Santos chief’s gassy vision Part 1 – Australian natgas reserves

Santos (South Australia Northern Territory Oil Search) is an Australian energy company that’s a commercial icon in my home state of South Australia. It’s a local economic dynamo, with a $2B/year turnover. Its principal focus — today and into the future — is on the exploitation of Australia’s natural gas reserves. In late September 2009, David Knox — Santos’ Chief Executive Officer and Managing Director — gave a speech to the Australia Israel Chamber of Commerce, entitled “Natural Gas: 40 years on and leading the way to a cleaner future” (transcript and slides here). In it (see pg 13), he criticised an article I’d written for the Adelaide Advertiser newspaper:

The Advertiser titled “Why nuclear power is the answer” stated that “We recognize the fact that our natural gas supplies are limited.” … Australia is blessed with enormous gas potential, one that will take us well into the next century and probably one or two well beyond that. There is nothing ‘limited’ about it. And there is certainly no fact to the contrary. We, in the gas industry, believe there is ample and affordable natural gas in Australia to meet both growing domestic and export requirements.

You can read the article here was referring to here. For context, I later followed up with this, also in the Advertiser:

The UK is now paying dearly for their dash for gas, following the coal mine closures of the 1980s. Their once-abundant North Sea fields are rapidly depleting. Again, Australia should take note of this warning. We must not go down the natural gas-for-coal substitution route. It would be long-term economic suicide. Also, gas is a carbon-based fossil fuel, releasing 600kg of carbon dioxide per megawatt hour. Unlike the situation for uranium power, the electricity price is strongly tied to the fuel price for gas. A spike in the gas price means big jumps in power prices. Cheap uranium energy is a much more secure proposition. Gas is best reserved to meet occasional peak power demands, not baseload needs.

The other point of note made by David Knox was this (see pg 11, bold emphasis mine), which also refers back to my article:

Let me cut to the chase. We all share the ambition of zero-emission baseload – but it simply is not available in Australia and it will be many years, possibly decades, before there is sufficient commercial confidence about such a technology,its affordability and widespread deployment. Nuclear power I hear you thinking. Right now, it’s illegal in this country. I don’t know anyone who seriously thinks that is going to change any time soon or that we are going to have nuclear power in our energy grid within the next decade at a very minimum. One thing I would note about advocates of nuclear is that they often ignore natural gas and its role in power generation. Often, they gloss over the existence of gas and simplistically abbreviate the debate to one of ‘if renewables fail, then we have to go nuclear’ as was reported in last week’s Advertiser. Gas already delivers close to 70% of the carbon intensity reduction that a shift from coal to nuclear would achieve in eastern Australia, but at far less expense and with none of the sociopolitical challenges. In short, the real competitor to nuclear power in Australia will be natural gas.

This is a 2-part post. Here, in part 1, I’ll briefly analyse Knox’s first fundamental argument — that Australia has abundant natural gas that will carry us through the 21st century and beyond. In Part 2, on Wednesday, I’ll critique the second argument — that gas will deliver almost as much emissions reductions as a shift from coal to nuclear would.

Natural gas reserves in Australia

Australia has large reserves of natural gas. Let me first explain by citing this article:

At the moment, Australia has the 14th largest known gas reserves on the planet. Dr. Bethune reckons that when you add up proved, possible, and probable gas reserves along with other potential resources, you get a reserve figure of around 200 trillion cubic feet (tcf) of gas. This is quite a generous use of the word “reserve,” which is typically reserved for well-drilled, well-defined resource or ore body that you know you can produce (capital spending and operating costs) economically. You wouldn’t typically use the word “reserve” to describe resources that haven’t even been drilled yet. But the point about Australia’s growing gas status is well taken. Australia will never compete with countries like Russia (1.5 quadrillion cubic feet of reserves) or Iran (981 tcf), or Qatar (904 tcf).

So whilst we’ve got a lot of potential gas, the big boys of the Middle East and Siberia still trump us many times over. What’s a “tcf”? It stands for a trillion cubic feet of gas, which has the energy content of 1,055 petajoules (PJ). More on that below.

Let’s look a little deeper. In a 2008 report to the Australian Parliament, Australia’s natural gas: issues and trends, it is stated:

As at 1 January 2005, Australia’s Category 1 and 2 reserves totalled just over 4 000 billion cubic metres (bcm) or 144 trillion cubic feet (tcf). Australia’s natural gas consumption for 2005–2006 amounted to 1 184PJ (equivalent to around 1.12 tcf). Exports in that same year amounted to 12.495 million tonnes (Mt) of LNG equivalent to 684.73 PJ.

