TOKYO -- The Economy, Trade and Industry Ministry of Japan and Kobe Steel Ltd. will in March start construction in Indonesia of the world's first plant capable of turning low-grade coal into high-grade coal.
According to sources in the ministry and the company, the plant will be built to test the commercial potential of a method in which low-grade coal, such as brown coal, is coated with asphalt before being fried in light oil.
Because low-grade coal contains a lot of water and discharges fewer calories than high-grade coal, it is rarely used in Japan.
The plant aims to turn low-grade coal into high-grade coal with a high energy output, but with low pollutant emissions.
It will be the first plant of its kind in the world to be built as a large-scale commercial facility, the ministry and the company said.
The ministry will contribute 4 billion yen for the construction of the plant via Japan Coal Energy Center, an affiliate of the Natural Resources and Energy Agency.
Kobe Steel will contribute a further 4 billion yen.
The plant will be built in southeastern Kalimantan, where there are many coal mines, and is scheduled to start operations in spring 2008. It is expected to be capable of processing 600 tons of low-grade coal per day.
Most of the processed coal will be exported to Japan.
The ministry and Kobe Steel aim to start supplying processed coal to Japanese power plants by fiscal 2010.
Low-grade coal has many tiny holes inside and contains a lot of water, so burning it provides only 70 percent of the energy obtained from high-grade coal.
But studies conducted by Kobe Steel found the same calorific output can be gained from low-grade coal as from high-grade coal by using the new method.
Under the method, low-grade coal is crushed, coated with liquid asphalt to prevent water from seeping inside, and fried in light oil to dehydrate it. The coal is then shaped into briquettes.
The company said the amounts of sulfur, ash and other pollutants normally discharged when burning high-grade coal is reduced to about one-third by using the new process. The light oil used for frying can be reused.
The company said the new business can be profitable if an estimated production cost of about $40 per ton of processed coal can be met.
The price of coal has almost doubled since 2000, partly because of increased demand from China.
Currently, the import price of coal from Australia, Japan's major coal supplier, is about U.S.$50 per ton.
Because Indonesia is closer to Japan than Australia, transportation costs from the plant will be lower, helping to make the processed coal more price competitive.
Japan imports about 80 million tons of fuel coal a year, mainly for its thermal power plants.
Low-grade coal accounts for about half of the global recoverable reserves of coal, which is estimated at about 980 billion tons. If low-grade coal can be better utilized by the new method, the project could help curb the rise of energy resource prices worldwide.