The ABC has a report on a proposed UCG (underground coal gasification) / coal to liquids project being promoted by Central Petroleum (whose pronouncements I tend to regard with a large degree of skepticism) - Company plans to tap world's biggest coal field.

An Australian company says a coal field discovered in the Simpson Desert could be the biggest in the world.

Central Petroleum Limited says it recently discovered the field in the south-east of the Northern Territory, about 300 kilometres from Alice Springs. It says the coal seam stretches across 400 kilometres.

The company has signed an agreement with Allied Resource Partners (ARP) to work towards setting up a coal production plant in the Great Artesian Basin area. ARP says the plan is to make liquid fuel without mining, by heating the coal underground, turning it into a gas, and then turning that gas into a liquid.

ARP spokesman David Shearwood says operations could last for 100 years because the field is so big. "It is an enormous quantity of coal," he said. "In our analysis, we can't find a bigger coal field on the planet."

He says the project would involve building a pipeline to Darwin and possibly one to South Australia.

The joint venture partners say they are seeking $300 million from investors to pay for a feasibility study that would include extensive exploration.

Stuart Staniford at Early Warning has a post on the state of play for gas-to-liquids projects around the world - Gas-to-Liquids Production Statistics.

Continuing this little series on production stats for various forms of alternative liquid fuels, this morning I look at Gas-to-Liquids (GTL). This is a process in which:

Gas to liquids is a refinery process to convert natural gas or other gaseous hydrocarbons into longer-chain hydrocarbons such as gasoline or diesel fuel. Methane-rich gases are converted into liquid fuels either via direct conversion or via syngas as an intermediate, for example using the Fischer Tropsch process.

After researching it, there seems little hope of obtaining actual production statistics for this process globally, but we can get pretty close just from research on plant capacity and opening dates. The graph above summarizes the situation. There are three plants globally operating GTL processes at commercial scale, and together they sum to less than 100,000 barrels/day.

The longest standing plant is at Mossel Bay in South Africa, operated by PetroSA since 1987 (I assume this is another legacy of apartheid sanctions) which has a 36kbd output capacity.

In 1993, Shell began operating a small plant in Bintalu, Malaysia, and increased its capacity in 2005 (from 12.5kbd to 14.6kbd).

Most recently, Sasol and Qatar Petroleum brought on stream the Oryx plant in Qatar. This had a difficult start up, but is now apparently operating at the designed 34kbd capacity.

There are also other plants under construction: the 120kbd Pearl GTL plant in Qatar, and the Escravos plant in Nigeria. Both hope for production in 2010, but given the history of difficulties with GTL plant startup we should probably reserve judgement.

There were many more plans for GTL plants around the year 2000, but most went under. A helpful National Petroleum Council study report explains ...

Start also has a post on coal to liquids - Coal-to-Liquids Production Statistics.

So, in today's adventure in much-harder-to-find-than-they-should-be energy statistics, I try to assemble some kind of series for global production of synfuel from coal-to-liquids (CTL). This went even worse than the tar sands. However, I think I have figured out the big picture, and I report my findings here for the benefit of future energy sleuths, or in the hope that someone will point me at better data if it exists.

Firstly, for the sake of readers just getting up to speed, what we are talking about is the possibility to use various kinds of chemical transformations to make a petroleum-like liquid fuel from coal. See the Wiki entry on coal liquefaction for more details of the various possibilities. This was done most famously by the Germans during World War II, and has been done for a long time in South Africa; the South Africans needed to get around economic sanctions during the Apartheid era, and that country has a lot of coal and not much oil. Since there are huge amounts of coal underground around the world, CTL is often cited as a potential substitute for oil in future (generally by folks not worried about climate change).

There are at present two plants in the world operating coal liquefaction processes at commercial scale. The first is operated by Sasol in South Africa and has been operating for a long time. The second has just been opened last year by Shenhua in China. ...

Overall, the picture seems to be that South African production of CTL synfuel has been roughly flat for many years. There are some fluctuations, but there is certainly not an overall upward trend.

The data situation for the new plant in China is even sketchier. According to this page, the capacity of the plant is 1 million tonnes per year, which is about 1/7 of the output of Sasol in South Africa. It reached full production some time in mid 2009, so there would not have been a full year of production in 2009. Thus, at this time this represents a rather small increase in total global production of coal to liquids - perhaps of the order of 5-10%, with a little more coming in 2010 with, I assume, a full year of operation. Shenhua does have plans to increase the plant capacity to 3Mt in the future, which would give another increase when that occurs.

Amusingly, the CTL plant is located in a place we have already referenced on this blog: Ordos.

Technology Review has an article on a new coal to liquids process which could "allow Air Force jets to run exclusively on domestically produced biomass and coal" - Cleaner Jet Fuel from Coal.

The Air Force is testing a jet fuel made from coal and plant biomass that could replace petroleum-based fuel and emit less carbon-dioxide compared to using conventional jet fuels. The fuel is made with a process developed by Accelergy, based in Houston, using technology licensed from ExxonMobil Research and Engineering Company and the Energy and Environmental Research Center at the University of North Dakota.

Other recently tested experimental biofuels for jets have required that the aircraft still use at least 50 percent petroleum-based product to meet performance requirements, particularly for the most advanced military jets. But the Accelergy process produces fuels that closely resemble petroleum-based fuels, making it possible to do away with petroleum altogether. Because of this, the new process could help the Air Force meet its goal of using domestic, lower-carbon fuels for half of its fuel needs by 2016. Although the first products will be jet fuels, the process can also be adapted to produce gasoline and diesel.

The fuel has passed through an initial round of testing, including lab-scale engine tests, and is on track to be flight-tested in 18 months, says Rocco Fiato, vice president of business development at Accelergy.

Turning coal into liquid fuels is nothing new, but such processes have been inefficient and produced large amounts of CO2 emissions. Accelergy's approach is different because it uses "direct liquefaction," which is similar to the process used to refine petroleum. It involves treating the coal with hydrogen in the presence of a catalyst. Conventional technology for converting coal to liquid fuels breaks the coal down into synthesis gas, which is mostly carbon monoxide with a little bit of hydrogen; the hydrogen and carbon are then recombined to produce liquid hydrocarbons, a process that releases carbon dioxide. Because the Accelergy process skips the need to gasify all of the coal--which consumes a lot of energy--before recombining the hydrogen and carbon, it's more efficient and produces less carbon dioxide. "We don't destroy the molecule in coal. Instead we massage it, inject hydrogen into it, and rearrange it to form the desired hydrocarbons," says Timothy Vail, Accelergy's president and CEO.

Energy Minister Martin Ferguson reports that Linc Energy's coal to liquids (or more accurately UCG - underground coal gasification - then GTL - gas to liquids) demonstration plant has opened in Queensland - Coal-to-liquids demonstration plant opens.

The Minister for Resources and Energy, Martin Ferguson AM MP, has launched the world's first coal-to-liquids demonstration plant to use Underground Coal Gasification (UCG) technology.