The category 1 and 2 reserves are often called “2P”, which stands for “proven plus probable” reserves. The question of the probable part is how economic it is to extract the stuff. At some point, without a carbon price, we’ll probably end up getting most or all of it, because beyond energy generation, gas is also valuable as a versatile chemical feedstock.

Australia also has some large concentrated reserves. For instance:

Gas sources in Australia are North West Shelf, Northern Australia, Timor Sea, Gorgon fields and Browse Basis with reserves of 100 trillion cubic feet. (1 tcf equals 19.4 million tonnes of gas or 1 petajoule). The north west shelf alone has reserves of 40 tcf more than enough to maintain current production for 30 years. Scott Reef/Breakneck at 21 tcf, Greater Gorgon at 28tcf plus the nearby Chrysaor field.

Then there is coalbed methane (also called ‘coal seam gas’ or CSG), something David Knox talked a lot about in his speech (see slide above). Our “world class potential’ for CSG is speculated to be ~250 tcf, in addition to 2P/3P reserves of 184 tcf — versus domestic consumption of just over 1 tcf per annum.

Natural gas production and export in Australia

Okay, so how much natural gas does Australia currently produce, and how much does it export? Here, I refer to a recent EIA report:

Natural gas production in Australia/New Zealand grows from 1.7 trillion cubic feet in 2006 to 4.4 trillion cubic feet in 2030 in the reference case, at an average rate of 4.2 percent per year—the strongest growth in natural gas production among the OECD countries. In 2006, Australia’s production was far larger than New Zealand’s, at 1.5 trillion cubic feet and 0.1 trillion cubic feet, respectively. Australia continues to dominate production in the region throughout the projection, given its large resource base and plans for expanding production of natural gas both for domestic use and for export.

The Carnarvon Basin—located off the Northwest shelf in Western Australia—is one of the country’s most important natural gas producing areas, holding an estimated 62 trillion cubic feet of probable reserves. In addition, new development in the deepwater Timor Sea at Browse Basin is expected to bring even more natural gas to market in the future. There also has been considerable interest in developing Australia’s coalbed methane resources, especially as a fuel for LNG production. Five projects to produce coalbed methane for conversion to LNG currently are planned or under development in Australia, with LNG production from the first project (the 1.5 million metric ton Fisherman’s Landing project in Queensland) scheduled to begin in late 2012.

So, in 2006 Australia produced 1.7 tcf, and this is expected to rise to 4.4 tcf in 20 years time. What about LNG (liquefied natural gas) exports? Below I reproduce figure 2 of the parliamentary report I referred to earlier, which plots historical and projected rates of domestic consumption and exports:

As you can see, exports are projected to rise sharply, such that by 2030, about 2,700 PJ (2.56 tcf) will be exported, versus a domestic consumption of 1,750 PJ (1.66 tcf). That means 60% of our natural gas production will be going to exports within two decades. For projects like the huge Gorgon gas field development, the majority of production will go into LNG exports.

Can natural gas provide a energy security for Australia?

Finally, let’s consider the argument put forward by David Knox — that Australia has centuries of gas reserves, and that my statement “We recognize the fact that our natural gas supplies are limited” is incorrect. As I explained in the previous post on BNC, Australia’s total energy consumption is ~5,500 PJ/a, including 900 PJ/a of electricity production. Let’s convert this to gas:

5,500 PJ / 1055 = 5.2 tcf (easy enough)

Let’s take it one more step of sophistication, and say that 4,600 PJ could be supplied by direct combustion of the gas (for vehicles, industrial heat, etc.), and the other 900 PJ of electricity was supplied 80% by advanced combined cycle gas turbines (CCGT – gas and steam turbine) and 20% by open cycle gas turbines (OCGT). A CCGT like this runs at about 55% conversion efficiency, whilst a typical OCGT runs at 35%. This puts our current annual requirement — if natgas was to meet all our energy needs — at:

{(4600+([900*0.8]/0.55)+([900*0.2]/0.35)}/1055 = 6.1 tcf

Under these conditions, our current 2P reserve of 144 tcf would last for 24 years. The higher estimate of 200 tcf would give 33 years of energy. If we add in all of the CSG potential, of 250 tcf, we take the figure up to 65 years. (For just current electricity use of 900 PJ/a, the 144 tcf of 2P would last 83 years).

