The Value Opportunity for New Zealand's Lignite Deposits

The lignites of Otago and Southland offer a potentially viable future feedstock for electricity production and possible conversion to petrochemicals or liquid fuels. The deposits, when combined, represent New ZealandÆs largest energy inventory; equivalent to about 74 000 petajoules û or approximately 35 times current natural gas reserves. Too often dismissed as irrelevant to New ZealandÆs energy future because of adverse perceptions of the value of low rank coals, the strategic value of this resource is in fact huge.   Investigations of the lignites extend back over more than 50 years (LFTB various, CRL Energy Ltd). Whilst it is not the intention of this paper to review this work, these investigations have confirmed the suitability of the resource as a feedstock for thermochemical conversion. Current estimates of South Island lignite mining costs are NZ$1.0 - 3.0/GJ (Natusch 2005), making these resources amongst the most competitively-priced energy sources available world-wide.   This value, however, will only be captured if we as a country begin to envisage a world-scale, long-life, integrated and multi-faceted development sized to supply world markets for chemicals or fuels. Recent CAE studies (Hooper and Riddolls, 2005) have emphasised the vital importance of ensuring that any exploitation of this resource maximises their value to New Zealand. The question that thus must be applied is how might large-scale utilisation of the resource fit with New ZealandÆs primary energy supply, and its potential for the export of high-value commodities.   From the broader perspective of New ZealandÆs total energy supply equation we need to examine other supply options beyond just the generation of electricity. We face in this country a situation wherein almost all our liquid fuels feedstock has to be imported with projections for an increasing dependence on imported oil. In addition NZ has a natural gas reserves-to-production ratio of less than ten years, and dwindling supply from local production. Without further natural gas discoveries, New Zealand has only a window of approximately five years before we will need to commit to imported LNG or some other thermal fuels option.   In other words, New Zealand is facing an uncertain future unless we can restore energy inventories to cover an adequate strategic reserve capacity as well as enable long-term investment in alternative sources. Within this context the South Island lignite resources are thus deserving of more attention. The extent of the resource is well known, its suitability for conversion reasonably assessed, and its magnitude such that there is little doubt that lignite conversion could adequately meet NZÆs future energy needs for many years out.   This paper reviews coal gasification technology, its application to lignite and the possibilities for future development of the lignite resources. It is argued that the strategic imperative for this country is to secure the lignite resources as a primary energy source for this country well into the latter half of this century.