SOURCE: Synthesis Energy Systems

May 03, 2007 08:00 ET

SES and YIMA Sign Preliminary Agreement for Syngas to Methanol to DME Plant in China's Henan Province

Coal Gasification Plant to Supply Petrochemical and Transportation Fuel Needs

HOUSTON, TX -- (MARKET WIRE) -- May 3, 2007 -- Synthesis Energy Systems, Inc. ("SES" or the "Company") (OTC: SYMX), a coal gasification company involved in the efficient conversion of low cost fuels into clean energy and chemical products, and Yima Coal Industry Group Co. Ltd. ("YIMA"), a large Chinese integrated coal company, have signed a preliminary agreement to establish a joint venture company ("JVC") for a new integrated coal gasification to methanol to Dimethly Ether ("DME") plant (the "Plant") in Henan Province, China to help supply the region's growing petrochemical and transportation fuel needs.

At the signing ceremony, Lorenzo Lamadrid, Chairman of SES, said, "This key relationship -- our third project in China -- positions SES with one of China's largest coal producers and one of the country's top companies focused on the development of the coal-to-chemicals industry as an environmentally responsible and viable alternative to supplying China's rising energy demands. We are honored and eager to work with YIMA, as we continue to expand our operations in China and worldwide."

The JVC will construct, own and operate the Plant, which will utilize the Company's licensed U-GAS® technology to convert low-quality, high-ash coals into a clean gaseous mixture called synthesis gas ("syngas"). The syngas produced will then be used as a feedstock for the production of methanol, a basic building block used in manufacturing for a wide variety of chemical products including plastics, paints, construction materials, as a hydrogen carrier for fuel cell applications, or as an alternative fuel. In this application, the coal-derived methanol will also be used to produce DME, an alternative to liquefied petroleum gas, liquid natural gas, diesel and gasoline. The parties are also considering opportunities for power generation applications. Formation of the JVC is subject to the negotiation and execution of a definitive agreement and approvals from both companies.

When completed, the Plant is expected to have a daily capacity of 10 million standard cubic meters of syngas and an annual capacity of 1 million tons of methanol. The Plant's capacity will help support the rapidly growing demand of Henan's industrial companies. With nearly 100 million people, Henan is the most populous province in China and one of the region's leading coal and aluminum production centers.

YIMA's Chairman Wu Yulu stated, "We are pleased to partner with SES and believe the advantage of SES' U-GAS® gasification technology to convert a wide array of low-quality coal, including high-ash fuels, into high-value energy and chemicals in an efficient and environmentally acceptable manner will provide our joint venture with a strong growth platform."

"This JVC is a step forward for China, as the country seeks solutions to address its reliance on imports and offset the effects of rising oil prices by accelerating its efforts to develop oil substitution programs that utilize its vast deposits of coal. Using coal-derived methanol to produce DME, and other clean fuels, can help meet China's and the world's need for non-petroleum-based fuels and petrochemical feedstocks," concluded YIMA's Chairman Wu Yulu.

Worldwide, SES is working to rapidly develop and commercialize alternative energy and chemical projects, technologies and systems based on the clean gasification of low-cost fuel sources and establishing U-GAS® as a reliable and efficient alternative source of energy and chemical products to manufacturers.

The Company currently is leveraging its engineering, procurement, and project development expertise in China through two additional U-GAS® coal gasification projects. The first facility, located in Shandong Province, is about 75 percent complete with start-up anticipated by mid-summer of 2007 and commercial operations expected to begin by the third quarter of this year. SES' second project, located in Inner Mongolia, is similar in structure to the Plant in Henan -- an integrated coal gasification to methanol to DME project. This second project is expected to break ground by the end of this summer and be in operation by late 2008.

Among the dignitaries witnessing the signing ceremony were Madam Wu Yi, Deputy Prime Minister of China, China's Minister of Commerce, and Sanmenxia City Mayor Li Wenhui.

About Synthesis Energy Systems

Synthesis Energy Systems, Inc. is an energy and technology company that deploys proprietary systems and technology to gasify low value fuels to replace high cost energy and chemical products sold to major global markets. The U-GAS® technology, which the Company licenses from the Gas Technology Institute, is designed to turn waste coal products into high value synthesis gas for use in power and chemical applications. The technology performs this gasification without many of the harmful emissions normally associated with coal fired energy production. SES currently has offices in Houston, Texas and 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's control. These include, but are not limited to, risks and uncertainties associated with: our early stage of development, the limited history and viability of our technology and our results of operation in foreign countries. 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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