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Impact of emissions must be factored

Threatened by expectations of a growing role of coal as the fuel of choice for future power plants in Asia, Royal Dutch Shell Group yesterday urged governments in the region to be careful to include environmental costs in their calculations before making a shift from gas to coal.

Dick Benschop, group vice president for gas market development, held a global Web chat yesterday with media from a number of countries, where he said a comparison of the total costs of energy showed that coal and gas were about equally expensive.

"But then you have to take air pollution and carbon dioxide into account as well … then you clearly see the enormous advantages of gas," he said.

According to a Shell report submitted to the Web conference, total generating cost of an "advanced supercritical" coal-fired power station is estimated at US$86 per megawatt-hour, slightly cheaper than a combined-cycle plant that runs on natural gas, which has an estimated cost of $92/MWh. But if the costs of health and carbon-emission impacts are included, a gas-fired plant will be significantly cheaper, with total costs of $123/MWh compared with $165/MWh for a coal-fired station.

The projection is based on the 2012-2030 assumptions that gas prices will range from $8.90-$11.10 per million British thermal units, coal prices of $120-$123 per tonne, and the cost of carbon credits, which could range from $9.60-$126 per tonne.

Alex Burnett, Shell's global gas and LNG market development manager, said gas-fired power plants emitted 50 per cent less carbon dioxide than coal, and significantly less non-carbon pollutants.

"Yet coal, which is responsible for as much as 44 per cent of energy-related CO2 emissions [according to the International Energy Agency, or IEA], and a significant proportion of harmful air [pollution] is predicted to account for 70 per cent of new power-generation capacity in Asia through to 2030.

"Responsible policy-makers will take a longer-term view on cost and consider whether alternatives such as coal are socially and environmentally affordable," he said.

Asked about the future prospects of liquefied-natural-gas prices in Asia, which are currently higher than in other regions, Benschop said a number of LNG projects were under construction in Australia, while the United States and Canada were working to get ready for LNG exports as well. Because of innovations in gas-extraction technologies, such as exploitation of shale-gas reserves and the construction of floating LNG facilities, a range of new supply projects are also under way.

Nevertheless, Daniel Fobelets, Shell's strategy and portfolio manager for global gas business, said that when compared to the US, shale-gas development would take quite some time in Asia.

"Apart from China, which has very significant shale-gas reserves, India and Indonesia also have shale gas. But to date, only the reserves in China are being actively developed. The local geology, pipeline infrastructure and proximity of a gas market very much determine the commercial [viability] of shale gas," he said.

Roger Bounds, Shell's vice president for global LNG, said Asia had ample supplies of natural gas, both offshore and unconventional such as shale gas, but the absence of pipelines meant that LNG had a big role to play.

Thierry Grauwels, manager of gas and LNG market development for Shell Upstream International, said that according to the IEA, natural-gas reserves could last more than 230 years at the current consumption rates. New technologies like floating LNG facilities will allow the exploration of fields that were too difficult to access in the past.

"LNG is fast becoming a truly global commodity and will continue its rapid expansion in the years ahead, with global demand growing around 2 per cent per year from 220 million tonnes per annum in 2010 to 370mpta in 2020," he said.

LNG is natural gas that has been converted to liquid by cooling it to approximately minus-162 degrees for ease of storage or transport.


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