Linc Energy's demonstration plant near Chinchilla in Queensland is producing clean synthetic diesel and jet fuel from gas sourced from deep underground coal reserves. First production was achieved on 14 October 2008.|

Minister Ferguson said: " Australia is coal and gas rich, with hundreds of years of reserves. Technologies that convert coal and gas to ultra-clean diesel and jet fuel have the potential to replace Australia's declining oil reserves and make us self-sufficient in liquid transport fuels once again.

"A domestic synthetic fuels industry would reduce - and maybe even one day remove - our growing trade deficit in petroleum products which last year grew to almost $15 billion."

Minister Ferguson said: "This technology unlocks energy from Australia's significant stranded and uneconomic coal reserves and has the potential to dramatically reduce Australia's dependence upon imported oil and refined products." ...

Minister Ferguson said: " Australia has enormous potential as a coal-to-liquids producer and an economically viable and environmentally sustainable coal-to-liquids industry would not only increase Australia's energy security, but also provide jobs, exports, revenue and economic growth, particularly in regional communities.

"Similarly, gas-to-liquids could open up new opportunities for development of Australia's vast northwest gas resources and east coast coal seam methane resources, complementing the potential of Australia's well-established LNG industry."

This is an oldish story but I'll note it for completeness - McClathcy has a report that the US air force has dropped its plans to produce aviation fuel via a coal to liquids plant in Montana (noted by Cretaceous at TOD ANZ) - Air Force drops plan to make fuel from coal in Montana.

The Air Force on Thursday dropped plans to build a coal-to-liquid plant to produce fuel for its aircraft, a plan that would've reduced dependence on oil but increased the emissions of the heat-trapping gases that cause global warming.

The Air Force has a goal to certify that all aircraft could fly on a 50-50 blend of fuel by 2011. It's been purchasing fuel made from coal from Sasol of South Africa, most recently 300,000 gallons, said Air Force spokesman Gary Strasburg.

The B1, B52 and C-17 already have been certified to run on the coal-mix blend, and the F-15, F-22, C-5 and KC-135 all have also used the blend, Strasburg said.

The Air Force is looking for alternatives to oil to make sure that it can continue to operate its aircraft when supplies are tight. The coal-to-liquid conversion process, however, is expensive to set up and there are no full-scale plants in the U.S.

Liquid fuel from coal produces more than twice the greenhouse gas emissions as conventional petroleum-based fuel.

The Air Force for the past year had been considering building the plant at Malmstrom Air Force Base in Montana, one of three U.S. Air Force bases that maintain and operate the Minuteman III intercontinental ballistic missile.

The service had required that the coal-to-liquid plant would be privately funded, according to an Air Force news release on Thursday.

The Air Force rejected the plans for the coal-to-liquids plant because of possible conflicts with the 341 Missile Wing's nuclear mission. The release said the concerns included decreased security near the base's weapons storage area, interference with missile transportation and "explosive safety arcs and operational flight safety issues."

Bloomberg reports that Linc Energy is trying to fuel from its planned coal-to-liquids plant in South Australia to BP - Linc Extends Diesel Option With BP From Australian GTL Plant.

Linc Energy Ltd., an Australian energy company planning to convert coal into diesel, extended an option to sell fuel to BP Plc from its planned gas-to-liquids plant in southern Australia. ... The company plans to develop the so-called gas-to-liquids, or GTL, project in the Arckaringa Basin in southern Australia. The company acquired rights to explore the region, which may yield coal-seam gas, in June when it agreed to buy Sapex Ltd.

The Business Spectator reports that Shall and Anglo-American have put the proposed Monash coal to liquids project on hold - yet another casualty of falling oil prices (though perhaps not one that will be missed much by those of us concerned about global warming and other environmental issues) - Shell, Anglo American rethink local coal-to-liquids project. More at Bloomberg amd The Australian.

Royal Dutch Shell Plc and Anglo American Plc are rethinking development of an Australian project to turn coal into liquid fuel, saying it might cost too much.

"Monash Energy, and its owners Shell and Anglo American, believe that, in the long term, coal to liquids may provide an opportunity for Victoria to provide domestically produced clean liquid fuels for Australian and international markets," Roger Bounds, project director at the jointly-owned Monash Energy Holdings Ltd venture, said in an e-mailed statement.

But Mr Bounds said critical requirements for the project were not yet in place for the oil and mining consortium to proceed to the next phase. "The reasons for this include higher capital cost estimates and escalated construction costs," Mr Bounds said.

Backers of many alternative energy projects around the world have delayed or scrapped plans since crude oil prices. Almost $A20 million ($US13 million) has been spent since September 2006 proving up the coal-to-liquids concept, according to Monash's website. Media reports estimate the project was originally estimated to cost $A5 billion to get up and running.

The core of the project is a large scale commercial plant in Victoria's Latrobe Valley drawing coal from its own mine and then drying and gasifying the coal for conversion into transport fuels. The use of brown coal for power generation in the Latrobe Valley accounts for 55 per cent of CO2 emissions in Victoria, a state with a population of around five million.

Another Australian venture between an oil company and a mining firm aimed at reducing Australia's greenhouse gas emissions has already been axed. BP Plc and Rio Tinto Ltd/Plc last May cancelled a plan to build a carbon capture power plant.

The Courier Mail reports that Queensland's coal seam gas producers have succeeded in chasing underground coal gasification hopeful Linc Energy out of the state, with Linc deciding its coal to liquids technology might find the going easier in South Australia - Linc pulls out of Queensland $1b liquids plan, heads to SA. More at Bloomberg.

UNDERGROUND coal gasification hopeful Linc Energy has seen the writing on the wall in Queensland and will transfer plans for its $1 billion gas-to-liquids plant to South Australia.

For many years Linc has been planning a large UCG-GTL plant at Chinchilla in Queensland, where it has spent close to $50 million on a pilot liquids plant and a coal exploration program.

It was hoping to begin detailed designs next year on a commercial facility, eventually producing 20,000 barrels of diesel and aviation fuel a day just down the road from the pilot plant.

But Linc, which recently took over Adelaide-based energy hopeful Sapex to get access to its large coal exploration areas in SA's Arckaringa Basin, yesterday announced that instead it would "focus on developing its first commercial UCG-GTL operation in South Australia".

The announcement came a day after BG Group, which has just taken over coal seam gas group Queensland Gas Company, called on the Queensland Government to give coal seam gas companies, rather than UCG groups, priority over coal exploration areas in Queensland.

At present, coal exploration licences (used by UCG groups) and petroleum licences (which govern CSG development) can exist over the same resource.

BG chief executive Frank Chapman said his group's plans to spend as much as $15 billion on CSG development and LNG processing at Gladstone -- where Santos, Origin Energy and Arrow Energy and their international partners are also planning large multibillion-dollar LNG developments -- would have to be delayed unless BG could get guaranteed resource security.

