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Peter Fagianoexplainshow the humble lumpof coal could be theanswer to securingdelivery of SouthAustralias futureenergy needs

IN recent years, theres been tremendous

volatility in the cost of crude oil,

culminating in prices reaching US$147/

bbl in July 2008. Due to the global recession,

the price fluctuated downwards, but as a

result of political instability in the Middle

East and North Africa, the crude oil price

currently sits around US$111/bbl. As its

unlikely in the medium term that prices

will stabilise or come down, many nations

are seeking security of supply at more

economic levels by diversifying their

sources and type of energy supply.

The situation is compounded by the fact

that conventional cheap sources of oil are

declining and hence international energy

exploration and production companies are

now seeking oil sources in areas of higher

political risk, with higher exploration and

production costs. This resulted in an 8%

growth in the natural gas market in 2010.

But what other options exist?

The exploitation of the huge shale gas

reserves in the US will mean that the country

will now become an exporter of LNG asopposed to an importer.

Nuclear is now facing many challenges as an

energy alternative following the 2011 tsunami

in Japan.

Renewable energy sources such as biofuels

and wind energy grew by 16% but overall

represent less than 2% of the global energy

consumption.

Coal consumption grew globally in 2010

at the same rate as natural gas with some

48% of world demand being consumed in

China. The growth in coal demand has not

been solely for generation of electricity but

also in the conversion of coal into synthetic

transportation fuels and petrochemicals.

energy in South Australia

missing a trick?South Australia currently relies on

importation of all of its transportation fuels

primarily from Singapore with bulk fuel

shipments arriving every three days at Coode

Island Terminal.

With synfuel production gaining pace in

other areas around the world (see box), an

opportunity to develop South Australias

coal reserves for the production of electricity

and synthetic transportation fuels lies onits doorstep in the form of the Arckaringa

basin. Arckaringas coal assets of 7.8b t

represent more than 10% of Australias total

coal reserves and with this in mind, Altona

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Synfuel from coal

Synfuel plants are operational or are

being built in North America, Europe

and Asia.

All international airlines that refuel

in Johannesburg or Cape Town fly on

50:50 synfuel:refinery aviation fuel.

China is following suit and is building

synfuel plants as well as developing

coal-based petrochemicals.

Korea is proceeding on major coal

gasification projects for the production

of electricity and synthetic natural

gas (SNG).

Figure 1: South Australia mines, including

Arckaringa coal asset

Energy decided to investigate the feasibility

of exploiting these currently undeveloped

reserves.

In November 2005, Altona acquired the

mineral exploration licence in the coal-

bearing areas in the Arckaringa basin,

covering 2,500 km2and including three

coal deposits Westfield, Wintinna and

Murloocoppie containing over 7.8b t of coal.

These coal deposits are effectively one of the

worlds largest undeveloped energy banks,

capable of conversion into clean liquid fuels,

low-cost power and high value industrial

feedstocks. We carried out process feasibility

studies (PFSs) for the mine development and

the proposed coal to liquids plant. Sufficient

technical and economic data was developed

to select suitable technology licences. In2010 we formed a joint venture with Chinas

CNOOC as a strategic partner. In return for

financial investment, CNOOC owns 51% of

the mineral exploration licences.

coal-to-liquids for Australia?South Australia can also develop its energy

economy based on indigenous coal reserves.

The coal is ideally suited for gasification

and for the coproduction of synfuels and

electricity. Firstly the coal is gasified to

produce raw syngas from which carbon

dioxide is captured before the treated syngas

is converted into synthetic liquid fuels asfollows:

syngas can be converted into long chain

liquid hydrocarbons (wax) (by the Fischer

Tropsch process) which are then refined to

produce primarily diesel, aviation fuel and

naptha; or

syngas can be converted into methanol,

which is then polymerised into gasoline orolefins.

multiple benefits at

ArckaringaIn 2006 we carried out drilling programmes

to confirm the coal quality and quantity and

subsequently develop the design of the mine

and synfuel plant (CTL). Due to the enormous

size of the coal reserves, the coal extraction

rate can be increased, so that there is ability to

also co-produce gasoline and petrochemicals.

The technologies required to produce

synthetic fuels are well proven and the coal

gasification process allows for the efficient

and economic capture of carbon dioxide for

sequestration, thus minimising greenhouse

gas emissions.

Also, the plant produces sufficient electricity

to meet the operational needs as well as to

export electricity into the transmission grid.

The water from the mine development and

the coal processing plant are treated to allow

use in the plant and export of the water to the

local farming communities and the mining

enterprises.

Our work to date using technical

engineering companies in Australia, Europeand the US indicate that we could produce

liquid fuels at a sale price of A$0.33/l,

which is extremely competitive at todays

international pricing, thus even providing

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the future opportunity for export once theneeds of the South Australian market have

been met. These costs will only be subjected

to inflationary costs and are not exposed to

international oil market volatility. The general

public and industry at large would benefit

from implementing the Arckaringa mine and

CTL plant.

Synfuel quality is superior to that

produced from conventional crude oil.

These properties include:

lower specific gravity which results in lower

payload, especially important for the aviation

industry;no aromatics orcarcinogenic compounds;

reduced sulphur and nitrogen emissions.

There are minimal carbon dioxide emissions

in the overall process with emission levels

similar to natural gas power plant due to the

carbon capture scheme.