Now, what if we became a 50% electrified society, based on gas turbines, with the other 50% used for vehicles fuels etc.? Without further growth demand (thanks to efficiencies + wishful thinking), the 5,500 PJ/a would require 7.9 tcf/a of gas, which means 18 years of supply based on our 2P reserves or 50 years if we add in our CSG potential. But hang on, we’ll be exporting 60% of it by 2030, so let’s revise those figures accordingly. That would leave 7 years of domestic supply from the 144 tcf of 2P reserves, or 20 years for 2P+CSG.

Suddenly, David Knox’s vision of a few centuries of gas supplies for Australia doesn’t look so great. More like a few decades — at least if gas is really going to be the ‘game changer’ that he claimed in his talk.

Now I’m sure David wasn’t thinking of a complete energy replacement scenario like I’m talking about here — I reckon he just had his Santos business hat on, and was probably thinking on the basis of healthy growth in gas use over the next few decades, embedded within the pragmatic reality that coal would still be the baseload mainstay. But I do think the numbers above back up my statement wholeheartedly — if we ‘dash for gas’ in a major way, in a short-term bid to cut back on our greenhouse gas emissions compared to business-as-usual, then we’ll run out of fuel far sooner than we’d care to imagine. Add to that the inevitability that, well before the wells are bled dry, gas prices (for heating, cooking and electricity) will skyrocket, as demand outstrips supply and the hungry export market continues to demand ever greater proportions of our production.

Next post, I’ll explore the GHG emissions implications of the above scenarios, and look at the comparative performance of the nuclear alternative that David so flippantly dismissed.

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  1. Santos is just pushing the Quarry Australia Inc line – short term greed exceeds long term need.

    Whatever the gas reserves are they should be conserved for transport fuel,chemical production,fertilizers and other uses for which substitutes are hard to come by.Burning NG and CSG for electricity generation is just waste.

    Exporting gas is just as stupid.Selling off finite resources to maintain an unsustainable lifestyle is the hallmark of a brain dead governing class.

  2. Here’s a thought experiment; what if by 2030 we used as much additional gas as we now use oil? That 50 extra Mtpa of gas would go to CNG and GTL transport fuel plus ethylene type chemical feedstocks. Assume the above graph abruptly plateaus out at 4,500 PJ or say 90 Mtpa. Add 50 Mtpa for extra oil replacement gas demand and we get 145 Mtpa. If total probable reserves of natgas and csg are 500 tcf X 19.4 Mt = 9,700 Mt and we consume or export 145 Mt a year the resource will last 9,700/145 = 67 years.

    A couple of years back ABARE thought Australia’s gas reserves would last 65 years. Blithely ignoring oil depletion is a mistake the captains of industry make over and over. Those industries include fishing farming manufacturing and hard rock mining. I seem to recall a couple of years ago Santos wanted to fill the empty spaces in the Cooper Basin with CO2 pumped from the Hunter Valley.

    Depletion this century will escalate wholesale gas prices way past the $10 or so per GJ they are now. If carbon tax was $20/t then add say 1c per kwh. Well before another human generation we’ll be paying double or more than what we pay now for electricity if gas fired predominates.

  3. My initial reaction to David Knox’s statements: it shows how corrct DV82XL is with his often stated contention that the fossil fuel industry is the main opponent of nuclear energy – and a transition to clean energy.

  4. I should expand on my previous comment.

    I agree that gas will make an important contribution to our electricity generation over the next half century or so. It should be the main replacement for coal until nuclear can take that role. As shown in Figure 3 here , I see gas taking an increasing share of our electricity generation to about 2025 then taking a progressively smaller share over time. By 2050 I see gas’s share of electricity generation being some 10% to 15%. Under the scenario shown in Figure 3, gas would still be supplying more electricity than it does now in 2050.

    This scenario assumes we roll out nuclear power at the rate of 1 GW per year from 2020 to 2025, then at 1.5 GW per year to 2030, then at 2 GW per year to 2050. I am assuming, nuclear will replace coal for base-load and natural gas will be the load follower for most of the time until we build some pumped hydro facilities such as described here:

    My concerns with the Gas industry’s advocacy of using natural gas to replace coal for base-load electricity generation are:

    5. cost of electricity;

    6. sustainability – burning all our natural gas like we’ve burnt the oil;

    7. health and environmental effects;

    8. Australia missing out on the technological benefits of being involved in the nuclear industry.

    The cost of electricity is closely related to the cost of gas, and the cost of gas is bound to rise many fold as we run out of oil.

