VICTORIA is poised to receive a coal-to-liquids plant for the Latrobe Valley that promises to produce cleaner coal, reduce greenhouse gas emissions by 40 per cent and extract thousands of barrels of high-grade oil.
The news is a relief for the Victorian Government, which has seen many of its supported "clean coal" projects either stalled or abandoned amid the global financial crisis and uncertainty around an emissions trading scheme.
The coal-to-liquids technology, which is known as supercritical water technology, adds water before using modular reactors to heat the coal and transform it into higher-grade coal and oil.
The plant, which Ignite Energy Resources will begin to build within weeks subject to State Government approval, will process up to 60,000 tonnes of brown coal a year to produce 60,000 barrels of oil and 18,000 tonnes of cleaner dry coal.
TRUenergy, which will supply the coal from its Yallourn power station, has agreed to take the initial resource, with Ignite hopeful increased production will lead to exports.
Ignite chief executive Len Humphreys said the initial plant would begin operation in 2010.
"The initial reactor will cost about $15 million — a hundredth of competitor technologies. The first module will be up in 2010 and then further modules can be added on every six months," he said.
"This process produces twice the energy of brown coal, with almost half as much carbon and also releases oil."
Mr Humphreys said about 10 jobs would be created initially but that this number could grow significantly if it could attract interest from overseas.
The project, if given final approval, comes after a number of false starts for the Government. In December, Royal Dutch Shell and Anglo American shelved their $5 billion coal-to-liquids project for the Latrobe Valley citing tight market conditions.
A further $1 billion in investment hangs in the balance with the Government still sitting on the release of coal reserves to move Exergen's continuous hydrothermal de-watering technology ahead. The technology, an Australian invention, transforms brown coal into export-quality coal for power generation.
The project has a number of international backers but could head offshore unless coal supply is guaranteed in Victoria.
HRL's $750 million, 400- megawatt coal gasification project was also meant to be directing power into the electricity grid this year but has been delayed due to a lack of investment.
Resources Minister Peter Batchelor said the Government had attracted record levels of leveraged investment for the Latrobe Valley's brown coal industry.
"Projects such as this have the potential to help establish new non-power industries for coal development in the Latrobe Valley and Gippsland region."