AN economic report forecasting a £13 billion boom in underground coal gasification (UCG) was greeted coolly yesterday as environmental groups and politicians urged caution over the controversial process.

A study commissioned by Cluff Natural Resources claims UCG could be worth £12.8bn for the UK economy, 45 per cent of which would stay in Scotland.

The paper, by Biggar Economics, also claims the industry could create up to 11,900 jobs directly and through the supply chain in peak years, including almost 5,000 in Scotland with more than 1,000 centred on the Firth of Forth.

However, politicians have urged caution and green groups said adopting the practice could derail efforts to adopt renewable technologies.

Lang Banks of WWF Scotland said: “In a worst-case scenario, Cluff’s proposals could even extend our use of fossil fuels, locking us into a high-carbon world.”

UCG works by drilling two boreholes and injecting a mix of water and oxygen into one before igniting and partly burning the coal and extracting the synthesis gas (“syngas”) products through the second pipe.

The process is aimed at underground coal seams that would be unprofitable or unsuitable for conventional extraction. The level of resultant surface pollutants is said to be less than that of established coal mining.

Carbon dioxide can also be removed from syngas before it is passed to end users, creating a cleaner fuel with fewer greenhouse emissions.

However, such developments are in their infancy and questions remain over the potential pollution of groundwater in the process. Toxic compounds thought to result from UCG were discovered in groundwater at some US test sites and UK research suggests such contamination is most likely to result from man-made infrastructure.

The Cluff report, which assumes “first-mover advantage”, sets out the potential economic impact of developing UCG projects in Kincardine and elsewhere around the Firth of Forth, as well as in other UK locations.

It also looks at the potential of the process to fuel a new generation of power stations, industrial heat and chemical feedstocks.

Forecasts are based on the development of an initial project at Kincardine, followed by a “conservative estimate” of another seven similar schemes across the UK.

Analysts suggest the Kincardine development would bring £603 million to the UK economy, 71 per cent of which would stay in Scotland, creating 830 jobs in the construction stage and around 350 jobs over a 30-year lifetime.

Meanwhile, similar projects could generate £5.6bn and an average of 3,300 jobs.

Overall, the sector could fuel power stations with a total capacity of around 3,600 megawatts.

The construction and running of these centres plus long-term sales of UCG exports are also included in the total calculation.

The report further claims if syngas was used as a feedstock for the chemicals sector, UCG would have a “fundamental role” in safeguarding 4,800 such jobs, protecting an economic contribution to the Scottish economy of up to £732m per year.

Algy Cluff, chief executive of Cluff Natural Resources, said: “The findings of this report highlight the huge potential of the development of a UCG industry in Scotland and the UK.

“UCG has a vital role to play in the diversification of the UK’s energy mix and security and this report demonstrates how the development of UCG would create significant benefits for both the Scottish and wider UK economy.”

Report author Graeme Blackett said: “Scotland is a hydrocarbon and energy-rich country, and this could be an important new industry on a UK-wide basis, supporting many thousands of sustainable jobs.

“Subject to the robust planning and regulatory processes that we rightly have, there are major advantages in being the first movers in this technology, and becoming a world leader.”

However, Green MSP Alison Johnstone said the figures hide “damaging” proposals by fossil fuel firms. She said: “We know that these companies will make big profits from driving climate change and exploiting the land under our communities.

“But we need to be clear – their plans are not in the interest of Scottish people, but in the interest of private stakeholders.”

Meanwhile, the SNP’s Martyn Day, who represents Linlithgow and East Falkirk, said his constituents have voiced concerns about potential developments on their doorstep, and he insisted Scotland must not be a guinea pig.

He said: “I’m not hostile to this and I think there could be a real future in the technology, I’m just not sure if it is quite there yet. There needs to be more work done.

“It is a little premature to move on this before we get some more information. I’m conscious of the public opinion and I’d be inclined to wait until we see what is achievable.”

The Scottish Government said it is taking a “careful, evidence-based” approach to the matter and no planning applications for UCG have been received.

Meanwhile, campaign group SMAUG (SNP Members Against Unconventional Gas) said: “It seems that Cluff have ignored in their report the most important factor in the debate, which is that these reserves cannot be used if we intend to fulfil our international obligations to restrict global warming to two degrees.

“SMAUG do not think setting fire to the ground underneath us is the method we should be choosing.”