of interest re coal to oil

You Yangs may herald world's newest 'oilfield' BARRY FITZGERALD
March 29, 2010

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The question is whether this junior miner can convert brown coal to oil above ground and within the coal seam itself.

IT'S not every day that an ASX-listed junior gets a shot at revolutionising the world oil industry. The company is Melbourne-based Regal Resources (ASX: RER). That its market cap is $25 million at Friday's closing price of 4.6 a share tells you that the jury is still very much out on just whether the Middle East has anything to worry about.

But we will all know soon enough though.

Regal is the proud owner of a $4 million, skid-mounted pilot test plant that it has positioned over the brown coal seams found beneath the plains to the west-south-west of Melbourne.

The shiny new plant sits in the shadows of the granite peaks of the You Yangs on Oak Park farm where the arrival of a ''new'' oil industry would be a welcome change to failed crops and dying sheep.

The aim of the pilot plant is to prove whether Regal's so-called UCTL (underground coal-to-liquids) patented technology can convert brown coal to oil above ground and within the coal seam itself.

For the technically minded, we're talking about the hydrogenation (adding hydrogen) of coal using super-critical water (Garimpeiro's got no idea on that one, so go to http://tinyurl.com/yzrzts2 for an explanation) to produce hydrocarbons in a low pressure environment.

Think about spraying the coal with high-velocity water to produce liquid hydrocarbons and you're as close as Garimpeiro is to understanding it all.

Best to focus on Regal's suggestion that if the pilot plant delivers the goods, it will begin working towards an initial development that would produced 10,000 barrels of oil a day from a 200-well field development covering an area of 2.5 kilometres by 6.5 kilometres and involving the ''depletion'' of a 10-metre section of a 15-20-metre coal seam. Costs of about $US20 a barrel have been suggested.

Obviously, Regal's ambitions are not resource constrained. There is more otherwise uneconomic brown coal/lignite in Victoria, and elsewhere in the world, than you can poke a stick at. But the technology has to be proved first before anyone gets too excited.

At least the moment of truth has arrived, with Regal announcing on March 16 that the Oak Park pilot plant had been commissioned.

Surface testing of samples of brown coal is up first. Additionally, Regal is also getting samples of black coal, oil shale and Canadian bitumen delivered to the site for surface testing.

Underground testing is due to start next month. Garimpeiro won't be the only one watching with interest.

BHP Billiton's president of energy coal between 2001-2004, and a chemical engineer to boot, Mike Oppenheimer, took up an advisory position with Regal on March 3.