    It is already much more expensive to generate electricity with gas than with coal in Australia. The Federal Opposition is proposing replacing Victoria’s dirtiest brown coal power stations with gas. This would more than double the cost of electricity from those power stations. This may be the only realistic option in the short term, to 2020, but for the longer term the rational policy would be to replace coal with low cost nuclear. But to do so is a political nightmare.

  5. Natural gas interests are the most important enemies of nuclear energy in the world at the moment, bar none. But it is not just a matter of short term greed vs long term need, as it is an awareness that once dependency on NG is established, the market can be controlled with much more ease than it could ever be with uranium.

  6. The notion that effective carbon mitigation is possible with natural gas is a joke. Even if we new enough to accurately gage the carbon mitigation impact of a switch from coal to natural gas, the best case for gas would be a higher cost per ton of carbon mitigation with gas than with nuclear. But there are factors that makes predicting the best case unlikely. First we have the problem of gas leaks, and the greenhouse impact of escaped methane. Secondly, we have the carbon penalty of incomplete combustion. So natural gas will probably never be as cost effective as nuclear and could possibly prove no better than coal.

    There is another issue, that is what is the highest and best use of natural gas? My father, who was after all a chemist, use to argue that he best use of gas was as a chemical feedstock, and the worst use was to burn it for heat or energy. Basically the natural gas executives who are campaigning for the substitution of natural gas for coal, may be failing their fiduciary duty to their shareholders by not maximizing the value of their product.

  7. Barry,

    I’m assuming it was you who asuggested reposting on the appropriate thread. There may be a convenient way to do this but I am computer-challenged as well as a one finger typist. Having just had a boozy lunch, I confess to being incapable of complying with your instructions in the short term. Feel free to delete my comment from this thread. if you think it was worth posting in the first place, please move it for me if it won’t take significant effort on your part. Actually, lunch was with retired army officer with previous experience of nuclear planning. He was also of the opinion that dirty bombs were inevitably going to come.

  8. Former WA Premier Alan Carpenter opposed NP but he did advocate a % set-aside for the State’s gas reserves. That percentage would be quarantined from export as LNG. Now Queensland will join the export business with liquefied coal seam gas. Conceivably Federal minister Ferguson could rule that say 50% of proven reserves must go to domestic uses.

    While it looks like Australia may never have a carbon price (thereby breaking election promises) I think there could be hydrocarbon bottlenecks as early as 2015 or so. If world liquid fuels decline from the current 86 million barrels a day to say 75 mbpd the rush will be on for gas based fuels. The now rare CNG filling stations will become more common. A couple more GW of gas fired generation would have been installed in small increments (like Tassie’s Tamar).

    By that time big power users like aluminium smelters will complain they can’t live with such high prices, noting for example the Pt Henry cheap coal power contract expires in 2014. Truck and bus operators will ask for assurances on long term prices. I wouldn’t be surprised if Holden make a natural gas-petrol dual fuel vehicle based on an Opel design. The obvious conclusion will be to free up gas for transport by using less in the stationary sector and exporting less. Or maybe the whole thing will turn into a free-for-all. Surely by 2020 or so people will work it out.

  9. Peter Lang, on 25 April 2010 at 18.27 — Load following NPPs already exist; the French do it daily. What one needs GTs (or pumped storage or ..) for is peak shaving; can’t cyle the nuclear reactors that fast.

  10. Of course the other way of dealing with peaking with nuclear generating stations, is to have some off-peak use for the power that can be quickly switched out (load shedding) to free up power for dispatch. The obvious one in Australia would be desal, rather than pumping as the net losses would be lower.

    I know I go on about Canada’s CANDU, but there is a system called CADSAL that is a combination power&water design that is set up to do just that. Over powered for electricity alone, it can shift output swiftly between its two functions to load-follow and cover peaks.

  11. When looking at the GHG production of natural gas fired generating stations it is important to realize that an important share is generated by the production and long-distance transport of this fuel. Emissions per kWh electricity are distributed very differently over the chain for different species (e.g. CO2, NOx, CH4). Carbon dioxide emissions, of course, are mainly the direct emissions during the operation of the power plant, and these are the ones often quoted in isolation as the carbon burden for this type of plant.