Linc, QGC and Arrow Energy, have competing petroleum interests over part of the coal areas Linc holds near Chinchilla.

There was no news from the Queensland Government yesterday on BG's demands. A spokeswoman for Mines and Energy Minister Geoff Wilson said there had been no formal or informal contact recently with Linc about its UCG plans.

But CSG groups have lobbied the Government hard, raising questions about UCG's commercial credentials and its safety, particularly as it relates to potential water table pollution, with rural interests also chipping in on the latter question.

And in an August statement the department had no intention of granting production tenures for underground coal gasification for at least three years.

Meanwhile the SMH has an update on the CSG boom, predicting rising gas prices for the NSW market - It's boom time for Queensland coal-seam gas.

THE boom in eastern Australia's coal-seam gas industry will accelerate a rise in NSW gas prices, the national energy regulator says.

The State of the Energy Market 2008 report, to be published today, says the rush of projects to develop Queensland's coal-seam gas into an exportable liquidate form has already nudged up prices along the east coast, as producers seek higher returns.

A gigajoule of gas fetched $2.50-$2.90 two years ago but the report's lead essay by forecasters ACIL Tasman said recent sales in Queensland had peaked at $7.

Unlike electricity, gas markets outside of Victoria's are opaque and allow deals to be settled privately, leaving forecasts hazy. But the report said gas was regularly selling for above $4 a gigajoule, as producers seek "significantly higher prices".

Global oil powers have been attracted to converting Queensland's extensive reserves into liquefied natural gas (LNG), which can fetch much higher prices on global markets. No LNG plants have been suggested for NSW but prices are being forced up regardless.

Oil has fallen more than 60 per cent from its peak but the companies behind the multibillion-dollar LNG projects are confident of getting high prices despite the downturn.

"The fact that most of the major [coal-seam gas] producers are currently looking to boost reserves and production capacity to underpin proposed LNG facilities means that the supply surplus which had prevailed in the Queensland market for several years has now been reversed," it said.

Historically, Australians have had the world's cheapest gas. In the US, it costs about $US6.70 per million British thermal units, slightly less than a gigajoule. ...

Gas companies have long argued that prices are set to rise towards "export parity'. The report confirms the Queensland LNG plans are accelerating the process. Australia is the fifth largest LNG exporter. The coal-seam gas bonanza has seen the likes of ConocoPhillips in the US, Britain's BG Group and Malaysia's Petronas pay well above previous prices.

Mining Era has a post on another UCG hopeful in Queensland - Carbon Energy Plans To Set The World On Fire.

Underground conversion of coal to gas, in a safe and profitable way, has been one of the mining world’s “Holy Grail” pursuits for the past 70 years, without much success. In the next few weeks the latest attempt to prove the commercial viability of underground coal gasification (UCG) will reach a critical point as a small Australian company, with impeccable connections, “fires” its first substantial trial. In theory, Carbon Energy will burn a deeply-buried coal seam to liberate a range of gases at its Bloodwood Creek test site in Queensland, some gas will be suitable for power generation and some suitable as a feedstock for ammonia production. If successful, investors in the company will be delighted, especially the two biggest shareholders, the Australian Government’s science agency and the country’s biggest fertiliser producer, Incitec Pivot.

It’s the presence of the Commonwealth Scientific and Industrial Research Organisation (CSRIO) with its 18.6 per cent stake in Carbon Energy, and Incitec with its 11.2 per cent, which adds credibility to a process which has its fair share of doubters, and sets the company apart from two other UCG experiments in Australia. Common objections to UCG includes fears of groundwater contamination from burning coal underground, high levels of carbon dioxide being released and the conventional concerns about risks associated with all forms of new technology.

Carbon Energy, chief executive, Andrew Dash, dismisses those concerns as inaccurate and misinformed. He told an investment conference in Queensland last week that rising energy prices and environmental concerns created a perfect climate for UCG. “Our aim is to produce clean energy and chemical feedstock from UCG syngas (synthetic gas).” he said. “We are able to extract the energy in coal without the environmental effects associated with coal mining.” He told the conference that the technology had been developed by the CSIRO, and acquired from the science agency, which emerged from the deal as the biggest single shareholder in Carbon Energy.

Dash used a graph to claim that the energy extraction from UCG is close to double that from actually mining the coal and more than 10 times the energy from coal-seam gas with the added energy coming from the way UCG used the methane, hydrogen and carbon monoxide in the coal rather than the coal itself, or the coal-seam gas on its own. “What we’re doing is based on 10 years of research,” Dash said. “That has enabled us to choose the perfect site for our first major trial.”

Bloodwood Creek is located approximately 150 kilometres west of Brisbane in the coal-rich Surat Basin. Costing around A$20 million the project consists of drilling a series of boreholes down to coal seams 200 metres beneath the surface. The holes start vertically and then run horizontally along the coal seam. Going down one borehole is a mix of oxygen and steam. This is ignited at one end of the coal panel and allowed to burn in a controlled manner, giving off hydrogen, carbon monoxide, methane and carbon dioxide, which are returned to the surface for collection and separation. Incitec Pivot is keen to get its hands on some of the gases to make ammonia which will be used to make fertiliser and explosives for the coal-mining industry. Nearby power plants are interested in the methane to generate electricity and a speciality chemical firm, LyondellBasell Industries is interested in building a methanol plant using UCG products.

Investors have remained strong supporters of Carbon Energy in a tricky market. The company, which is the reincarnated shell of a once well-known gold explorer, Metex, snatched its first UCG headline on April 8 when (as Metex) it reported receipt of Queensland Government approvals to conduct the 100-day Bloodwood Creek trial burn with the aim of producing one petajoule of “syngas” a year.

I noted a little while back that UCG is losing out to CSM in Queensland. The SMH reports that a company is considering the idea of performing UCG (underground coal gasification - a coal to liquids process) on offshore coal deposits in New South Wales - Coal trial submerged in debate. Usually I'm all for ocean energy, but this isn't what I've got in mind.

UNTAPPED coal reserves under the Pacific Ocean could provide enough energy to power every house in NSW for about 13,000 years, a company that wants to explore a massive area under the seabed says. Energie Future is seeking leave to conduct tests under 5940 quare kilometres of the ocean floor between Newcastle and Wollongong.

If successful, the company would be the first in the world to use coal gasification - extreme heat to turn underground coal into gas - under the ocean floor.

The proposal has outraged Greens MP Lee Rhiannon, who said that even the exploratory work, centring on seismic testing, would endanger whales and other marine life. It would almost be inevitable that the Government would grant a mining licence to a company that had spent hundreds of millions of dollars on mining exploration, she said.

The MP, who is organising a protest at Bondi on Friday, said there was a "real threat of unforseen damage to the seabed and pollution and degradation to our coastal waters and beaches. Mining always follows exploration if the mining company wishes it, so this proposal should be ruled out now. The answer to climate change is investing in proven sustainable solutions like solar energy, not dangerous experiments that threaten our oceans and beaches," she said.

