While the Syngas Board continues to hold a positive long term oil and oil equivalent product market outlook, the Company has responded to the conditions presented within the current business environment by shifting the focus away from large upfront capital investment, longer timeframe to cashflow and ‘new to Australia’ clean coal technology based liquid fuel project developments towards shorter term development cycle, Renewable/clean energy project developments generating, supplying and selling power. These projects present more modest upfront capital requirements (depending on scale, upwards of A$5 million) and potentially shorter (12 to 24 month) timeframes to initial cashflow. As a result they hold greater investment and development appeal within the current market. 

Through Syngas’ wholly owned subsidiary BioSyngas Pty Ltd (BioSyngas), a primarily biomass feedstock based Renewable/clean power generation, supply and sale business was further developed during the year.

Several significant shifts are taking place in the Australian Renewable/clean power industry and in terms of power sales generally which underpin this shift in Syngas’ focus:

1. There is an acknowledgement by Governments around the world within the current capital constrained/restrained and risk averse business environment that investment in power distribution (i.e. poles and wires or underground cable) to meet everyone’s requirements will be increasingly difficult to both justify and fund.  Investments in power networks where optimal opportunities to stimulate economic development and create wealth, for example in corridors or nodes, will need to be a focus. This has created opportunities for directly connected power generation facilities to be developed and supply lower cost power to customers in certain locations.  These types of developments are referred to as “distributed”, “behind the meter” or “embedded plants” around the world.
2. Power prices in Australia are widely acknowledged as increasing significantly in both nominal and real terms and this trend is expected to persist, driven by several factors.  For example, investment is required in distribution network extensions and upgrades to meet ongoing population growth and spread across Australia. Regional areas, distant from centralised generation sources, are where significant investments are required. In some regional areas power prices are forecast to increase on average year-on-year by 7% over the next five years.
3. There simply are more efficient ways of handling the significant quantities of energy containing biomass waste being sent to landfill annually in Australia. Biomass waste, excluding industrial waste, comprises 15% of total land fill tonnages receipted per annum. Large quantities of wood waste are also generated in the forestry industry and in downstream value adding in forestry e.g. timber production and veneering. In the past much of this waste has been used in pulp or particle board production. An area which is becoming increasingly competitive with logistics costs for Australian companies to access key markets presenting disadvantages. Large quantities of material suitable for BioSyngas’ projects are, as a result, becoming available.
4. There is growing community awareness around the safety benefits of good forest floor/biomass management and practices as a result of major forest fires in recent years. These practices lead to greater quantities of material being collected and available for value adding.
5. The carbon tax passed by the Australian Federal Government in November 2011 was implemented on 1^st July 2012. Two hundred and forty eight companies/organisations have been identified as likely to produce in excess of 25,000 tonnes of carbon per annum in the 2012/2013 tax year and as a result likely to be subject to a A$23/t carbon tax.  This is driving, as was intended, a focus on lower carbon emission power generation options.
6. There have been several significant technology advances that have impacted the commercial viability of smaller biomass to power projects over the past ten years. Capital costs for small scale equipment have decreased as a result of manufacturing cost improvements and there have been improvements in the reliability and efficiency of operation of smaller scale equipment e.g. gas turbines.  In addition there is a growing body of design, engineering, manufacture and construction knowledge as well as operating experience around the world which Syngas’ biomass to power business in Australia will benefit from.

These significant market shifts and developments are leading to highly favourable shorter term business opportunities being created for Syngas to pursue within the current markets while the Company continues to maintain and consolidate its Coal to Liquid position and expertise.

Syngas has, during the year, also positioned itself favourably for future renewed interest in alternative oil and oil related product production pathways. It has done so by building on the Company’s past investments to develop  and further refine  a proprietary modular, fully integrated, ‘proven at scale’ equipment based design for a 3,600 barrels per day of oil equivalent Coal to Liquid (CTL) plant. Increasing yields, reductions in capital costs and potential production of a wider suite of higher value products are some of the improvements achieved.