    However for carbon monoxide the emissions during production and transport are dominating. As well cumulative methane emissions of a gas power plant originate almost completely from the upstream part of the chain. In particular the losses due to leakages in the long distance, high pressure transmission from Russia to UCTE countries are significant for the cumulative methane emissions. The distribution in the low pressure network, connecting direct consumers like homes and businesses contributes significantly to cumulative methane emissions especially in older networks.

    Nitrogen oxide emissions are significant from combined cycle power plant operation, and these are rarely mentioned at all.

  12. DV82XL, on 26 April 2010 at 9.19 — GE claims their H series CCGT is low NOx if run at 50% of rating or higher. Anyway, NOx is not difficult to scrub. However, my understanding is that currently US EPA does not require this for GTs, only coal burners.

  13. I am supportive of the use of natural gas as a transition fuel on the road to one hundred per cent renewables.

    One hundred percent renewable energy is possible, especially if one counts geothermal hot rock power as renewable. One hundred percent renewable power should be aimed for, but will probably take some time to achieve.

    Some power is needed all the time, but the need for “base Load” power has been exagerated. At least till recently people were encouraged to heat water by electricity overnight in order to use some of this surplus “base load” power, and reduce peak power use.

    Photovotaics provide peak power and middle of the day power, but their power is capable of being stored, solar thermal power with chemical storage has been demonstrated to be able to provide power overnight, geothermal and wave power can generate all the time, except for generator shut down similar to that experienced by fossil fuel generators, and distributed wind can produce power most of the time.

    It’s not impossible. When costs come down and better storage technology is developed renewables may become the most economically competitive form of power. It is essential for the future of civilisation and perhaps the survival of our own and other species that either this or a safe form of nuclear power be developed.

    In the mean time, gas is a much better option than coal and may provide places to store CO2 from blast furnaces and any coal fired power stations that practice Carbon Capture and Storage.

    While we still mine coal it will be important to burn the methane and use it to make electricity, to prevent it from escaping to the atmosphere and creating 23 times the amount of greenhouse warming that an equivalent amount of CO2 would produce.

  14. Granted it is not the worst of the GHG emissions, but it is a bit of a fudge claiming lower NOx emissions. True compared to a naked GT, the per KWe production is lower because of the extra generation from the hot end, but this also assumes that the plant is running in baseload, as most of the NOx is produced during the first 20min or so of operation. When configured and run as a peaking plant Nox is a significant issue, as most times these plants see about a two hour duty-cycle.

  15. It is essential for the future of civilisation and perhaps the survival of our own and other species that either this or a safe form of nuclear power be developed.

    Nuclear power is already ‘safe’, by any reasonable yardstick.

  16. Margaret Dingle, on 26 April 2010 at 10.55 Said:

    “Some power is needed all the time, but the need for “base Load” power has been exaggerated. At least till recently people were encouraged to heat water by electricity overnight in order to use some of this surplus “base load” power, and reduce peak power use.”

    This statement every time I see it tells me that I am dealing with someone that is an ignoramus. You know nothing at all about this subject and you are just parroting what you have read elsewhere because it happens to support your own desires to see the triumph of renewables.

    You have have a religion. Your religion tells you that only renewable energy is “good” and all other energy is “bad.” Your definitions of good and bad are in your mind. You are one of the the useful idiots of those who wish to make us dependent on natural gas.

    Wind and solar are stupid little toys; they will forever remain toys. They will never power an advanced civilization. They are a waste of our economic resources, our attention and our time.

  17. Finrod says,

    Nuclear power is already ‘safe’, by any reasonable yardstick.

    Greenpeace has provided a reasonable yardstick, too. Nuclear power is safe for their own associates’ personal use. The alternative dangers they would impose on the rest of us are only for the rest of us.

    (I always expect that page to disappear if they ever notice that people have noticed it. Whoever is reading this should save a copy.)

    (How fire can be domesticated)

  18. While we still mine coal it will be important to burn the methane and use it to make electricity, to prevent it from escaping to the atmosphere and creating 23 times the amount of greenhouse warming that an equivalent amount of CO2 would produce.

    Sounds like a great excuse to keep burning coal there Margaret — by using the coalbed methane, it’s ‘cleaner’. I can see the greenwashers loving this. Besides, a lot of coal seam gas is extracted without actually mining the coal.

