South Korean steelmaker, Posco, has signed a protocol of intentions with Brazil’s Rio Grande do Sul state for the construction of a US$ 1.8 billion coal gasification plant near the Triunfor petrochemical hub.

The deal provides incentives for the plant and a partnership between Posco and local coal miner Copelmi.

With a 2 million m3/day capacity, the plant will produce coal-derived synthetic natural gas (SNG) through coal gasification. Rio Grande do Sul signed an MOU with local gas distributor Sulgás to market the SNG produced at the Posco-Copelmi plant, the report said.

The deals come as Brazil continues to seek ways to diversify its energy matrix, which remains heavily dependent on hydroelectric plants.