Southland's vast lignite resources could be tapped, with Solid Energy yesterday confirming it was investigating building a lignite-briquetting plant as part of an industrial estate in Mataura.
The energy producer has joined forces with Australian company GTL Energy Ltd in the investigation.
If the project is supported by commercial and industrial , customers, the plant could open by the end of next year, creating about 10 jobs and providing a new household heating option for consumers.
A decision on the development will be made early next year.
Lignite briquettes are a composition fuel manufactured from lignite coal.
The lignite is crushed, dried and moulded under high pressure into briquettes.
The plant would be built on the site of the former Mataura paper mill, about 10km east of Solid Energy's New Vale open-cast mine.
Using GTL Energy's technology, it would process about 100,000 tonnes of lignite annually.
The manufacturing process upgrades the low-rank coal by removing significant amounts of moisture before the lignite is combusted.
This raises its thermal value and reduces emissions.
Solid Energy's general manager, Brett Gamble, said the joint venture was the next stage in Solid Energy's long-term programme to maximise the value from New Zealand's "world-scale lignite resource."
Over the next few months, Solid Energy and GTL Energy would complete technical and economic feasibility studies, engineering designs and lodge resource consent applications.
Mr Gamble said GTL Energy's technology would produce a significantly higher grade and cleaner energy source for South Island industrial and commercial customers.
Although it started in Australia, GTL Energy now operates mainly out of the American state of Colorado.
Mr Gamble said Solid Energy's decision on whether to open the plant would be based on demand from industrial and commercial customers.
The lignite briquettes could also be used for home heating - the feasibility studies will include a look at the possibility of bagging briquettes for the household market at Solid Energy's Ohai mine, which closed earlier this year.
