APEL and Syntroleum sign letter of intent for US$3 billion Australian coal to liquids development

Petroleum News Alaska Staff

Australian Power & Energy Limited and Syntroleum Corp. said Jan. 8 that they have signed a letter of intent outlining terms and conditions for Syntroleum to participate in the US$3 billion Victorian Power and Liquids Project being developed by APEL to co-produce power and hydrocarbon liquids from brown coal.

APEL received a license in 2002 to explore for brown coal in the Latrobe Valley in the southeastern Australian state of Victoria. APEL said brown coal seams in the Latrobe Valley are some of the thickest and closest to the surface of any in the world, and more than 90 percent of Victoria's electricity is currently generated from the coal.

The APEL license is for an area with a measured resource in excess of 3 billion metric tons of mineable brown coal, a coal resource which could yield more than 2 billion barrels of synthetic fuel products, the companies said.

APEL would contribute licenses to explore for brown coal and Syntroleum would contribute a license for its proprietary GTL technologies and would take 20 percent interest in the project and an undivided 20 percent interest in the coal resources.

In stage one, some 52,000 barrels per day of very low sulfur fuels, mainly diesel, and 500 megawatts of electricity would be produced. Over a 30-year period, cumulative production could be more than 500 million barrels, the companies said. Geo-sequestration of carbon dioxide produced in the process is also proposed.

Allan Blood, APEL's chairman, said the vision for the project "is that the GTL facility using Syntroleum's technology will produce ultra-clean distillate to help Australia achieve targets, which government has already set for higher transportation fuel quality standards, while also creating jobs and dramatically reducing greenhouse emissions."

Kenneth Agee, Syntroleum's chairman and chief executive officer, said that if the project goes forward, Syntroleum would have an interest in the coal resources "equivalent to approximately 400 million barrels."

Unless the parties extend or reach agreement and definite a joint venture agreement the letter of intent expires at the end of 2003. APEL is undertaking a feasibility study of the project. The coal award is for exploration only; future mining and coal development would require environmental assessment and regulatory approval.