Former fund manager David Shearwood has big plans to turn Leigh Creek Energy into an underground coal gasification producer by 2018, and in the process, offer hope of future employment to the hundreds of workers affected by the Leigh Creek coalmine shutdown.

The no-longer profitable Alinta Energy-operated open cut coalmine officially ceased production in November after more than 100 years of operation, resulting in the loss of about 200 jobs.

The shutdown marked the end of an era for the small town of Leigh Creek, located about 567 km north of Adelaide and 261 km north of Port Augusta in South Australia.

The mines closure is another blow for South Australia which is starting to feel the pinch of the resources slow down, while cuts sustained from the end of the state’s car manufacturing sector will add to the pain.

But ASX-listed Leigh Creek Energy is offering a small glimmer of hope for the town of Leigh Creek with a resurgence plan that could inject some much-needed confidence back into the state’s wider business community.

Leigh Creek Energy, formerly known as Marathon Resources, is ready to spruik its investment case following a listing on the public market which was met with a name change earlier this year.

While the company has been re-branded, Shearwood said it had been quietly working on the Leigh Creek project for some time after he made the switch from funds management into the private equity space five years ago.

“We effectively sat down and put our money into this and went what is the best project we can find?,” Shearwood told Hart Energy recently.

“There’s a gas shortage looming down the track, let’s see how we can solve that. That’s the genesis of what we’ve been doing and we’ve been working on this for four and a half years.”

Shearwood is confident it can fast-track the company’s producer-status ambitions due to the benefits that come with working on an established site, such as infrastructure. The company is aiming to produce commercial quantities of gas in the 2018-19 financial year.

In a nutshell, the project, which would be operational for 30 years on a 80 petajoules (75.8 Bcf) per annum base case scenario, will involve extracting the energy in the remaining coal deposits via in-situ gasification, otherwise known as underground coal gasification, to produce methane for sale into the nearby eastern Australian gas pipeline network.

The company will also utilize waste gas via an adjacent new fertilizer plant to provide supply to farmers across South Australia who are currently reliant on imports.

The company is fresh from releasing an inferred coal resource of 377 million tonnes for its flagship project, and according to Shearwood, the immediate next steps will be an independent gas certification of the projects recoverable resources, expected to be completed around the new year.

Operationally, the company is keen to flare gas in the last quarter of 2016.

“We have a fairly fast tracked scheduled to full field commercial development, unlike a normal oil and gas filed where you run significant reservoir risk,” Shearwood said.

“Once we demonstrate in one place we don’t have those reservoir risks you would normally see and we can go straight to full field commercial development.”

The potential of a looming gas shortage on Australia’s east coast has Leigh Creek Energy bullish on the demand story for its gas.

The company’s commercial general manager Garry Marsden told ogiaustralia.com there were currently a lot of people on the hunt for additional molecules.

“We are now seeing massive growth in the volume of gas that’s being demanded for these LNG projects and its acting like a vacuum cleaner to domestic gas around the place,” he said.

According to Marsden, the Leigh Creek operation could help fill some of the shortfall of projected gas, which would be aided by the projects proximity to the Moomba-Adelaide pipeline.

“We can take gas to Sydney, Brisbane or down to Adelaide,” Marsden said.

“We’ve been engaged for probably the best part of the past three or four months with a number of potential buyers of gas from the Leigh Creek energy project,” he added.

The company is confident of bedding down binding supply contracts for its gas in the first-half of 2016.

While finer details of the project are still being fine-tuned by what Shearwood says is an “ever-growing team of engineers and experts”, the company is already placing a $1 billion price tag on the development.

Despite the hefty capital cost, which the company hopes to finance through a mix of debt and equity, Shearwood says Leigh Creek is attractive from a financial standpoint.

“Operating costs will be under $2.50 a gigajoule which puts the company at the low end of the cost curve of gas production,” he said.

“Even though we are a small company, we are in a position where we have options to obtain capital from different sources and we will be monetizing some of that gas in the ground next year.”

The company already has some financial might behind it, having mandated the same boutique investment firm that helped bankroll Fortescue Metals Group in its early days.

Shearwood said the company was working closely with US-based firm EAS Advisors in the design of a suitable capital strategy for the Leigh Creek operation.