While UCG may lose out to CSM in Queensland's coal fields, the unhealthy Chinese interest in coal to liquids (and plastics) continues unabated, with their latest move being an interest in taking Linc Energy's UCG technology to the Chinese coal fields - Linc inks UCG deal in China.

Linc Energy Ltd has signed a deal with Xinwen Mining Group to develop underground coal gasification (UCG) and gas to liquids (GTL) projects in China. The Queensland-based group has signed a letter of intent with Xinwen, the same company which agreed to acquire a package of Linc's Australian coal exploration permits for $1.5 billion.

The two companies have agreed to form a joint company to develop UCG fields to produce gas for transport to Shanghai through the west to east pipeline project, which is under construction. The joint company will also provide feedstock for a GTL facility to produce liquids that will be transported by pipeline to the Dushanzi oil refinery.

"This is an exciting development as Xinwen already has government approval for underground coal gasification," Linc chief executive Peter Bond said in a statement.

UCG is the process of extracting coal from the ground through its transformation into a combustible gas for power generation, or as a feedstock in the production of diesel or fertilisers.

Xinwen owns the Yinan and Yibei coal fields in the Yining mining area of China, which cover over 479 square kilometres and have a reported 15.37 billion tonnes of coal.

In my coal to liquids in Australia post a few months ago I rated the chances of a development in northern South Australia as low. The SMH has a report today that the chances have improved greatly with Chinese firm CNOOC indicating an interest in the project - Chinese oil firm targets coal-to-liquids. Just what SA needs - another coal fired power plant...

A subsidiary of a Chinese state-owned oil giant has thrown its weight behind an ambitious, $3 billion coal-to-liquids (CTL) project planned for South Australia.

Australia-focused energy minnow Altona Resources Plc, which is listed on London's Alternative Investment Market, has signed an in-principle agreement with CNOOC (Beijing) Energy Investment Co Ltd to cooperate in the development of Altona's Arckaringa project in SA. The project includes a 10 million barrel per year open cut mine and a 560 megawatt power plant.

Interest in CTL, which involves converting coal into liquid hydrocarbons, is growing amid concerns about "peak oil". ...

He said the project would provide a major new source of base load power and diesel to SA, "which has a significant looming power deficiency and currently imports all of its distillate requirements".

The Australian reports that aspiring CTL (coal to liquids) and urea entrepreneur Allan Blood has grabbed a stake in the Crow CTL project in Montana I mentioned recently - Aussie coal deal with Montana's Crow tribe. As usual they are dreaming about a way of sequestering all the carbon dioxide produced.

WITH oil prices seemingly entrenched above long-term averages, Perth businessman Allan Blood has struck a deal with Montana's Crow tribe to look at building a $US7 billion ($8 billion) plant to turn their stranded coal reserves into diesel and jet fuel.

In a twist to local greenhouse gas capture schemes, Mr Blood plans to limit emissions from the project by selling carbon dioxide to Montana oil projects to inject into their fields and improve oil recovery.

If all goes to plan, the project will be profitable at oil prices above $US60 a barrel and could be producing 50,000 barrels daily by 2016. Mr Blood also has plans to develop a coal-to-urea plant in Victoria's La Trobe Valley.

The deal inked last week, calls for the Crow Nation to provide coal and water, and Mr Blood's unlisted Australian American Energy Co will provide funding and project management.

The coal will be mined above ground and converted to diesel using processes similar to those of South African synthetic fuels company Sasol.

Sasol's process produces more than twice the greenhouse emissions of a normal oil refinery, but the Montana project, known as Many Stars, will minimise these by either storing CO2 or selling it to nearby oil producers. "We're hoping to sell all the CO2 that gets trapped, as a by-product," he said. There were more than 8000km of dedicated CO2 pipeline in the US, he said.

One problem I've long warned about related to peak oil is the surge of interest is that it will create in dirtier alternative fuels like coal to liquids plants. As a result, I haven't been surprised about the steady flow of news about planned CTL plants that is flowing from locations around the world, the latest from the US - Crow Tribe strikes deal for $7B coal project.

The Crow Tribe struck a deal Thursday with an Australian company toward building a $7 billion plant to convert coal into liquid fuels, which would be among the first such projects in the nation.

Capping months of negotiations, the Crow Legislature ratified a 50-year development agreement with Australian-American Energy Co., a subsidiary of Australian Energy Co.

The Many Stars coal-to-liquids plant initially would produce 50,000 barrels a day of diesel and other fuels. Construction would begin in several years and coal for the project would come from a mine yet to be developed by the tribe on the reservation, Crow leaders said.

The tribe's chairman, Carl Venne, said the coal-to-liquids project offered an unprecedented chance at improving the lives of the tribe's 12,000 members. The agreement calls for the Crow to receive up to 50 percent of profits from the plant after investors in the project recoup their costs.

"It means we will become self sufficient as a tribe," Venne said. "I won't need no more federal dollars. I won't need no more state dollars."

Total proceeds to the tribe could eventually top $1 billion annually — a breathtaking sum that dwarfs the Crow's current annual budget of about $26 million.

Representatives of the company and the tribe plan a public unveiling of the project at a news conference Friday. Expected to attend is Gov. Brian Schweitzer, who declined comment Thursday.

The Crow reservation sits atop some of the nation's largest coal reserves — an estimated 9 billion tons of recoverable resources. Yet only limited mining has occurred, and the tribe's economy remains hobbled by high rates of poverty and unemployment.

The development agreement comes as the coal industry faces rising criticism over its role as one of the largest sources of greenhouse gases blamed for global warming.

Hoping to defuse opposition, tribal leaders said the Many Stars plant would be built to capture 95 percent of the carbon dioxide it produces. That gas would be stored in underground geologic formations or sold to the oil industry, which pumps carbon dioxide into aging oil wells to squeeze additional production out of them.

Still, the fuel produced by such plants release carbon dioxide when burned, putting it roughly on par with conventional petroleum in terms of overall emissions, industry experts and government scientists have said.

One company I mentioned in my post on coal to liquids (CTL) last year was Linc Energy, who are trying to produce CTL using underground coal gasification (UCG) in Queensland. The Australian reports that the state government is having second thoughts about allowing UCG projects to proceed, instead seemingly preferring the rapidly expanding coal seam methane (CSM) industry - State lets off steam in coal gasification plans.

THE Queensland Government appears to be putting the brakes on its emerging coal gasification industry as it considers environmental concerns and whether the industry can co-exist with plans for a $20 billion LNG export industry.

Queensland's coal fields have attracted an investment bonanza in recent years as companies including Santos and Queensland Gas Company plan to use coal seam methane to develop a massive new LNG export industry, and other firms such as Linc Energy continue long-standing efforts to commercialise the entirely different coal gasification technology, which burns coal deep underground to extract a gas that can be liquefied into diesel and aviation fuel.

