Last year, the UK began to toy with coal gasification very seriously, issuing a flurry of licenses all at once—18 in total—for UCG plants. The sweet spot here is Swansea Bay, which is believed to have as much as 1 billion tons of coal under the water.
Canada
Coal seams are deep in Canada, so this makes it ripe for UCB. Here, Swan Hills Synfuels is the big player, currently working on a $1.5 billion coal gasification plant in Whitecourt, Alberta. The coal seam is about 4,700 feet deep.
Australia
Australia’s Linc Energy (LNC) is operating a demonstration plant in Chinchilla, Queensland, and has formed a joint venture with a Chinese company to develop gasification projects on the mainland. The Chinchilla site has been operational since 2000. Carbon Energy also completed a 100-day commercial scale study in Bloodwood in 2008.
New Zealand
Solid Energy in April this year fired up its $22 million underground coal gasification (UCG), which is expected to run for up to 18 months in the pilot phase.
India
India has some very ambitious coal gasification dreams, but as yet they haven’t gotten too far. In February, India announced plans to collaborate with South Africa on UCB technologies and projects, but nothing concrete has been hashed out just yet because they’re still working on a new policy for coal gasification, which they expect to come out this year. For now, India is about a decade behind China in this game, but just as desperate for the extra energy that would come from otherwise un-minable coal.
Bottom Line: We understand the environmental concerns here, but we’re increasingly fired up about coal gasification now that it has been proven that it is compatible with carbon capture. And Duke Energy’s massive debut onto this scene and its declaration of commercial viability just less than two weeks ago lends even more promise to UCB.