  19. Margaret Dingle,

    You have made a number of statements about you beliefs regarding energy matters. Are you interested in discussing the basis for your beliefs, or is your intention to simply assert them and leave it at that. I am wonedering if you have an open mind regarding the assertions you ahve made here?

  20. Come on DV82XL, you can explain why you think Margaret is wrong
    without being rude. Margaret isn’t a frequent poster and certainly hasn’t
    earned such vitriol. Newish people to BNC won’t hang around if they get that kind of treatment. Perhaps try again when you have chilled a little!

    Margaret, I’d suggest you spend a month just reading through prior
    posts on BNC … they are worth the effort, and I’d be surprised if your opinions don’t change.

  21. Geoff Russell, on 26 April 2010 at 15.19 Said:

    “Come on DV82XL, you can explain why you think Margaret is wrong
    without being rude. Margaret isn’t a frequent poster and certainly hasn’t
    earned such vitriol.”

    Perhaps you are right. However the ‘we don’t need baseload generation’ argument makes me see red, and is typical of the more doctrinaire type, that has decided that this is something that they can handwave away by asserting it firmly enough. For me it has become the hallmark lie of the whole renewable industry, because I can buy that some may believe that these modes can contribute, I cannot accept that anyone competent enough to be in working in or for this sector, believes themselves in this. As far as I am concerned, this demonstrates clearly that they are well aware that they running a fraud.

    And without expanding on it, I have serious doubts of the motivation of any self-declared renewable supporter that uses a phrase like “I am supportive of the use of natural gas as a transition fuel on the road to one hundred per cent renewables.” As this is pure gas industry propaganda.

    However I will defer to others from now on before replying to such comments from new posters.

  22. Margaret Dingle has been to my talks on nuclear power and energy (as well as various climate talks). We on BNC have also engaged her assertions before — if you don’t recall, see here. It is therefore not for want of opportunity to learn otherwise that she holds her “100% renewables, 0% nuclear” position. It is, as DV8 correctly surmised, a doctrinaire position.

    That is not to say that she his not welcome here, in making her arguments. But we’d appreciate it if she could talk about numbers and real-world figures, rather than hand-waving assertions. I think that is the point of DV8, Peter Lang and others.

  23. Hmmm – I worked through these calculations (converting all electricity generation and transport in Australia to gas, and expanding LNG exports to handle all planned plants) a year or two ago and came up with a century of supply available (for nat gas, CSG, shale gas and biogas).

    I’ll have a look through your calculations and see what the difference is…

    (For the record, I think gas and nuclear power both suck as long term alternatives…)

  24. (For the record, I think gas and nuclear power both suck as long term alternatives…)

    If you have some new, credible criticism of nuclear power to back up that claim, I’m sure we’d all love to hear it.

  25. Replace coal with gas, Ottawa tells power firms
    The Globe and Mail, 26 April 2010

    OTTAWA — Environment Minister Jim Prentice has told Canada’s major electricity producers that they’ll have to gradually retire their coal-fired plants and replace them with cleaner sources of power – a plan that would be a boon to natural gas producers.

    As the U.S. Senate struggles to deal with climate legislation, Mr. Prentice met with power company chief executives in Ottawa last week and made it clear the government intends to highlight Canada’s relative advantage in clean electricity compared to U.S. reliance on coal.

    Under Ottawa’s proposal, power companies would have to close their coal-fired facilities as they reach the end of their commercial life, largely over the next 10 to 15 years. The companies would not be allowed to refurbish the plants to extend their usefulness or replace them with new coal units, unless they include technology to capture the carbon dioxide and sequester it underground.

    The government has announced a target to increase Canada’s reliance on non-emitting sources of power to 90 per cent by 2020, from the current level of 75 per cent.

    But the environment minister is quietly shifting that goal to “low emitting sources,” which includes natural gas, nuclear, hydroelectric and renewables such as wind and solar.

    Natural gas power plants emit roughly half the carbon dioxide as coal-burning ones, and the fuel is expected to be abundant for the next several decades as the industry develops massive shale gas deposits.

    Mr. Prentice also assured the executives that the government intends to set flexible rules that would not force them to close down the plants at an arbitrary date, sources said. The government believes most of Canada’s 21 coal-burning power plants would reach the end of their commercial life between 2015 and 2025, though industry officials say companies would find ways to keep them running longer if they are prevented from investing in more cost-efficient overhauls or new coal plants. The government plans to move fairly quickly because power companies are already starting to plan how they will meet electricity demand later this decade.