Were considering building a plant to

convert some of the carbon dioxide into

methanol, which can be directly added to the

gasoline pool; there are favourable economics

Combined cycle

power plant

Fischer-Tropsch

synthesisCleanup

Tail gas

LPsteam

Refining

Diesel

Naptha

Other fuels

By

products

Sulphur

Inert slag

Coal

O2

Syngas

CO+2H2

Gasification

CO2

Figure 2: Synfuel process schematic

for conversion of methanol into gasoline.The Arckaringa Project is ideally placed to:

supply fuel and chemicals to new resources

and industrial projects;

enhance power supply to the state grid and

the national electricity market;

distribute water to the region from mine

dewatering and plant processes; and

be a catalyst for regional development and

employment.

can it be done?The Arckaringa Project design was developed

from prefeasibility technical studies, coveringCTL plant design and costing, open cut mine

design and costing, a field drilling programme

and follow up hydrogeological modelling,

geotechnical evaluation and coal quality

testing and analysis. From these studies and

the large body of work from past evaluations

of the Wintinna coal resource, we derived a

project base case.

A field drilling programme commenced in

2006 and was completed in 2008, with the

associated geotechnical, hydrogeological,

coal testing and analysis and resources

statements. During 2007, we commissioned

CTL and power plant options optimisation

work on mine costs and constructed a

project economic model. Studies on fuel and

electricity markets were also undertaken.

These studies, together with the historical

database and the field drilling and associated

technical programmes, constituted a

prefeasibility body of work at a standard

which permitted an informed decision on

proceeding to the bankable feasibility stage

(BFS).

where were at

Along with CNOOC we started the two-yearBFS programme for the mine and CTL plant

development in October 2010.

To date, major milestones achieved include:

the Chinese authorities have confirmed the

Left to right: Arckaringa Creek and hillsnear Wintinna, April 2010; Investigations

underway

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key findings

Key findings from the pre-feasibility level studies are

described below:

geology and coal resourcesThe Wintinna Deposit contains up to 3,900m t of coal

resources. The resources statement incorporating the results

of the field drilling programme show a Joint Ore Reserves

Committee (JORC) compliant resource estimate of 1,287m t

which covers only about 25% of the area of the deposit.

mine design and costsThe Wintinna deposit can be mined as a conventional open cut and back fill

operation.

The initial box cut will take approximately 2 years to uncover first coal, thereafter

mining is virtually steady state through dewatered overburden and gently dipping,

consistent coal seams.

The mine footprint after 30 years at 1015m t/y of coal will be around 20 km

2

.Groundwater modelling shows that average dewatering volumes are significant,

estimated at up to 600m l/d in early years reducing to 300m l/d.

CTL and power plant design and costsThe base case CTL plant comprises gasification, FischerTropsch liquids and

combined cycle power generation. It is a complex but integrated facility that

combines to produce 30,000 bbl/d (10m bbl/y) of diesel products and naptha, and

the export of 560 MWh

(4m MWh/y) of electricity to the grid and/or third parties.

infrastructure requirementsThe mine and CTL plant site is remote from large regional centres but has the prime

advantage of proximity to the Adelaide Darwin railway and the Stuart Highway.

The costs of normal mine site infrastructure, with the exception of the grid

transmission link, have already been factored into project economic model.

Connecting the power plant to the national electricity grid will benefit the grid

system in terms of load balancing, especially if the plant operates in base load mode.

fuels and electricity marketsThe fuel market in SA and NT can absorb all of 10m bbl/y of liquid fuels from the

CTL plant:

the SA and NT market relies totally on imports of diesel fuel and is estimated at

9m bbl/y currently and forecast to rise steadily to around 12m bbl/y by 2014

fuels can be exported via the nearby rail link to Darwin to supply markets in Asia,

particularly China

It is anticipated that the lower density specification for CTL diesel (0.77) compared

to conventional refinery diesel (0.83) will be accommodated in future within the Diesel

Fuel Standard.

Electricity market studies show costs of generating power at Arckaringa are

sufficiently low to enable the power plants export capacity to be dispatched into the

national grid.

environmental issues and approvalsThe key issues are the impact of mine dewatering on regional water sources,

mound springs associated with the Great Artesian Basin (GAB) and aquifer systems,

and CO2mitigation.

The management plan for pumping, diversion and disposal of groundwater will

require a water allocation licence (WAL) from state government authorities to ensure

it protects local water supplies, GAB mound springs, flora and fauna species etc.

CO2mitigation plans include plant capture, compression and storage at asequestration site already identified in the East Officer Basin, around 100 km from

the proposed CTL plant site, for long-term sequestration under a gas storage

licence.

Arckaringa coal asset in terms of both qualityand quantity;

South Australian government approval for

the field programme commencing this year

for the specification and location of coal and

geotechnical boreholes and hydrological

tests wells;

reconfirmation of the suitability of the coal

for gasification; and

re-evaluation of the mine and CTL plant

development options and project economics.

The BFS will further optimise the

configuration of the overall complex in

respect of the project economic model,compliance with environmental legislation

and overall logistics for products export.

Were confident that South Australias coal

reserves can allow it to become a regional

leader in synfuels production and offset its

reliance on imported fuels, thus achieving

economic benefits and homeland security.

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Peter Fagiano(pfagiano@altonaenergy.

com) is director at Altona Energy.

Miracles can happen even

to those who are small,

flammable and dressed all

in black.*The miracle isthat coal can be convertedinto synthetic fuels andpetrochemicals whileminimising any effluentsor emissions into theenvironment.

* From Lemony Snickets book

The Lump of Coal

IChemE EVENTS

Gasification 11

Cagliari, Sardinia, Italy

811 May

Gasification technology provides an

attractive conversion route to fuels

and chemicals from a wide range of

primary energy sources. Most of the

undesirable by-products created by

conventional combustion processes are

either eliminated, converted into saleable

products, or can be captured for safe

storage. Gasification 11 will take a close

look at the latest developments in the field.

Register now: www.icheme.org/

events/gasi11