But the approach is so far untested on a commercial scale, making the initial expense a concern for governments and investors. "The potential is huge," said Gordon Couch, from the International Energy Agency's Clean Coal Center.
"It needs a series of successful demonstrations. Despite 50 years of trials no commercial use has been demonstrated. Current pilots could result in commercial opportunities within five to seven years."
Higher energy prices and security fears and in particular advances in drilling — the biggest single cost — were focusing new attention on underground coal gasification (UCG).
The technology involves injecting air or oxygen into a coal seam, which is burned and heated to produce and then pipe to the surface an energy-rich gas that contains hydrogen, methane and carbon dioxide.
The gas could be burned to produce electricity or liquefied and turned into a liquid carbon fuel. Alternatively, the hydrogen could be separated for a transport fuel or used by the oil refining industry.
"We believe strongly that UCG is the next frontier for us," said Dzung Nguyen from Canada's Alberta Energy Research Institute.
"Thirty years ago no-one had heard of the oil sands industry, now it's the biggest oil reserve in North America," he said, adding that investment had cut by one third the cost of extracting heavy oil from sands in Alberta.
Successful UCG could access 628 billion tons of coal from Alberta's Mannville seam alone, 1,400 meters underground and too deep for mining, said Nguyen.
That compares with global coal production now of 6 billion tons a year, according to the IEA's Couch.
Half of Germany's coal reserves were below 1,500 meters and too deep for mining, said Thomas Kempka from the German Research Center for Geosciences. If developed on a commercial scale, UCG would produce the world's cheapest electricity, he added.
Researchers are working on particular problems, especially the danger of contaminating groundwater, as well as the extra greenhouse gas emissions from a new focus on burning high-carbon coal.
"When you burn coal it produces benzenes, weird aromatic compounds, tarry materials, ideally you want these generated in a totally sealed way," said Michael Stephenson, head of science energy at the British Geological Survey.
Research had to establish whether heating coal underground, cracking bedrock above and drawing in water, could contaminate surface supplies, he said.
Greenhouse gas emissions from the process could be cut by storing the carbon dioxide underground using an equally experimental technology called carbon capture and storage (CCS).
"We see UCG and CCS together as a bridging technology to the deployment of renewable energy" such as wind and solar power, said Germany's Kempka.