Announcing the move at a CTL and GTL conference in Brisbane this week, Federal Resources Minister Martin Ferguson noted that Australia has only
eight years of oil reserves left at current extraction rates, but more than 600 years of coal reserves.
He told delegates of the third annual coal-to-liquids and gas-to-liquids conference in Brisbane that by 2015, the country would be producing only about 20% of its own transport fuels.
"CTL and GTL will be a very important part of the department's work over the next few years in the context of securing Australia's energy future," he said.
He said the Government's first priority involved implementing Labor's election commitment to undertake a National Energy Security Assessment to paint an integrated picture of the outlook for electricity, gas and liquid fuel supply and demand over the next five to 15 years.
In terms of cost, the Australian Bureau of Agricultural and Resource Economics says CTL and GTL should become viable once the long-term oil price settles above $US40-45 per barrel.
The organisation suggests a capital cost of $US50,000-70,000/bbl of daily capacity for a CTL plant, compared with the cost of a conventional refinery of about $15,000/bbl of daily capacity.
Diesel is produced from coal and gas via the Fischer-Tropsch process, a catalysed chemical reaction in which carbon monoxide and hydrogen are converted into liquid hydrocarbons, which can then be refined to produce diesel.
The Government is working alongside Monash Energy - a joint venture between Shell and Anglo - on a potential CTL project in the Latrobe Valley in Victoria.
This would involve the gasification - via Shell's proprietary coal gasification process - of Anglo American's brown coal (or lignite) from the Latrobe Valley for liquefaction into clean transportation fuels. (Shell is already operating a GTL plant in Malaysia and is planning another in Qatar.)
Commissioning of the plant is envisaged for 2016.
Several other companies are also boasting similar CTL projects in a more advanced stage of development.
Construction of a world-first coal-to-liquids demonstration plant at Chinchilla in Queensland is almost complete and is expected to enter commissioning later this month, according to operator Linc Energy.
The pilot project will involve underground coal gasification, then converting the UCG gas into a clean diesel fuel.
Linc estimates it would cost $700 million to $1 billion to turn its Chinchilla coal reserves into a CTL project capable of producing 20,000 barrels of fuel per day (7.3 million barrels per year).
Last week, chief executive Peter Bond said the plant was on track for early commissioning with no major delays experienced to date.
"The GTL pilot plant is tracking very well with the bulk of the plant erected," he said.
"We feel confident that Linc will commence early commissioning of the plant by February 28."
Linc has also certified enough coal reserves to justify the construction of the plant, based on the results from 106 drill holes completed over the past year.
The company needed at least 300 million tonnes of coal, but recently the joint ore reserves committee (JORC) certified it as having 401 million tonnes.
"Not only does 401 million tonnes of coal give Linc over 60 years of Syngasfeedstock at a production level of 20,000 barrels per day - but 401 million
tonnes potentially offers 600 million barrels of liquids (diesel and jet fuel) production from the Chinchilla site," Bond said.
The Linc Energy project near Chinchilla, Queensland, about 300km west of Brisbane, involves underground gasification of coal followed by liquefaction to produce synthetic hydrocarbons.
Linc has also teamed up with frontier explorer Sapex look at developing the large coal deposits in its Arckaringa Basin licence into potential UCG and CTL projects.
Elsewhere in the Arckaringa Basin, Altona Resources has its own plans to integrate a 10 million barrel per year CTL plant with 560MW co-power generation project.
Just yesterday, the company announced plans to raise £11.6 million ($A24.6 million) to fund a bankable feasibility study into the proposal.
Altona is raising the funds via a share subscription agreement with Hong Kong investment company Tongjiang International Energy Co for the placement of 240 million new ordinary shares.
Last October, the company signed a memorandum of understanding with logistics company Freightlink to use the Darwin-to-Adelaide rail corridor for the project.
These services would include importing goods and materials required to build and maintain the plant, as well as transporting liquid fuels from the
facility.
The Adelaide-to-Darwin rail corridor runs directly through the area covered by Altona's coal leases in the Arckaringa Basin and is 60km from the Wintinna deposit, which will provide the coal feedstock for the CTL and power plant.
Back in Queensland, Metex Resources is making inroads of its own, having bought out the CSIRO's interest in its joint venture firm Carbon Energy in November.
The company was set up four months prior to develop a UCG technology, now set to be commercially tested some time this year with a demonstration plant in the Surat Basin.
The UCG plant is being build at Bloodwood Creek, 30km west of Brisbane,chosen after 100 million tonnes of coal resource was inferred at the site earlier this year.
The resource is estimated to contain about 2000 petajoules of energy, half of which is potentially recoverable using the UCG extraction technology.
Outside Australia, CTL technology is best demonstrated in South Africa, where currently 30% of the country's transport fuel needs are met through CTL plants.
