[Kabar-indonesia] Asia coal-to-liquids faces more than cost constraint

[Joyo at aol.com]

Asia coal-to-liquids faces more than cost constraint

By Neil Chatterjee

SINGAPORE, November 15 (Reuters) - Countries looking at
developing coal-to-liquids projects should be net energy
importers with state backing, ideally with deregulated fuel
prices and no carbon constraints as well as large coal and
water resources, an executive said on Wednesday.

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 $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 $30-$40 a barrel, half its current price <CLc1>.
Louw said coal feedstock costs were currently around $5 a
barrel with operating costs about $15 a barrel, though
plants also have high capital costs of $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.

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Joyo Indonesia News Service
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