Federal Resources Minister Martin Ferguson has hailed both CSM and coal gasification as crucial to Australia's future energy security.

But the Queensland Government has realised that in several cases it has issued rights over the same tenements to companies pursuing each of the technologies -- even though most say they are incompatible because the coal gasification process burns the methane that the CSM producers are seeking to extract. And the Government now believes that in the long run the market will support the full-scale development of only one of the technologies, with cost and greenhouse emission levels from the production process the deciding factors.

"I expect both will develop until the market works out which one is most cost effective, but at the end of the day only one of these technologies will emerge as the winner on cost and greenhouse grounds," Queensland Climate Change Minister Andrew McNamara told The Australian.

In the meantime, as it seeks to sort out the problem of overlapping coal gasification licences issued under the Minerals Resources Act and CSM licences issued under the Petroleum and Natural Gas Act, the Queensland Department of Mines has sought advice from the Queensland Conservation Council and has heard deep concerns about the environmental impact of the coal gasification process, including its carbon emissions and claims that it could contaminate ground water.

The QCC told The Australian that it considered coal gasification a "more environmentally questionable resource" than CSM and had recommended to the Government that no UCG project should receive approval to commercialise in Queensland.

A spokeswoman for Queensland Mines and Energy Minister Geoff Wilson said the Government "has no intention of granting production tenures for underground coal gasification for at least three years. Underground coal gasification is a new technology, untried in Australian conditions, and it poses some potential problems, especially with groundwater systems," she said. "We will only do what is best for Queensland. In this case, we don't believe it's in the best interests of Queensland to grant production tenures for technology that is untried."

And Mr McNamara said his department had asked Linc Energy -- the most advanced of the coal gasification companies -- to perform new demonstration trials so that the Environmental Protection Agency could monitor emissions and groundwater quality. "Linc has been asked to do another more rigorous trial of its technology; it is critical we make sure we don't contaminate our groundwater," he said.

Linc CEO Peter Bond, whose company has a market capitalisation of $1.45 billion and has seen its share price rise from just 20c to $3.50 over the past two years, rejects the notion that his technology is incompatible with CSM performing stringent environmental assessments entirely of its own volition.

Keith Johnson at the WSJ reports that the US may soon get its first coal to liquids plant, noting that one unfortunate side effect of high oil prices is that it makes both dirty and clean energy alternatives more attractive - Coal Juice: High Energy Prices Prompt First U.S. Coal-to-Liquids Plant.

It’s far from clear that higher energy prices are environmentalists’ friend. Though they migh eventually spur clean energy, they’re doing a good bit of the opposite right now.

Today’s energy prices—and just as importantly, growing concern over energy security—are driving ever-dirtier energy solutions, from Canadian tar sands, to a rush to develop shale oil and gas in the U.S., to a dash away from natural gas and back toward coal. The latest unintended consequence? America’s first coal-to-liquids plant, to be built in West Virginia.

Consol Energy and Synthesis Energy Systems, or SES, announced today they will build a smallish plant right next to a Consol mine that can turn abundant West Virginia coal into gas. Eventually, and with the help of ExxonMobil, the pair hope to crank out 100 million gallons a year of gasoline from the coal. Technology permitting, Consol and SES hope to one day stick the plant’s carbon-dioxide emissions underground, making it a “clean coal” gasification plant.

The pilot project responds to the two dirtiest words in America’s energy lexicon—“foreign oil”—with a politically, if not environmentally, appealing alternative—“domestic coal.” Both West Virginia senators love the idea, praising it as an answer to the state’s economic development and America’s quest for energy security. Environmentalists hate it.

Coal-to-liquids technology isn’t new—the process was developed in Weimar Germany in the 1920s. Apartheid-era South Africa used the technology to escape sanctions. Today, coal-rich and oil-poor China is leading the world’s charge to turn coal into industrial gases and transport fuel, though other countries with oodles of coal reserves—from the U.S. to Australia—are increasingly turning to the black stuff as an answer to the oil crunch.

Despite the complicated processes involved, the economics aren’t bad. Oil prices are high, and coal is still relatively cheap (and companies like Consol’s new partner SES can use the really cheap grades of coal.) Worse are the environmental impacts—burning the coal once to make a gas, which is then turned into gasoline, which is then burned again in cars. That’s the same charge levied against tar sands development—even though pricey oil now makes so-called dg“unconventional reserves” an economically—attractive project for oil companies, it takes a lot more energy to get the stuff out of the ground, leading to a lot more emissions of greenhouse gases.

Reuters has a slightly alarming (for those concerned about global warming) article on Chinese progress (and "ambitious" plans) for coal to liquids plants - China builds plant to turn coal into barrels of oil.

With oil prices at historic highs, China is moving full steam ahead with a controversial process to turn its vast coal reserves into barrels of oil. Known as coal-to-liquid (CTL), the process is reviled by environmentalists who say it causes excessive greenhouse gases.

Yet the possibility of obtaining oil from coal and being fuel self-sufficient is enticing to coal-rich countries seeking to secure their energy supply in an age of increased debate about how long the world's oil reserves can continue to meet demand.

The United States, Australia and India are among those countries looking at CTL technology but are constrained by environmental concerns associated with the process which releases excessive amounts of carbon gases into the atmosphere and consumes huge amounts of water.

But China, which lacks the powerful environmental lobbyists that might stymie any widescale initiative elsewhere, is building a major complex on the grasslands of Inner Mongolia.

"Those countries with large coal reserves, like South Africa, China or the United States, are very keen on CTL as it helps ensure energy security," said Yuichiro Shimura at Mitsubishi Research Institute Inc (MRI) in Tokyo.

"However, the problem is that it creates a lot of carbon dioxide. Also you need a huge amount of energy for liquefaction, which means you end up wasting quite a lot of energy," the chief consultant at MRI in charge of energy told Reuters.

In Erdos, Inner Mongolia, about 10,000 workers are putting the final touches to a CTL plant that will be run by state-owned Shenhua Group, China's biggest coal mine. The plant will be the biggest outside of South Africa, which adopted CTL technology due to international embargoes on fuel during the apartheid years.

"We cannot fail," Zhang Jiming, deputy general manager at Shenhua Coal Liquefaction, told Reuters. "If things go smoothly, we will start with the expansion next year," he said.

The plant will start operating later this year and is expected to convert 3.5 million tonnes of coal per year into 1 million tonnes of oil products such as diesel for cars. That's the equivalent of about 20,000 barrels a day, a tiny percentage of China's oil needs as oil consumption in China is around 7.2 million barrels a day.

If all goes well, then Inner Mongolia will push on with an ambitious plan to turn half of its coal output into liquid fuel or chemicals by 2010. This would be around 135 million tonnes, or about 40 percent of Australia's annual coal output.

The region, as big as France, Germany and England put together, hopes CTL will propel development while contributing to Beijing's plan to have CTL capacity of 50 million tonnes by 2020.

