The world’s biggest independent oil trader and the largest non-government-owned coal mining giant on Earth are joining forces to develop a new use for coal.
Vitol Group and Peabody Energy have teamed with a U.K. startup that’s developed a process to pulverize coal, remove impurities and pollutants, and blend it with crude oil or fuels for use by refineries and other customers, Bloomberg reported.
While unproven on an industrial scale, the technique has the potential to revive an industry that has stumbled as the world shuns coal for cleaner natural gas and renewables.
“The coal industry needs this because we are able to upgrade their material into higher-value, lower-emission products,” Julian McIntyre, founder and CEO of startup Arq Ltd., said in an interview with Bloomberg. “The oil industry needs this as the energy industry becomes more diversified and competitive with renewables.”
Arq is building a plant in Corbin, Kentucky, to process coal from a nearby Peabody mine, and Vitol has agreed to blend and market the resulting output, Kallanish Energy reports. Production costs less than $10 an oil-equivalent barrel, according to London-based Arq.
Methods of transforming coal into oil liquids or other hydrocarbons have been tried for roughly a century, with varying degrees of success.
Under deals announced Wednesday, Vitol and Peabody will each invest $10 million in Arq, with the potential to inject more cash over the next three years.
The partnership could allow Peabody to add value to its coal, reduce its environmental footprint and expand the market for its products, Charles Meintjes, executive vice president and chief commercial officer for the St. Louis, Missouri-based company, said, in a statement.
The venture may also allow refiners and fuel customers to diversify sources of supply, Mike Muller, the former head of crude trading at Royal Dutch Shell, who recently joined Vitol, said in a separate statement.
Arq looks to complete its Kentucky plant by early 2019, and produce the equivalent of roughly 2,000 barrels a day once it’s running at full capacity. The company then plans to build larger plants near coal mines in the U.S. and Australia, and targets 100,000 barrels a day within two years, McIntyre told Bloomberg.
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