The use of coal in world energy supply continues to increase. With growing uncertainty over the ability to maintain reliable supplies of oil & gas due to political as well as resource limitations, attention is focusing on the very large world reserves of coal and its potential as a raw material for alternative fuels.
Milton Catelin, Chief Executive of the World Coal Institute, set the scene for this workshop with an appraisal of coal resources against consumption, demonstrating the potential for coal as an oil and gas substitute.
Expanding on this overview, the pros and cons of two promising technologies – CTL and UGC – were then explored. Coal-to-Liquids is a well-established technology that has been practiced in South Africa over many years. High oil prices and the concept of peak oil production have brought a great deal of interest to bear on CTL. Scott Hargreaves, of Monash Energy Pty Ltd, Australia described the joint Anglo American/Shell Power & Gas/Monash Energy Project to construct a world-scale coal-to-liquids facility with off-shore CCS in Victoria’s Gippsland Basin in Australia. Underground Coal Gasification offers the opportunity to develop normally unrecoverable coal reserves and to bring the coal industry into lucrative gas markets. Dr Michael Green from UCG Partnership reviewed the work that has been carried out to date in UCG and showed the potential for UCG business against the background of public perception. Of course, in a carbon constrained world of the future, neither of these technologies makes sense without being associated with Carbon Capture & Storage. Dr Jeff Chapman, Chief Executive of the Carbon Capture & Storage Association, reviewed the worldwide political progress that is now being made towards the widespread adoption of CCS necessary to underpin these coal technology developments.
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“An Overview of World Coal Resources: opportunities & challenges” |
Milton Catelin became Chief Executive of the World Coal Institute in January 2005. Prior to that he worked with the UN Environment Programme (UNEP), where as Chief of Partnerships & Public Affairs, he created a public-private partnership programme for the Basel Convention on Hazardous Wastes. He has worked in the Australian Departments of the Prime Minister & Cabinet; Finance & Administration; and Environment & Heritage. He was a chief negotiator for Australia on both the Kyoto Protocol and the Montreal Protocol and has a Masters in Public Policy. He has received Awards for his environmental work from Australia (2001: “significant and sustained contribution to the achievements of Environment Australia”); the USA (2003 EPA Stratospheric Protection Award; and the United Nations (2007 UNEP Montreal Protocol Outstanding Contributors Award). |
Milton opened with a striking observation: there are sufficient global coal reserves for the next 147 years, vastly outweighing estimated gas reserves (by 63 years) and oil reserves (by 41 years).
Coal is a well-understood, abundant resource, globally well distributed and easily available in all the energy hungry areas of the world. Its provenance is familiar; it already accounts for 40% of the world’s electricity and 70% of its steel and aluminium production, and has been the fastest growing fuel annually since 1995. With ever higher oil and gas prices, the relatively low and stable coal price offers significant cost advantages, and many other factors make coal the more secure energy resource. There has been a noticeable trend of growing dependence on Russian mined coal in the last few years, and on a worldwide scale, it is self-evident that coal will continue to provide the backbone for the global energy mix of the future.
Scientific opinion has grown bolder and less equivocal about the long-term consequences of climate change, viz. the 2007 IPCC statement that: “Warming of the climate system is unequivocal. It is very likely that anthropogenic greenhouse gas increases caused most of the observed increase.”
Coal use, leading to economic and energy security using CCS technologies and improving the efficiency levels of power plant, is high on the energy policy agendas of government and business. The development of clean coal technologies is encouraging many new partnerships between the energy majors who recognise the imperative to move beyond our present oil and gas reliance.
Dealing first with CTL technology, Milton illustrated its environmental performance advantages. CTL use can significantly reduce many normal vehicle emissions and offers great benefits to centres of high pollution. Furthermore, the high concentration of CO2 in the production process is particularly suited to carbon capture & storage.
In terms of power generation, Milton emphasised the need for efficiency improvements at power plants and the rapid uptake of CCS. Replacing a class of sub-critical power plant, less than 300MW and more than 25 years could achieve a 5.5% reduction in global GHG emissions - much more than the current Kyoto targets. Furthermore, the UN IPCC has found that the costs of stabilising CO2 emissions can be reduced by 30% or more by including CCS in mitigation portfolios, and power plants with CCS could emit 80-90% less CO2 net.
The IPCC Special Report on CCS further found that more than half of the necessary CCS technologies were either “economically feasible” (under specific conditions) or already part of the mature market; potential for global CO2 storage capacity in geological formations is enormous, with long-term leakage from such places likely to be so low (<1%) as to be negligible.
