By Business Reporter Simon Hartley
Monday, 14th August 2006
A $6 billion petrochemical plant in Otago or Southland within six years is the focus of a year-long feasibility study due to begin early next year.
The regions contain a vast untapped wealth of up to 12 billion tonnes of lignite, the lowest grade of coal, which could yield a barrel of diesel for every tonne of lignite processed.
Per capita, New Zealand is second only to Australia in its wealth of coal. The more than a dozen identified southern lignite fields have been estimated to contain the energy equivalent of 35 to 40 Maui gas fields.
Exploration company L&M Group is completing initial analysis on three of five permitted areas it holds at Kaitangata in South Otago, Hawkdun, in Central Otago, and Ashers-Waituna in Southland including test drilling in preparation to begin its feasibility study in April next year.
L&M managing director Greg Hogan emphasises the initial studies are a long way from turning lignite into diesel, petrol, aviation gas or methanol, but he is adamant a southern petrochemical plant could be operating by 2012.
“There are the raw materials here for more than one project. They the three L&M sites are all looking good at present,” he said when contacted.
Mr Hogan said the figure of $6 billion for a petrochemical “coalgasification” plant was based on estimates from around the world, where there are 130 gasification plants operating and producing more than 40,000MW of energy annually.
L&M intends to take the results of its feasibility study to the Government, to clarify regulatory requirements, and would most likely seek offshore financing for a gasification plant.
Mr Hogan said while no negotiations had been held, the company had access to heavyweights in the mining and energy sector, such as Rio Tinto, the world’s second-largest mining company.
“These are the companies who would be in a position to fund billion-dollar investments,” Mr Hogan said.
L&M wants to identify which of its three permitted areas would be best to develop, estimating the lifespan of any single operation would be a minimum 20 to 30 years.
Mr Hogan estimated 50,000 tonnes of lignite could be processed a day with a guideline production of about 50,000 barrels of diesel a day about 18 million tonnes of lignite a year.
Initially, L&M is concentrating on diesel production, because of the high grade which could be produced, and then the other fuels, all of which had “huge potential” as export earners, he said.
Although 13 lignite fields have been identified so far three in Central Otago, four in eastern Otago and six in Southland there could be double that number again, according to former government staff.
Mr Hogan said the lignite, of which L&M has estimated there is 2 billion tonnes within its five areas, was generally in easily accessible places, in seams 10m thick.
Last month, coal producer Solid Energy purchased farms and lifestyle blocks surrounding its former lignite mine near Mataura, on State Highway 1, containing an estimated 2.1 million tonnes.
In the short term, trials were under way for burning the coal as an energy source but Solid Energy was also investigating a gasification plant for coal-to-diesel production
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