State-owned coal miner, Solid Energy has secured the exclusive New Zealand rights to a technology which converts low-grade lignite to high-grade coal and synthetic crude oils, as it looks to kick start production from its lignite reserves.

The agreement was signed with Australian company Ignite Energy Resources, on the lignite to coal-fuel technology, which uses a water-based chemical conversion and miner, would pay staged fees up to a maximum of A$15 million (NZ$18.4m), plus royalties.

Their agreement to work together will commercialise the technology and will construct and commission a standalone pilot plant able to process lignite and biomass in New Zealand.

The cost of constructing will be around ten million dollars and its "super critical water reactor" will attack organic polymers, cutting them directly into the higher grade fuels. The coal will have the potential to be used in the steel-making process.

Biomass and biofuels businesses producing wood pellets have already been established by Solid Energy at Taupo, Rotorua and Christchurch, and biodiesel from raw and recycled canola oil, at Christchurch.

Solid Energy had a number of projects running that were looking at converting low-grade coal, including a coal to fertiliser project and lignite to transport fuel project. It was also developing a lignite-briquetting plant near Mataura with GTL Energy. The key to the success of all of these is to find the technologies which can best be applied in New Zealand.