Governments are recognising the benefits of including CCS technology in the future energy mix, and recently the G8 countries have focused on this. Europe has developed an integrated environmental and energy plan incorporating efficiency and clean coal technologies and expects to have some twelve CCS demonstration plants in commission by 2015, with all new power plant as CCS compliant after 2020. CCS has also been closely tied into the EU ETS. It is important for the UNFCCC and Kyoto Protocol to include CCS in the Clean Development Mechanism.
In Australia, the COAL 21 Fund has been established by coal producers there imposing a voluntary levy on production, to pay for CCS – Australian coal producers are spending 6 times more on CCS under this Fund than is the UK Government on its Carbon Abatement Technologies Strategy.
For the moment, pending the outcome of the Presidential elections, detailed action on climate change is completely stalled in the USA. However, all the candidates appear sympathetic to climate change issues and to CCS technologies, so the long-term signs are very encouraging.
In Milton’s view, governments have been very good at publicising the problems of the future but not so successful at publicising the solutions. He has no doubt whatever that sustainable coal is an affordable and essential solution and, using data from Deutsche Bank and Pew Centre on Climate Change data, he illustrated the significant abatement cost savings that European and US energy markets could expect from CCS technology. He finished by describing the actions needed for government and business to bridge the difficulties faced in fostering technologies right across the innovation chain, pointing out that this would require policies to bridge the technology ‘valley of death’ which, where successful, would help move technologies on to the phase of large-scale CCS diffusion.
| ”Coal-to-Liquids: opportunities & constraints” |
Scott Hargreaves joined Monash Energy Pty. Ltd. as Manager of Public and Government Affairs in 2005. He first degree was a BA in politics and economics and he later completed an MBA. Scott’s career in Energy includes both the public and private sectors. At one time he was Chief of Staff to the Victorian Minister for Finance. Later he joined that State’s Treasury Department and delivered a number of projects during Victoria’s energy privatisation program of the late 1990s – one of the world’s largest and most successful privatisations. He is currently involved in Monash Energy’s joint development with Anglo American and Shell Gas & Power in constructing a world-scale coal-to-liquids facility with off-shore CCS in Victoria’s Gippsland Basin. Immediately prior to joining Monash Energy he was General Manager of a Public Affairs firm which helped clients solve various stakeholder and regulatory challenges. |
Scott began by describing how his company, Monash Energy, in a joint project with Anglo American (since 2004), a major mining house with substantial coal business, and with Shell Gas & Power (since 2006), are now examining a world-scale CTL facility with offshore CCS in the Latrobe Valley/Gippsland Basin area of south eastern Victoria. This area of Australia offers a number of advantages. Major brown coal resources are already mined in the Latrobe Valley, which currently supports over 6GW of coal-fired generation. On top of this, the geological formation of the relatively close off-shore Gippsland Basin is ideal for large-scale CCS with a very large system of interconnected aquifers under a regional seal, and containing a number of oil and gas fields that have been producing for over 40 years. The Project vision incorporates CCS and, with a phased approach, envisages a plant producing around 70,000 barrels/day of ultra-clean, virtually zero sulphur, synthetic diesel. Development of the Project has focussed upon three basic drivers – Economics; Environment; and Energy Security.
The Latrobe Valley site offers economical transportation of CO2 to storage sites, as well as low-cost, easy to mine, lignite supplies readily available for local CTL project use, and which do not have the alternative option of export to Asia associated with the established Queensland and New South Wales black coal trade. These economics are supported by the IEA judgment in 2006 that, despite the usual CTL unit cost production disadvantages compared with conventionally refined products, nonetheless where coal can be delivered at low cost, CTL can be competitive.
The Project will use the Fischer-Tropsch synfuels production process, chosen because it is more common, more flexible, more suited to carbon capture, and produces better synthetic diesel, and he illustrated a typical FT reaction chain. Furthermore, the Project would like to see built a CO2 sequestration pipeline network to share and bring down CCS costs.
Synfuel diesels are quiet and clean and should provide an economically positive, premium fuel, which will help to reduce city-polluting emissions. XTL diesels have been very well tested in motor sports racing, providing exceptional acceleration, massive torque, and low engine noise (NB: “XTL” encompasses CTL and gas-to-liquids (GTL) where the end product via Fischer-Tropsch is the same). In June 2006 the Audi R10 powered by Shell GTL diesel was the first diesel car to win the 24-hr Le Mans endurance race, completing the fastest lap in the history of Le Mans and taking the checkered flag three laps ahead of its closest rival. This high-class performance was repeated at the American Le Mans series 2006 and at Sebring and again at Le Mans during 2007.
