Decision on lignite plan soon

Solid Energy may make a decision early next year on whether to commit hundreds of millions of dollars to a feasibility study for a huge lignite-to-liquid fuels plant in Southland.

The state coal miner has "more than enough" lignite resources after spending about $60 million in the past few years buying up farms in Southland for the project.

The company has been working away on the pre-feasibility aspects of the project, which would involve investment of at least $10 billion and government support to succeed.

Solid Energy chief executive Don Elder said such a project would need at least three international partners for the technology, skills and finance and could involve five or more.

A true feasibility study would cost "hundreds of millions of dollars" he said.

So far the SOE had spent about $10 million on pre-feasibility work and about $60 million on land.

Elder would not comment on whether the new government would look more favourably on the project than the last Labour government which focused its energy policy on the development of renewable energy.

He said no company would do a project of such scale without government involvement. That did not mean money necessarily.

The government would be involved in everything from regulation issues and planning right through to helping comfort international investors, he said.

"There's no way you would do a project like this unless the government of the day approved that it was a good project for New Zealand."

Any government would look at the affordability of the project and national benefit, the security of energy supply and environmental impact. Solid Energy could address all of those, Elder said.

There were typically about six stages to a 15-year project like this and Solid Energy was four to five years in at stage three, the pre-feasibility stage.

The first was the pre-conceptual study, not much more than the back-of-the-envelope study, the second was a conceptual study and then a pre-feasibility study, then a phase of detailed investigations of drilling and sampling, followed by a feasibility study and finally front end engineering design.

Elder said Solid Energy was currently at the pre-feasibility stage, which was nearing its completion in the next three to six months.

"We would be making a decision on going to the full feasibility study sometime during this year or early next year based on the timeline we are on, once we complete the pre-feasibility study and do final reviews of that and assure ourselves, yes, we should be going to the next stage. But there are still another few months of work and reviews to go under the bridge before we are at that point."

It would be a bigger facility than anything else in New Zealand.

"We are still in the normal world, nine or 10 years away from having this project up and running or probably three or four years away from pushing the button to go ahead and start ordering and construction and things like that."

Elder said such a project was feasible if the price of oil was between US$60 to US$80, depending on the size of the project and the economies of regional location.

While the oil price was below that at present, such a project looked at where oil prices were expected to be up to 30 years out.

"So our expectations are the price of oil will easily justify the project but we've got plenty of time to develop the project."

The project would halve New Zealand's requirements to import transport fuel by replacing all the diesel.
The savings to New Zealand might be between $2 billion and $4 billion a year.

The project would not only benefit the balance of payments  the difference between what New Zealand spends overseas and what it earns  but would also significantly boost gross domestic product.

- © Fairfax NZ News