That would be about 286,000 barrels a day, or about four percent of China's energy needs based on current consumption.

The Australian has an article on a new proposed coal to liquids plant in Australia, near the Monash Energy project. This one aims to produce urea as well as diesel, and hopes to try and sequester the CO2 produced in Bass Strait gas fields (making the large assumption that BHP will let them) - $2bn plan to 'fuel petroleum needs'.

The entrepreneur behind the project, Allan Blood, said Victoria's reserves of brown coal had enormous potential for fertiliser and oil production. The plant would generate 1.2million tonnes a year of urea and all the CO2 produced would be stored in reservoirs that once contained natural gas in Bass Strait.

The plant, expected to be operational by 2012, has the backing of several London-based equity funds. Joint-venture discussions with several major chemical companies have begun. The project will require 1000 workers to produce urea through a gasification process similar to the one used in the first stage of producing oil from coal.

Mr Blood was the brains behind a $5 billion coal-to-oil project in the Latrobe Valley that was bought by Shell and Anglo American. It is designed to produce 70,000 barrels of oil a day. The Australian Energy Corporation chairman said the tremendous amount of energy trapped in brown coal - coupled with gasification and geosequestration technology - provided a clean source of a range of hydrocarbons.

"There's no reason why Australia could not be totally self sustainable in petroleum products, or any other chemical product such as urea, from coal," he said. "We have got all the coal in the world here for goodness sake. It becomes the highest-quality fuel or diesel imaginable. Sasol in South Africa have been doing it since 1968, making 150,000 barrels a day."

Turning coal into diesel goes back to World War II, when besieged Germany used it to supplement its dwindling oil supplies. South Africa is by far the biggest user of the technology in what is a hangover from apartheid days when the country was concerned it would be locked out of world oil markets. However, it hasn't been widely taken up despite the wide geographic spread of coal reserves, largely because it is expensive.

It also produces significantly more carbon than traditional petrol-diesel production and has been described as one of the most environmentally unfriendly means of producing oil.

Australia imports 550,000 barrels a day of oil and 1.3 million tonnes, or $300 million worth, of urea for fertiliser each year. The urea comes from the Middle East.

Gasification works by treating coal at very high temperature with a controlled amount of oxygen to produce a gas that can be converted to diesel. Nitrogen is added towards the end of the process to make urea. Mr Blood said once the reaction was established, it was self-propelling and the CO2 generated was easy to trap and then store.

Energy Minister Martin Ferguson has been talking about gas to liquids (a subject covered here previously) as part of a strategy to address Australia's dependence on imported fuels. The minister has also previously expressed enthusiasm about coal to liquids projects (declaring at a recent CTL and GTL Conference "I regard this industry as the key to securing Australia's energy future"), so in this post I'll have a look at a few CTL projects currently at various stages of development around the country.

MARTIN FERGUSON: Just think about the competitive difficulties at the moment confronting Australian industry and the ordinary motorists given the price of oil. If we don't actually come to terms with investing in our future, then this is going to raise serious questions about our competitive position internationally in a tough global market in a very short period.

GREG HOY: According to the Minister, the best hope may lie in applying a new technology to Australia's vast reserves of natural gas and coal to create a new fuel for Australia's motorists and transport fleet.

GREG HOY: Crucial trials at Queensland's Linc Energy will begin before the end of the month, where a coal seem at Chinchilla, north-west of Brisbane, will be ignited underground like so, with compressed air forced through the seem to form a synthetic gas of steam and carbon, which as it exits will be converted from gas to a clear liquid diesel, with enormous production potential, the same technology we are told, can be applied to natural gas reserves.

MARTIN FERGUSON: So it's about exploration, plus encouraging investment in downstream processing in Australia on gas liquids and coal liquids and thereby creating synthetic alternative fuels.

GREG HOY: Once again, the sceptics do not share the Government's optimism that a solution to Australia's oil crisis is at hand.

JIM BUCKEE: The conversion of coal and gas, gas to liquids, for example, are quite energy expensive of themselves.

Monash Energy

Monash Energy is a venture by Shell and Anglo American to jointly develop a "clean" coal to liquids project in the Latrobe Valley, "utilising the latest low-emissions technologies".

The Monash plant is to use local brown coal as a fuel source (gently lifted from the earth by the little machine shown above) which has a moisture content of more than 60%. Vaporising the moisture when the coal is used for power generation results in an energy loss that also results in higher CO2 emissions per unit of electricity generated (around 50% higher than using black coal), which presents a major problem for Victorian power generators with the commencement of carbon emissions trading looming in the not-too-distant future.





Monash promotes their CTL project by highlighting both energy security concerns and their plan to sequester the CO2 produced (approximately 13 million tonnes of CO2 per year) offshore beneath depleting oilfields in Bass Strait.

Roll-out of these technologies – particularly coal gasification and carbon capture and storage – is becoming critical at a time when official forecasts project a 60% increase in world primary energy demand over the next thirty years. These same forecasts also suggest fossils fuels remain one of the primary sources of energy, so the aggressive adoption of new and less carbon intensive technologies is vital. Critically, the technologies chosen by Monash Energy enable separation of a concentrated stream of CO2 that can be transported to injection wells in deep underground geological formations for secure storage.

The Monash Energy focus on the production of liquid fuels – such as an ultra-clean, virtually zero sulphur synthetic diesel – is also highly relevant to the emerging debate around energy security. The Project would be one of the largest single investments ever undertaken in Australia. Its size and complexity means that at least a decade from initiation to commercial production.

The first commercial plant is expected to produce about 60,000 barrels per day of synthetic fuel (80% of which is high-quality diesel). Commissioning of the plant is targeted for 2016. There has also been talk of the project producing hydrogen. According to the company (as of late 2006) the output of the plant has an indicative price of $US50/barrel - however I suspect this number has changed somewhat since then - and the Gippsland Basin brown coal resource is sufficient to support several such plants, each operating for 50 years.


The plan to sequester CO2 in Bass Strait has hit some snags, with Exxon announcing last year that the region still has more than 20 years left of oil production and more than 30 years of gas, prompting speculation that the carbon dioxide may need to find another home. Exxon continued to raise concerns about this plan at the APPEA conference this week.

A pilot onshore sequestration project recently started up which may provide an alternative option if it can be made to work.





Linc Energy

Linc Energy is a small player that is commissioning a demonstration plant to convert coal to liquids at Chinchilla, on Queensland's Darling Downs (and one which promotes its process as a solution to peak oil). The demonstration plant is due to prove at the end of the month that it can produce products such as diesel and aviation fuel.


The company is using underground coal gasification (UCG) to produce syngas, then converting the syngas into liquids using the Fischer Tropsch process.

UCG differs from conventional above-ground gasification in a number of ways:

* Coal is not mined.

* Chemical processes are arranged to occur in the coal seam in situ.

* The injection and production wells must be connected within the coal seam by the links of low hydraulic resistance to allow production of commercial quantities of gas.