CTL technology meets the challenge for Energy Security, offering a reliable energy supply at a reasonable cost and with acceptable environmental impacts. In terms of volume security and trade advantages, CTL should be a pro-market response to Energy Security: to develop new markets; give consumers new choices; monetise otherwise non-tradeable assets, such as lower-ranked coals, and thus increase coal’s export intensity and its share of world energy trade. CTL offers real environmental benefits, and he illustrated the potential for emissions reductions across key air quality drivers including Nox and particulates, that could be achieved using XTL synfuels. CCS brings major improvements to the Well-to-Wheel life-cycle benefits that could be expected.
XTL synfuels offer a number of economic advantages over conventional fuels, featuring a mutual reinforcement of several end products. Optimised engine design could take advantage of higher XTL cetane ratings resulting in much greater engine efficiencies and lower running costs. XTL diesel can be used in conventional diesel engines as either a blend or pure; XTL naptha by-product yields are superior to those from petroleum-based naptha feedstock; XTL base oils enable production of low-viscosity lubricants with improved fuel economy; and XTL Kerosene burns more cleanly than standard Kerosene.
Globally, in our large cities, smog and GHG emissions can grow dramatically as the demand for increased mobility is ever expanding. If the forecast of vehicle usage reaching 2+ billion by 2050 proves accurate, unabated global carbon emissions by then are likely to be three times higher than the already unacceptable levels of today. Possibly the most powerful and influential role for XTL technologies will be in helping to assure future sustainable mobility across the globe.
Scott described the potential for sharing CCS operational costs utilising a CCS Hub to draw off CO2 from several different sources down an integrated pipeline network. There are issues of clean production, efficiency and cost challenges to be met, but all the processes this Project intends to utilise have already been widely tried and tested so the technology is established and well understood.
He did reiterate Milton Catelin’s warning about the ‘valley of death’, or what Scott preferred to call ‘Mind the Gap’ that stretches between product/technology ‘push’ versus market ‘pull’. The challenges of commercialising ‘first-of-kind’ technologies are always great and the willingness of business to invest in XTL technologies without a climate of real government policy incentives for them to do so remains an issue. In his experience, national governments are now grasping the nettle to promote and encourage CTL. Measures being considered include potential market incentives such as public/private partnerships, government loan guarantees, tax incentives, fuel excise taxation, accelerated depreciation, and providing a floor price for the fuels produced.
These are encouraging signs and in the Australian context could help at least one world-scale Victorian CTL/CCS Project to become a commercial reality and success.
| “Underground Coal Gasification as a Clean Indigenous Energy Option" |
Dr. Michael Green is a founding Director both of the UCG Partnership Ltd and UCG Engineering Ltd, a UK engineering company providing specialist technical and management services to organizations on underground coal gasification. The UCG Partnership is a trade association acting as a point of contact for companies, government bodies, academia and investors that wish to follow the expanding activities in UCG as a modern and efficient method of coal exploitation through the drilling of boreholes and the use of advanced completions to control the process. Michael Green has been working in the field of underground coal gasification for 11 years, first as the Director of the European deep UCG trial in Spain (1996-1999) and later as chief advisor to the UK Government for the UK initiative on UCG (1999-2004) to assess the feasibility of UCG as a future energy option. He has authored many papers on UCG and made presentations at most of the major coal and energy conferences in Europe, India, United States and Australia. He has also undertaken internal seminars for companies and helped launch the first training course on UCG in 2007. He has 32 years experience in energy related engineering research, and holds a PhD in Chemical Engineering from Imperial College, London. |
Michael Green provided an in-depth, state-of-the art evaluation of UCG development around the world today. He began by defining the principles of inseam Underground Coal Gasification (UCG)
Michael overviewed the history and development of UCG in Europe and the UK, illustrating modern UCG technology, highlighting some basic environmental risk management issues, and identifying many of the commercial opportunities for UCG syngas.
UCG has been around for much longer than might generally be realised. Russia began studies and bored pilot projects, albeit fairly crudely at shallow 200m depths, back as far as the 1930s. Wider European UCG technology developed throughout the 50s-60s and in 1970, the USA programme was established and ran for nearly twenty years. After extensive tests, and utilising modern advances in drilling techniques, the US developed two sophisticated and reliable UCG technologies - Steeply Dipping Beds and Moveable Injection CRIP. The Europeans, in the 1990s, then adapted the CRIP technique to the much greater, and environmentally safer, depth of 500m and below. The commercial and financial viability of UCG is being proven, and many other studies and trials are currently under way around the world wherever indigenous coal is to be found, most notably in China and Australia.
