But while the end product is a clean-burning diesel fuel for the transport industry, the actual coal-to-liquids process produces far more carbon dioxide emissions than that created by oil or gas refineries.
As a result, some energy and environmental experts have warned that unless these emissions are captured at a production level, a CTL industry is unlikely to fit in with a potential carbon constrained economy of the future.
“It’s a potential disaster for the environment if we move in the direction of trying to create a big synfuel program based on coal to run our transportation fleet,” the New York Times quoted Daniel Lashof of the United States-based Natural Resources Defense of Council as saying recently.
“There’s a brown path and a green path to replacing oil, and Fischer-Tropsch fuel is definitely on the brown path.”
But while there are drawbacks, there are plenty of pluses. Coal is cheap to produce and there is an abundance, especially in energy-hungry countries such as Australia, the US and China.
In recent times, more and more companies both at home and overseas are announcing their intentions to get ‘clean’ coal projects off the ground.
Just yesterday, Linc Energy declared it had moved a step closer to establishing a 20,000 barrels a day ‘ultra-clean’ diesel plant at Chinchilla in Queensland, with immediate plans to start a six-week drilling program to expand its existing nine production wells.
Then a couple of weeks ago, US company Geostar announced plans to use a ‘clean dewatering coal’ technology developed by Perth-based Environmental Solutions International.
More recently, two energy giants – Royal Dutch Shell and Shenhua – have teamed up to conduct a feasibility study into developing a major CTL project in China that could cost up to $US6 billion (almost $A8 billion).
And it is not just the private enterprise jumping on the bandwagon either. Last week, the CSIRO put its research into action, after plans were unveiled to develop its Underground Coal Gasification technology in partnership with Australian-listed Metex Resources.
Even US President George W Bush has declared his support. In his State of Union speech in February – probably most remembered for his declaration of America’s “addiction to oil” – he called for further research and development in alternative energies, making specific mention of cleaner coal technologies.
As a result, the US Department of Energy is now funding a two-year study into tweaking the CTL, or Fischer-Tropsch, process and determining the feasibility of establishing a widespread industry in the coal-rich nation.
However, just because the US is a fan, does this mean a CTL future is necessarily in Australia’s best interest?
Perhaps not, if CSIRO business development manager James Puller’s comments carry some weight.
Speaking at a gas-to-liquids and CTL conference in March, Puller told delegates that while the US and China are focusing on cleaner coal technologies, Australia should instead look to develop its own technological solutions in order to unlock its massive offshore stranded gas reserves.
“Australia has traditionally relied on research and technology developed by other countries, especially the United States,” he said.
“But the size of the US’ coal reserves are bigger than the oil reserves in the Middle East, which explains why the country is spending so many dollars researching how to clean up coal.”
While interest in this alternative energy sector is being driven by high oil prices and a demand for cleaner fuels, the reality is that developing CTL technology does not come cheap. The technology needs a large initial capital investment and a drop in oil prices could potentially render a plant redundant.
But high prices are only part of the equation. Australian Bureau of Agricultural and Resource Economics senior economist Jamie Penm, who also spoke at the GTL and CTL conference, said technological improvements were needed in the sector to ensure these alternatives were cost-competitive with other mainstream energy industries.
These limitations and concerns have been the primary reason that a widespread CTL industry has never really taken off. However, today’s optimists are operating on the premise that high oil prices are here to stay.
One company’s enthusiasm for the industry that has not waned is Sasol, which has used the technology in South Africa for decades. The company is currently exploring potential uses around the world and is conducting a feasibility study with a Chinese partner of two big CTL projects in western China.
At the end of the day, coal is cheap and there is plenty of it. So as long as talks of ‘peak oil’ and further oil price rises continue, coal is likely to keep being promoted as a potentially viable alternative – even despite doubts over how clean these ‘clean’ technologies profess to be.