* Process water for gasification usually comes from the coal itself and surrounding rocks, and its influx must be carefully regulated.

* No ash or slag removal and handling are necessary since they predominantly stay behind in the underground cavities.

* The process must be confined within a hydraulic system created in the coal seam so that no leakage of the product is possible and no contamination of the underground environment can occur. Such a hydraulic system is called an underground gasifier, and its design is the most crucial part of a UCG operation.

The company is claiming it can produce syngas for about 70c a gigajoule, which The Australian claims is "causing some discomfort for Queensland's coal seam methane producers" (although they don't appear to be direct competitors, in the absence of any gas-to-liquids projects in the coal seam methane industry at present). The company also claims UCG produces 20 times more gas for a given volume of coal than CSM can.


If the demonstration plant is successful, the company hopes to develop a 20,000 barrels-a-day commercial operation - expected to cost around $800 million. The output would be trucked to Brisbane for distribution by BP.

Linc has formed a joint venture with a small Queensland based biotechnology company called BioCleanCoal to develop a bioreactor which will "convert CO2 into oxygen and solid biomass through a photosynthesis process" in the hope of reducing or eliminating CO2 emissions.

Some of the early proposals from Linc talked about a syngas fuelled power station as well, though this now seems to be on the back burner. The company claims this would produce fewer greenhouse gas emissions than regular natural gas fired power plants, which might be another reason why it promotes itself as a "clean coal" company.

According to a lifecycle analysis of UCG electricity production by BHP's Newcastle Technology Center in Australia (note that BHP is a very large producer of coal):

* UCG-CCGT (Underground Coal Gasification-Combined Cycle Gas Turbine) has the potential to be one of the lowest greenhouse gas (GGE) coal-based technologies, and compares with the emerging IGCC (Integrated Gasification Combined Cycle) and more radical ultra-supercritical developments — it would generate around 25% less GGE than the most efficient of Australian coal-fired power stations.

* UCG-CCGT, however, emits more GGE than does a natural-gas-fired CCGT process due primarily to the higher carbon to hydrogen ratio of the gasified coal product.

* NOx values are equivalent to other combined cycle type power stations.

* UCG-CCGT requires smaller amounts of water compared to other combined cycle technologies, as gasification water requirement is provided by controlling ingress of water from aquifers surrounding the wells and gasification voids. Some of this water is extracted as condensate and reused for cooling purposes.

The company is also expanding into Vietnam, recently announcing plans to build a UCG power plant there.

In addition, there are reports that Linc may be involved in plans to evaluate "huge but little explored coal reserves" in the Arckaringa Basin in South Australia's far north, with the goal of producing electricity and fuel for major resources projects - in particular Olympic Dam and its large new requirements for power (in a state already short of power generation capacity). According to The Age, no serious exploration work has been carried out in the basin since the 1980s, although the SA Department of Primary Industries and Resources has data from previous drilling indicating that billions of tonnes of coal could be contained in the region.


GulfX / Syngas Energy

GulfX is another company talking about building a CTL plant, again via gasification of coal, at a site 300 kilometres north-west of Adelaide. Apparently they partnering with geothermal energy hopeful Torrens Energy. The company says "We will have an on-site facility which will consist of a 30,000 barrel a day refining plant and a 500 megawatt power plant, of which 50 per cent would go into the national grid".

Both companies are minnows, so this project appears highly speculative.

Coal to Liquids Elsewhere

Until recent years, the only countries that have pursued coal-to-liquids programs have been those that have had difficulty obtaining sufficient oil supplies - particularly Nazi Germany and in apartheid-era South Africa by SASOL. Both used the Fischer-Tropsch process - a number of other coal-to-liquids processes have been explored in the years since.

South Africa has been producing fuel from coal since 1955 and has the only commercial CTL industry currently in operation. Around 30% of the country’s liquid fuel needs are produced from coal, with total capacity above 160,000 barrels per day.

Rising oil and gas prices have caused Asian countries to start looking seriously at coal-to-liquids projects, with China expected to start its first large scale plant in the coal-rich region of Inner Mongolia, using the Bergius process. The plant will reportedly have a daily output of 20,000 barrels, rising to 100,000 barrels a day in future years.

A study last year by the Chinese Academy of Sciences said: "Production of liquid fuels from coal is practically the most feasible route to cope with the dilemma in oil supply." It concluded: "Establishing large-scale CTL plants on the pitheads of several main coalfields is feasible and competitive when oil price is well over US$25 per barrel." According to The Guardian, at least two more commercial scale coal-to-liquids plants are under construction in China, although the Chinese government has expressed concern about the possible environmental impact of uncontrolled expansion, and has taken steps to limit the number of smaller facilities.

The IEA is predicting that by 2030, China's non-conventional oil supply from CTL plants will reach 750,000 barrels a day. An IEA report on CTL, due to be published this spring, will highlight other projects planned or under way in Japan, the US, Australia, China, India, Botswana, Indonesia, the Phillippines and South Africa.

The Indian government recently approved a joint venture between Tata and Sasol.

There is an organisation pushing adoption of coal-to-liquids processes in the United States called the Coal To Liquids Coaltion (also known as FutureCoalFules.org".

The US Air Force seems to be showing a keen interest in synthetic fuels from CTL and is reportedly encouraging the creation of a CTL industry that could leverage local coal reserves based on energy security concerns. They apparently have plans to lease property at Malmstrom Air Force Base in Montana for the construction of a CTL plant.

The Governor of Pennsylvania is also pushing for federal funding to establish a CTL plant in his state - a plan not without critics.




Environmental Concerns

Coal mining has always attracted a large amount of criticism from environmental groups because of the devastation it causes to both mined and surrounding areas and as a result of the pollutants emitted when burning.

Carbon dioxide emissions have been the number one concern in recent years, with critics pointing out that even if "clean coal" power plants can be built and operated successfully, CTL plants will always be major sources of emissions because the fuel produced is burnt where it cannot be sequestered - in vehicles.

While some scenarios have been considered that combine peak oil models with deliberate efforts to reduce our use of coal in order to reduce our carbon emissions to levels that are considered safe, accelerating the use of coal via coal-to-liquids schemes (in a knee-jerk reaction to peak oil) will achieve the opposite effect - rapidly increasing emissions as we use coal to make up for shortfalls in oil supplies.

Known coal supplies have the potential to increase carbon dioxide levels to almost 1000 ppm, which is far in excess of levels considered safe by the IPCC, leading some global warming activists to declare "coal is the enemy of the human race".

Some observers are already predicting the "beginning of the end for coal" in the US as a result of government and finance industry obstacles to new coal based energy developments.



Peak Coal ?

Australia's largest export is coal. The country is the world's fourth biggest coal producer, behind China, the United States and India, and largest coal exporter - with plans to dramatically increase supply by eliminating the infrastructure bottlenecks that exist in the major ports servicing the industry at Port Waratah in Newcastle (to 140 million tonnes per year) and Dalyrmple Bay in Queensland (to 85 million tonnes per year), weather permitting. A new port at Wiggins Island in Queensland capable of handling 85 million tonnes per year is also planned.

