COAL explorer Greenpower Energy believes it may have lucked onto the Holy Grail of coal to liquid technology that will allow it to produce crude oil.
The company is currently hosting two US scientists who say they conducted successful lab trials on a 60kg sample of brown coal from Victoria's Gippsland region.
The technology they developed could use Victoria's vast brown coal reserves for the production of synthetic crude oil (CTL), University of Texas scientists Richard Billo and John Priest claim.
"Some of the major benefits are that it makes very low-cost synthetic transportation fuel," Professor Billo told AAP.
"It's environmentally friendly, providing almost no carbon dioxide coming out of the process, as well as no mineral deposits and things of that nature.
"It works very, very well with Gippsland coal, which we're very excited about."
Greenpower Energy owns an area that includes Gippsland brown coal reserves, which used to be owned by Esso.
The development of brown coal reserves is a sensitive issue in Victoria, because it is a high polluting source of energy.
The scientists plan a larger scale pilot plant to further test the new technology.
Coal to liquid technology is often maligned because it is regarded as too expensive, carbon-intensive, complicated and labour-intensive, with large amounts of water removed.
High crude prices are needed - such as the current $US100-plus per barrel prices - to justify the cost and Prof Priest acknowledged at least 12,000 patents existed for coal to liquid inventions.
Australia's national science agency, the CSIRO, takes coal to liquid technology seriously and researches it with the aim of ensuring security of fuel supply.
Prof Billo won't reveal how the coal to liquid technology works - saying that sensitive negotiations are taking place - other than to say it uses a cold rather than common heat process, with any expenditure to be repaid within 14 months if crude prices are $70 per barrel.
Crude oil would provide better margins than brown coal for Greenpower, but would not be exported and sold primarily to Victorian refineries, said Greenpower chief executive John Watt.
The company planned to meet with Clean Coal Victoria, a group within the Department of Primary Industry, with a view towards getting a coal to liquid pilot plant approved.
He said the introduction of any carbon tax would make the technology more viable, with Prof Billo saying the technology produced a low emission to purity rate of two per cent.
"The process being developed by Professor Billo and his colleagues will have a carbon dioxide footprint which is significantly lower than other CTL schemes," Mr Watt said.
"We feel that the right technology for CTL will enable the Gippsland brown coals to be used in an environmentally responsible manner for many years to come."
Not everyone is convinced, with Mine Life senior resources analyst Gavin Wendt saying it was easier to label something cost-effective in a laboratory than in the real world.
"Typically the capital cost of doing them is huge and no matter what they say in terms of the operating cost it is usually higher than what they think," he told AAP.
"You can't build a multi-billion dollar plant on an oil price being high now. What if it goes back to $60/barrel or $50/barrel?"
Greenpower Energy's shares shot up by 76 per cent in a day this week from 3.8 cents to 6.7 cents with a lift in volumes.
The jump resulted in a 'please explain' from the ASX, but the company cited strong drilling results by Empire Oil & Gas offshore Western Australia near an area Greenpower Energy in which has interests.
GPP Price at posting:
6.4¢ Sentiment: Hold Disclosure: Held
