Yesterday Solid Energy confirmed it was investigating a NZ$1 billion project to convert brown coal into liquid fuels in the Southland region, while the L & M Group said it was carrying out pre-feasibility studies into a NZ$5.8 billion project.

Solid Energy spokeswoman Vicki Blyth said lignite offered several development options. These included synthetic fuels, electricity generation and gasification, or converting the carbon in lignite to carbon monoxide and hydrogen, which in turn could be used in manufacturing methanol or ammonia.

L&M Group managing director Greg Hogan said his company’s pre-feasibility study into the economics of a NZ$5.8 billion lignite-to-liquids plant, capable of producing about 50,000 barrels of diesel per day, was due to start early next year and would take about a year to complete.

L & M would seek investment partners if the pre-feasibility study was positive, added Hogan.

Southland and Central Otago contains about 70% of New Zealand's lignite reserves, nearly five billion tonnes, of which Solid Energy has rights to over 3.4 billion tonnes. This would be enough to provide about 46,700 petajoules of energy. New Zealand currently uses about 150PJ of natural gas a year.

Executive director at Christchurch’s Centre for Advanced Engineering, George Hooper, said lignite reserves were New Zealand's most strategic energy resource, with various roles including electricity generation and liquid fuels manufacture.

Hooper said the centre and regional economic development agency Venture Southland had hosted a meeting earlier this year to look at the best strategic use for lignite.

L & M has coal exploration permit 40749 in Central Otago and Solid Energy has several coal exploration permits around Southland and Central Otago. Both companies have several coalbed methane exploration permits, while L & M also has several Southland petroleum exploration permits.