In 2006, Australia produced around 310 million tonnes (Mt) of coal, of which 230 Mt was exported. Australian coal reserves are estimated (by the EIA) to amount to 86,530 Mt, or just under 9% of world reserves, with deposits primarily located in Queensland and NSW.




There was a report in the SMH last year that NSW could run out of coal "within 35 years", based on a production growth rate of 3.2% per year - but this was using a resource estimate of 10,600 Mt, whereas the official estimate from Geoscience Australia is 34,100 Mt (of black coal). I'm not sure where the disconnect is here.

The Australian Coal Association, on the other hand, estimates Australia's identified black coal resources would last more than 200 years at current rates of production. Obviously current production rates are a foolish baseline to use, given the steady increase in domestic consumption and the expansion of export capacity, but even if we assume production rapidly increased to 1,000 Mt per year, this would still last for 70 years using the Geoscience Australia black coal figure (brown coal reserves are much larger) - and there does seem to be some scope for increases in resource estimates given that the huge known reserves haven't provide a lot of incentive for going out and scouring prospective areas that haven't been well explored so far.

Based on these numbers, it would seem that the only thing likely to constrain the growth of CTL plants in Australia as a response to rising oil prices is climate change policy limiting or heavily taxing carbon dioxide emissions.


Australia, along with India, is apparently the exception in terms of managing to find new coal reserves. According to a report on "Coal: Resources and Future Production" (pdf) from the EWG (Energy Watch Group), since 1986 all other nations with significant coal resources that have made the effort to update their reserves estimates have reported substantial downward revisions. Some countries - including Botswana, Germany, and the UK - have downgraded their reserves by more than 90 per cent. Poland’s reserves are now 50 per cent smaller than was the case 20 years ago.

The EWG report resulted in a slew of articles on "peak coal" predicting that coal production will peak in the 2020 - 2025 timeframe.



The Australian Disease ?

Woodside CEO Don voelte recently said Australia had a "raw, fragile, non-manufacturing and extraction-based economy". By some estimates, the North West Shelf gas project now represents about 3% of Australia's gross national product. If the Gorgon, Browse, Ichthys, Wheatstone, Pilbara, Gladstone and Darwin Phase 2 LNG projects all came to fruition, this would likely rise to over 10% of GNP.


With coal exports worth 5 times those of LNG in 2006, the weight of coal in Australia's economy is even greater.

Soaring coal prices - BHP, Rio Tinto and other Australian miners expect prices for exports to Asia to triple this year, before falling back a little in subsequent years - will further increase the share of the economy devoted to fossil fuel extraction.

Mineral exports are also causing the Australian dollar to appreciate sharply, with US dollar parity expected in the near future. These factors are having a large impact on other sectors of the economy, with exporters that can't command these sorts of price rises being severely squeezed by the rising currency.

These issues raise the spectre of Australia suffering from what is known as "The Dutch Disease" - the theory that an increase in revenues from natural resources will deindustrialise a nation’s economy by raising the exchange rate, which makes the manufacturing sector less competitive. The term was coined in 1977 by The Economist to describe the decline of the manufacturing sector in the Netherlands after the discovery of natural gas in the 1960s.

This potential fate has already been raised in the Australian Financial Review, The Age and others, but it is hard to see any government action to try and prevent this.

I'm not sure if there is a term for the converse of the Dutch disease - what happens to economies that become dependent on consuming a cheap and plentiful resource - but I think that would be an interesting area of study on its own.

One obvious outcome of peak oil is that all alternative fuel sources, no matter how dirty or greenhouse intensive, come under consideration as oil prices rise.

Tar sands and shale oil are obvious alternatives to regular crude that are receiving a lot of attention, and coal to liquids is another alternative that will be a disaster from a global warming (and general environmental) point of view.

The Australian has a predictable but nevertheless demoralising report on investigations into coal to liquids plants in Asia - "Oil price fuels fresh look at coal" - hopefully they'll realise that investment in renewables, smart grids and electric transport is a less suicidal option in the long run.

VAST coal reserves in Asia are gaining attention as major energy consumers such as China and India grapple with the reality of oil prices around $US100 a barrel and the risks they pose to their economies.

Multibillion-dollar facilities that convert coal to oil are being studied across Asia, while utilities are shelving plans to build power plants that use natural gas or fuel oil because prices of those fuels track the cost of crude.

Crude-oil futures on the New York Mercantile Exchange are more than 50 per cent higher than they were a year ago and are within sight of an inflation-adjusted peak of $US102.81 a barrel set in early 1980.

"The longer oil prices stay at these levels, then the more the incentives are going to be there for exploiting coal reserves," said Cambridge Energy Research Associates coal expert Jim Brock.

Coal prices would have to rise nearly fivefold to match current oil prices on a unit-of-energy basis, he said, and the difference between the cost of the commodities "is actually widening", he said.

Sharp increases in oil prices in recent years have already encouraged China to substitute coal for oil. Morgan Stanley said China's oil-dependency ratio fell to 20 per cent in 2006 from 23per cent in 2002, while its reliance on coal had risen.

Asian energy consumers are attracted to coal because it is less vulnerable than oil to the geopolitical upheaval that can cause price volatility. Asia has a third of the world's coal reserves, which stood at 909.06 billion metric tons at the end of 2006, according to BP PLC's most recent statistical review of world energy. Most of Asia's reserves are shared by three countries: China, India and Australia.

But greater coal use in Asia risks harming the region's environment, especially in developing economies that can't afford expensive technologies that capture greenhouse gases.

The International Energy Agency recently forecast that China would be the main contributor to incremental emissions through 2030. Output of greenhouse gases in India is rising faster than in almost any other country. China and India, which account for 45 per cent of world coal use, will account for more than four-fifths of the increase in global consumption over the next two decades, the IEA said.

Unsettled by a rising bill for crude imports, which is only partly mitigated by a weakening dollar, Asian energy consumers are examining the feasibility of building coal-to-liquids (CTL) plants to make gasoline and diesel. Creating such synthetic fuels from coal is attractive to China because of its dependency on crude imports, which run close to 50 per cent of its oil needs. The technology also offers cleaner fuels than those produced from oil.

Shenhua Group Corp will this year start China's first large-scale CTL plant, in the coal-rich region of Inner Mongolia. The plant will have a daily output of 20,000 barrels before raising output to 100,000 barrels a day in future years.

Other CTL plants in the works involve foreign investors, such as Sasol and Royal Dutch Shell. By 2030, the IEA said, China's non-conventional oil supply from CTL plants will reach 750,000 barrels a day.

India also is preparing to get in on the act. Coal India, a mining company, is in talks with several CTL-technology companies, including Sasol, about setting up a joint venture, an executive said last month.