With modern advances in drilling, completion and control technologies, UCG can take advantage of otherwise un-extractable indigenous coal deposits, enhancing natural gas production enormously in all the major global coal producing countries. Linking this with CCS and pre-combustion processing, then UCG becomes an ideal response to the Energy Gap. UCG clean syngas can be utilised in existing or new power stations, for the production of a range of fuel gas applications (GTL, SNG, H2), and for making other chemical by-products. Syngas production costs are now highly competitive against natural gas.
In 1999, the UK Energy Review of the time identified UCG as having significant potential for the UK. With government’s growing responsibility to take action to mitigate climate change whilst ensuring security of supply, UCG became an obvious and very affordable option for the UK energy portfolio of now and the future. After a thorough 6-year investigation into the regulatory and environmental implications, in 2005 the UK government gave its support for a UCG near-shore feasibility study in the Firth of Forth, Scotland. The 1st phase of the study is complete and is now with Scottish & Southern Energy.
Licensing issues for UCG development are one of the concerns for its application in the UK. A Licence from the Coal Authority gives the operator the right to work the coal and a Lease gives the property interest. The Coal Authority had originally believed that it could grant a Licence and Lease to an operator even if they did not hold a Petroleum Licence in the area, but this is still open to interpretation. At the February 2008 conference organised by UCG Partnership, Mike Hawkins, Head of Oil & Gas Administration at BERR, stated that:
“The current situation is that BERR believes that at least some cases of UCG will require a Petroleum Act License. It may well turn out that all do, though we are happy to consider a technical case for exceptions, and we will be ready to consider the question on a case-by-case basis at least until we have greatly expanded our knowledge of the nature and particularly the variability of UCG. I should stress that licensability is not a question of policy; it comes down to a legal and technical comparison of UCG against the wording of the Petroleum Act. Any award of licenses must be made in accordance with all relevant legislation, of which the Strategic Environmental assessment appears particularly important. It would surely also be appropriate to consider the position and for the purposes of such discussions, BERR would welcome a body that can speak for all companies involved in UCG”.
Michael expanded upon the price competitiveness UCG syngas compared to natural gas (currently between 8-16 US$/MMBTU) and showed the range of CO2 capture advantages from deep-seam UCG-CCS. He noted as well that CO2 emissions from UCG compared most favourably to those from conventional power plant. In addition, UCG offers a wide range of CO2 sequestration options, being well suited for all the current storage sites being considered, namely: abandoned offshore gas reservoirs; enhanced oil recovery; saline aquifers; and even deep ocean floors, although this last is controversial. Another potential local store could be the abandoned cavity itself and its overburden, which becomes stressed as the cavity develops, but this still requires deeper feasibility study and testing.
UCG development is growing apace all over the world with a flurry of activities during 2007-08. Of especial interest is the EU’s project, Hydrogen Underground Gasification Europe (HUGE), which started in July 2007 at a cost of €3.5M and involves 10 Institutions across Europe headed by the Central Mining Institute, Poland. Key to this project is the optimisation of hydrogen production from the UCG cavity, by methods such as pressure and temperature swing and a looping scheme with Calcium Oxide.
Elsewhere, Michael noted that most coal producing countries are now involved with their own UCG schemes but notably the emphasis seems to have switched from government supported programmes to those undertaken by private companies, with the downside that there is much less disclosure now. There is growing interest in the USA and Canada, viz. UCG reviews by US National Laboratories, a GasTech Inc. 5MW demonstration project with support from a Wyoming business study, and new entrepreneurial initiatives in both countries. As well as the EU’s HUGE project, the UK’s Firth of Forth trial is now in its 2nd phase, and interest is growing in Hungary and many of the Eastern European countries.
China already has up to 16 State sponsored trials in place, supported by strong entrepreneurial activity. After announcing its fledgling Xinao joint venture UCG trial in 2006, it has romped ahead with a project in Mongolia and reported ignition in September 2007, and already one month’s test results by February 2008. In India, Reliance, BHEL, NLC and others are planning trials, with an ONGC site already selected and technical designs underway, whilst Pakistan is examining prospects in the Sindh coalfield. Australia is showing strong commitment with Linc Energy IPO share offers raising A$22M in 2006 and another A$65M in 2008 for their UCG trial in Chinchilla Queensland; Carbon Energy Pty Ltd holds licenses for trial UCG schemes in Queensland’s Surat basin; the CSIRO has set up a joint venture, and another new initiative is planned in South Australia.
