Solid Energy says it is taking an important step of exploiting its huge South Island lignite reserve in a trial to turn the low-grade coal into higher value briquettes for commercial users.
The state-owned enterprise has rights to about 1.6 billion tonnes of lignite in Southland and with a UnitedStates company will investigate building a plant to supply South Island commercial and industrial customers.
Depending on the results and the timing of a ban on residential coal use, lignite briquettes could be sold to domestic users.
Solid Energy's joint-venture partner, GTL Energy, has devised a process which uses compression and drying at moderate heat to reduce the moisture content of the lignite from 40 per cent to 12 per cent.
The new product would have about a third more energy value than lignite that is used straight from the ground near the New Vale Opencast Mine near Mataura.
The company's general manager of new energy, Brett Gamble, said it would be cleaner burning with fewer emissions. The assessment project was an important step in the use of the vast and largely untapped lignite resource, he said.
Ministry of Economic Development figures put the easily extractable lignite resource at 6.3 billion tonnes - the energy content equivalent to about 20 Maui gas fields.
Over the next few months Solid Energy and Colorado-based GTL Energy will complete technical and economic feasibility studies, undertake final engineering design and seek resource consents.
A decision to proceed with construction of the plant is expected to be made early next year and will be based on demand. Exports were also a possibility, with Chile being the most likely market, said Gamble.
Solid Energy is also at the early stage of a project aimed at transforming lignite to transport fuels or fertilisers. The ministry has calculated that if extracted at a rate of 20 million tonnes a year, the lignite resource could provide energy and feedstock for most of the country's transport fuel and petrochemical needs for the next 300 years.
