Untapped gas fields beckon

Listed mining company L&M Group believes successive governments have squandered the opportunity to develop southern lignite fields worth billions of dollars.

L&M is forging ahead with lignite exploration - as is competitor Solid Energy - and yesterday confirmed it would spend $21 million on a more than two-year feasibility study of Southland and Otago fields, estimated to have 11,000 petajoules of energy locked away.

About a dozen southern lignite fields are thought to contain the energy equivalent of 35-40 Maui gas fields.

Proposals to develop Southland and South Otago lignite - the lowest grade of coal - are not new, and more than $100 million has been spent by L&M Group and Solid Energy.

The Government remains lukewarm to the potential, largely because of the carbon emissions created in the gasification process and the technology to capture and store carbon underground is still in the development stage.

"I have to say I believe we have hit a brick wall [with successive governments]," L&M Group chairman Geoff Loudon said.

"But we're here for the long term. This [lignite] could be the heritage for our children and grandchildren.

"We have been ill-served by politicians under both sides [National and Labour] who have had a myopic view of lignite," Mr Loudon told the more than 300 delegates attending the Australian Institute of Mining and Metallurgy, New Zealand branch annual conference in Wellington yesterday.

The L&M Group has five southern permits containing about eight billion tonnes, including Ashers-Waituna, north of Invercargill, Benhar, near Kaitangata, and Hawkdun, near St Bathans, the latter where the Department of Conservation wants to establish a recreational reserve, coincidentally at the exact point where mining operations would begin.

Mr Loudon was acutely aware of energy development issues in Central Otago, such as local opposition to wind farms and recent proposals for dams.

In an interview, he said if the deposits were mined, the overburden of soil would be back-filled into the hole created and, with an expected 10% shrinkage in volume from the extracted lignite, the rehabilitation would be recreational lakes.

He highlighted that unlike higher grades of coal, lignite had less sulphur content and would therefore create lakes with higher grades of water.

"[However,] DoC want to put a reserve over [Hawkdun], which will essentially lock it away. We hope to be able to speak to some responsible people about that."

Mr Loudon did not play down the massive investment required to turn lignite into fuel, citing 2007 studies costing $4.5 billion per project to have gasification under way, and noting inflation and global metal prices had already boosted estimates of the capital outlay.

But with one tonne of lignite producing a barrel of diesel, for $US65, it remained feasible.

New Zealand lignite was the most suitable in the world for converting to hydrocarbons.

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