Finally, in South Africa, the Eskom UCG trial at Majuba Coal field has been in gas production since January 2007 and there are plans to build an air-blown co-fired 350MWe IGCC unit. Sasol have trained a project team and feasibility work is now underway.
As a result of this upsurge of interest in UCG, many technology supply firms, such as UCGEL (Michael’s own firm), Ergo Energy, Linc Energy, In Situ Energy, now offer their services worldwide. In addition, in April 2006 Michael and a colleague launched a trade association, UCG Partnership, to act as a centre of information and expertise worldwide.
To sum up, feasibility and pilot tests are underway in Asia, Australia, US, Eastern Europe, South Africa and the UK. There is growing availability of private capital for major UCG projects and there is mounting interest in offshore and coastal schemes seen as more acceptable for local communities. The prospects for the UCG business look good, and are set fair for the future.
| ”Securing Political Acceptance for adopting CCS” |
Jeff Chapman established the Carbon Capture & Storage Association in March 2006 following a long period of supporting UK businesses to establish a position in greenhouse gas emissions trading and carbon capture & storage. Jeff has over thirty years of management experience in industry, consultancy and more latterly in government circles. He has specialised in the energy sector with a focus on the business opportunities that arise from climate change mitigation. Jeff has been a significant contributor to the establishment of London as the World centre of emissions trading. Recognising the enormous potential of carbon capture & storage to control global greenhouse gas emissions and the consequent opportunities for business Jeff established an industry interest group with support from UK Trade & Investment in 2001 which became the foundation of the Carbon Capture & Storage Association in 2006. The objective of the Association is to represent the interests of its members in the business of capture and geological storage of carbon dioxide. From its base in London the CCSA brings together specialist companies in manufacturing & processing, power generation, engineering & contracting, oil, gas & minerals as well as a wide range of support services to the energy sector such as law, banking, consultancy and project management. |
Dr Chapman opened by stating that the only thing holding up implementation of CCS in the UK was the lack of clear government policy direction.
In his view, there seems to be little public objection to CCS, the price is positive, there is no shortage of business interest, (viz. the CCSA now has 55 members), and there should be no shortage of capital for investment into this palpably ‘good’ technology, since CCS has no competition. The one major drawback remaining is the lack of regulation to give the financial incentive to get business rolling.
The UK is leading the world in formulating CCS policy and there is a great opportunity for the UK to lead the global market for CCS. But certain steps must take place before this can become a reality:
As of now, there is growing interest in the UK and Europe in implementing CCS. The UK government has already commissioned one demonstration project, though their chosen technology (post-combustion capture) was not perhaps the best choice. Another project and more are needed as quickly as possible.
The European Union is further ahead, planning to have ten to twelve CCS projects up and running in Europe by 2015, and has a draft CCS Directive already prepared. On the whole, these initiatives have provided a good policy start, and are well founded based as they are on UK thinking.
CCS is recognised in the 3rd Phase EU/ETS, qualifying because it removes CO2 emissions. CC-ready plant will have to be re-licensed as ‘installations’ in order to be able to buy ETS allowances, as will Pipelines and Storage facilities, from which any CO2 losses will need to be monitored long-term and covered by buying ETS allowances. All installations will have to be licensed separately.
There is great European support for CCS, but the question still remains – where will the financial incentive come from? The EU/ETS Clause 10 may help to incentivise investment, since it provides for 20% of auction revenues to be ploughed back into projects like CCS development, but Clause 10 may well be scrapped because of opposition from finance ministers.
Internationally, the London Convention is now fixed. The OSPAR Convention on the North Sea seabed has been agreed but is not yet ratified. Most importantly, CCS must now be recognised at part of the Clean Development Mechanism, and CCS support measures must be put into place. Although CCS technology will fix emissions from fossil fuel conventional production, nonetheless it has met with some public opposition. Canada is working hard to overcome some local objections to the technology, but the USA is currently supporting four CCS projects. In Australia there is great support for CCS whilst the Middle East knows their future lies in adopting CCS unequivocally. China poses a huge challenge and it is imperative to get CCS under way there despite the huge cost issues. China recognises this and is driving forward with CCS fast. The same can be said for India.
Jeff concluded by pointing out that Carbon Capture and Storage should be viewed not as a major added cost, but rather as a major business opportunity, one that would inevitably lead to higher turnovers, bigger companies and even greater opportunities for business in the future.