The companies will use Syntroleum's proprietary air-based Fischer-Tropsch technology and Linc Energy's underground coal gasification, or UCG, technology at Linc's Chinchilla coal project in Queensland.

The UCG process involves injecting air and steam into an underground coal seam through boreholes and igniting the coal in situ. The coal seam is gasified and hot product gas containing the key feedstock for power generation or synthetic gas is produced via a second series of boreholes.

The UCG synthetic gas, which undergoes sulphur removal and additional conditioning at the surface, resembles synthetic gas obtained from conventional surface coal gasification systems, but costs far less.

The coal-derived synthetic gas is burned in gas turbines to produce power or is used as feedstock for reactors and refining processes to make “ultra-clean” diesel fuel, the companies claim.

The first commercial phase of the Chinchilla Project, which Linc Energy plans for next year, involves installing a 30-40MW power plant that will provide electricity to local markets.

The second commercial phase of the Chinchilla Project – a 17,000 barrel per day Syntroleum CTL plant and power plant expansion – will be developed over the next several years.

Linc Energy currently holds over four billion tonnes of coal reserves in Queensland, and intends to develop multiple worldwide CTL projects utilising its proven UCG technology and expertise integrated with the Syntroleum Process.

"We are pleased to be working with Syntroleum on this emerging UCG-CTL industry,” said Linc Energy managing director Peter Bond.

“The advancements they have made with the proven technology at their Catoosa Demonstration Facility complement the accomplishments we have made at our Chinchilla facility, setting the stage for successful integration of our two technologies.

"Demonstration of this concept will provide a roadmap for converting Australia's vast coal reserves into ultra-clean fuels."

Syntroleum also owns a proprietary gas-to-liquids (GTL) process for converting natural gas as well as other materials like coal and petroleum coke into liquid hydrocarbons. The company plans to use its technology, as well as others, to develop and participate in GTL and CTL projects in several locations around the world.