SOURCE: Synthesis Energy Systems

December 05, 2006 17:17 ET

Construction Begins in China on SES' First Coal Gasification Facility

SES Continues to Advance Its Global Development and Commercialization of U-GAS® Technology

HOUSTON, TX -- (MARKET WIRE) -- December 5, 2006 -- Synthesis Energy Systems ("SES" or the "Company") (OTC: SYMX) announced that its 95%-owned joint venture, SES (Zaozhuang) New Gas Company, Ltd., held an official ground breaking ceremony in Shandong, China today for its new coal gasification facility. This facility will use the Company's proprietary U-GAS® licensed technology to cleanly convert waste coal to synthesis gas ("syn-gas"). The plant will be SES' first designed and built U-GAS® coal gasification facility and signifies a key milestone in the global development and commercialization of the Company's gasification technology.

"As a way to help reduce China's dependence on the import of petroleum products, coal gasification technologies represent an important substitute as well as a viable solution to energy security," said SES Chairman Lorenzo Lamadrid. "China has some of the world's largest coal reserves and we believe our clean and efficient U-GAS® coal gasification technology fits perfectly with China's development priorities. This plant will be the first in China to offer low-pollution, high-efficiency U-GAS® technology that will convert low quality, low cost coals into syn-gas, which can be used in a variety of applications. We are excited and proud to be providing a technology that is coming to the forefront not only in China, but throughout the world."

"This new development represents an important milestone for SES. We are grateful for the support we have received from our leading customer, Hai Hua Coal Chemical Company, Ltd. ("Hai Hua"), and from Zaozhuang City and look forward to continuing to earn their confidence in this very important market," added SES President and CEO Asia Pacific Don Bunnell.

Adjacent to Hai Hua's coke and methanol facility located in Zaozhuang City, Shandong Province, China, the 28,000 Normal cubic meters ("Ncum") per hour U-GAS® coal gasification plant will use approximately 200,000 tons of waste coal per year. Hai Hua will use the product syn-gas created by the facility as a feedstock for its newly constructed methanol plant, and as fuel in its coke ovens and for its internal power generation facility.

The SES coal gasification plant is expected to commence commercial operation in the third quarter of 2007. Once operational, it will employ approximately 100 people. Discussion of expanding the U-GAS® facility to accommodate Hai Hua's planned increased methanol production and to meet the gas demands of other Xuecheng industrial park tenants has already begun between SES and Hai Hua.

Ceremonies, hosted jointly by SES Chairman Lorenzo Lamadrid and Hai Hua Group Vice Chairman Mr. Liu Jingmeng, commemorated the start of construction on the new U-GAS® facility as well as the commercial operation of a new 100,000 tons per year of capacity methanol plant, owned by a subsidiary of Hai Hua.

Among the dignitaries attending the ceremonies were the Party Secretary of Zaozhuang City, as well as leaders from the Shandong Province of Xuecheng, Economic Development Zone, and regional and local government. Other prominent invited guests included scientific and business members and press corps from China and abroad.

As one of the Guests of Honor for the ground breaking ceremonies, Hai Hua Group Vice Chairman Mr. Liu Jingmeng said, "The development of this project will enable Hai Hua to take advantage of the inherent value of SES' U-GAS® gasification technology which is to utilize a wide array of low quality, low cost coals and the flexibility to cleanly and efficiently convert coal to a variety of high grade chemical products." Mr. Liu Jingmeng went on to say, "Hai Hua's partnership with SES is a plus for both sides. As a result, Hai Hua will have a secure supply of syn-gas cleanly produced from Hai Hua's waste coal for its methanol facility while SES values from the opportunity to provide a viable alternative energy solution with remarkable economic returns."

About Synthesis Energy Systems

Synthesis Energy Systems, Inc. is an energy and technology company that deploys proprietary technology to efficiently and cleanly gasify low value fuels to replace high cost energy and chemical products sold to major global markets. With its proprietary U-GAS® technology, licensed from the Gas Technology Institute, SES can cleanly turn waste coal products into high value synthesis gas for use in power and chemical applications. SES' technology performs this gasification without the harmful emissions normally associated with coal fired energy production. SES currently has offices in Houston, Texas, Shanghai and Beijing, China. For more information on SES, visit www.synthesisenergy.com or call (713) 579-0600.

Forward-Looking Statements

Except for historical information contained herein, the matters discussed in this press release contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended that involve substantial risks and uncertainties. When used in this press release and in any documents incorporated by reference herein, the words "expects," "will" and similar expressions identify certain of such forward-looking statements. Actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements contained herein. These forward-looking statements are based largely on the expectations of SES and are subject to a number of risks and uncertainties that are subject to change based on factors which are, in many instances, beyond SES' control. These include, but are not limited to, risks and uncertainties associated with: the impact of economic, competitive, and other factors affecting the SES and its operations; and other risk factors. SES cautions that the foregoing factors are not exclusive. SES assumes no obligation to update the information contained in this press release.

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