A Deed of Arrangement was announced yesterday for the 'clean' production of gas and liquids using the Rentech-patented gas-to-liquids technology.

Partners in the $500 million deal include unlisted public Australian gas-to-liquids company, GTL Energy Limited and International Power (Australia) Pty Ltd, a subsidiary of UK-based International Power plc (majority owners of the Hazelwood power station at Morwell). Rentech's president and chief executive officer, Dennis Yakobson, is also a director of GTL Energy.

The deal could lead to the establishment of a large capacity gasification and gas-to-liquids (GTL) plant adjacent to International Power's 1600 MW Hazelwood generator

In addition to the Rentech Australian licencing agreement, GTL Energy and Rentech have also developed and patented techniques in cooperation with Denver-based Hazen Research, Inc. to beneficiate low-grade brown coal into high energy feedstocks.

"Preliminary assessments show that for a throughput of 4,500 tonnes per day of Yallourn Seam coal, the Hazelwood project could produce two million barrels a year of high quality, sulphur-free diesel, and just under a million barrels a year of naphtha," said GTL Energy's chairman, Robert Kennedy.

The technology proposed for Hazelwood can reduce carbon dioxide emissions by 40% compared to conventional power generation and allows capture of 90% of the remaining CO2 - potentially a lucrative source of carbon credits for Australia's energy players.

International Power's Hazelwood chief executive officer, Dave Quinn, said the company welcomed the opportunity to be involved in a potential expansion of the region's energy industry into clean fuel production using advanced and proven GTL technology.

"The close alliances within the parties have the experience to produce efficient, high quality feedstocks and introduce a new energy alternative for the Latrobe Valley," Quinn said.

"Importantly, the process can utilise approximately 50 million tonnes of low grade coal resources which do not have the quality of the deeper seams of coal currently used to fuel Hazelwood."

Kennedy said Hazelwood had the potential to be the project in which Australia took leadership in the development of low grade lignites to produce clean, efficient power and liquid products.