Asia Coal-to-Liquids Faces More than Cost Constraint
Date: 16-Nov-06
Country: SINGAPORE
Author: Neil Chatterjee
This may rule out hopes from Asian countries such as oil trading hub Singapore, even though it can get coal from neighbouring Indonesia, as well as Japan with its Kyoto Protocol target and gas-to-liquids projects for import-dependent China.
"If you have to purchase the coal and don't have control over the price, then the barriers to entry will be higher," Marjo Louw, managing director of Sasol Chemicals Pacific Ltd., told a seminar at the Institute of South East Studies in Singapore.
"It really depends on the country and the strategic importance of (energy) sustainability -- there is definitely a strategic undertone."
Global miner Anglo American is conducting a feasibility study for a US$4 billion coal-to-gas, power and chemicals project in northern China that would start in 2009, said its chairman Mark Moody-Stuart on Wednesday.
Louw said a country ideally needed 2-4 billion tonnes of coal, which would rule out Asia-Pacific countries other than China, India, Australia, Indonesia and Pakistan. High-quality coal may get better use elsewhere, while gasification does not work well for lignite coal.
"If you don't have sufficient coal and water resources available you shouldn't even start," said Louw.
GAS CONSTRAINTS
Countries are looking at such plants, which produce clean transport fuels from coal, as they seek to reduce the pain of costly oil imports and improve energy security.
Firms such as China's Shenhua Group say it is viable with oil above US$30-US$40 a barrel, half its current price Louw said coal feedstock costs were currently around US$5 a barrel with operating costs about US$15 a barrel, though plants also have high capital costs of US$60-80,000 per barrel of daily output.
Louw said Sasol had completed pre-feasibility studies for two plants in China, for which operations would be expected by 2013, while he saw four or five plants in the United States in the next decade and said India had similar potential.
"We're looking at opening three plants in India in the next 12-15 years," he said.
However, coal-to-liquids plants produce more carbon dioxide (CO2) than oil refineries, and so are unlikely to be suitable for countries such as Japan or in the European Union that have targets to cut greenhouse gases under the Kyoto Protocol.
"Carbon is an important part of any project evaluation," he said. Another limiting factor is state-controlled diesel prices capped below international levels, such as in much of Asia, which would cut profitability for a plant's output.
"If you don't have a normal competitive environment it's very difficult to sustain it," he said.
In Southeast Asia, gas-to-liquids (GTL) could be an option for gas producers Indonesia, Malaysia and Vietnam, though small stranded gas reserves such as in Australia may no longer be suitable for GTL and more valuable for growing gas demand.
"I would speculate that very few of these (small) projects will go ahead -- the cost of gas has gone up too much," Louw said. "It's really difficult to purchase gas and convert gas to GTL -- there's not sufficient gas in China," he said.