    The power industry has been concerned about Mr. Prentice’s 2020 emission target, arguing that the prohibition on refurbishments could hurt shareholder value and drive up costs to energy consumers. It was unclear how some provinces would fill the gap, particularly Alberta and Saskatchewan, which rely on coal for more than half their power supply.

    Among the companies attending the meeting were executives from TransAlta Corp., Capital Power Corp, SaskPower, Ontario Power Generation, New Brunswick Power and Nova Scotia Power. Ontario has already committed to closing its coal-fired plants by 2014.

    Ottawa plans to regulate greenhouse gas emissions in lockstep with the U.S. because of the integrated nature of the two economies.

    But Mr. Prentice has said the electricity sectors are vastly different and that, therefore, Canada can move unilaterally to showcase its leadership in clean power, a strategy aimed in part at deflecting the strident criticism targeting the rapidly growing emissions in the expanding oil sands sector.

    Canada has 21 operating coal plants – with Ontario planning to close its four by 2014; while the U.S. has some 650 coal-burning plants that provide more than half the country’s electricity.

    A non-partisan group of senators led by Democrat John Kerry and Republican Lindsay Graham had been expected to introduce long-anticipated legislation to meet the U.S. commitment to reduce emissions by 17 per cent from 2005 levels by 2020. But intra-party wrangling has threatened to delay the bill.

    Despite the delays in the U.S., power producers believe the government will move far more quickly to impose new rules on them, though Mr. Prentice has not indicated a timeline.

    Don Wharton, TransAlta’s vice-president of sustainable development, said the companies would prefer a regulatory approach that set clear and achievable emission-reduction standards for them individually, rather than a vague industry-wide approach aimed at a “non-emitting” goal.

    “We struggle to understand what the goal ‘90 per cent non-emitting,’ what problems does that actually get at,” Mr. Wharton said. “It is a very prescription goal whose end-point isn’t clear to us.”

    Publicly traded TransAlta recently shut down a coal-fired plant at Wabamun, Alta., but is partnering with Edmonton-based Capital Power on the new 450-megawatt Keephills 3 unit. The two Alberta companies have also received federal and provincial funding to construct a carbon-capture pilot project at the site.

    In Saskatchewan, three coal-fired stations account for more than 55 per cent of the province’s power generation, and SaskPower has refurbished them all over the past 15 years. “There are no plans to decommission any of our coal fired plants before 2020,” said SaskPower spokesman James Parker.

    Rick Smith, president of Environmental Defence, said the government’s efforts to reduce emissions in the power sector – which account for 17 per cent of emissions – will be overwhelmed by growing CO2 emissions as oil companies boost production from the oil sands.

    But building more CANDUs – that’s out of the question. Anyone who can’t see that this has been bought and paid for by Canadian Natural Resources, the largest independent natural gas producer in the world, is just blind

  26. In Australia the push is also for C2G not C2N
    A year or so ago I believe a secret task force offered big bucks to Victoria’s brown coal generators to switch to gas. Since it appears they knocked it back they must have correctly predicted that there was no carbon pricing on the political horizon. I’d guess their internal transfer price for minemouth brown coal might be $20 per tonne, heating value about 10 GJ
    Gas with the same energy content might cost $100 or 5X as much even when carbon taxes are dead in the water.

    Therefore I don’t despair of a late switch to nuclear when the punters discover just how expensive the gas backed renewables nirvana will be.

  27. DV82XL,

    Thank you for that post. Very interesting.

    This is particularly so:

    Don Wharton, TransAlta’s vice-president of sustainable development, said the companies would prefer a regulatory approach that set clear and achievable emission-reduction standards for them individually, rather than a vague industry-wide approach aimed at a “non-emitting” goal.

  28. Hello Margaret Dingle. I agree with Geoff Russell. Go back over all of Barry’s BNC blogs. I think you will come to the conclusion that the renewables are not the way to go, that we really should phase out the fossil fuels, especially coal, for electricity production and phase in over coming decades, nuclear power. Please do not be offended by any insults that some bloggers hurl at you. I had plenty hurled at me by the AGW believers a month or so ago. I’ve done lots of reading on that subject since and the more I read, the more I’m convinced that the AGW believers are wrong.But they are quite certain that they are right, refusing to even question the possibility that they might be wrong. Is that to do with having a closed mind? Also recommended Margaret is “Power to save the World-the truth about nuclear energy” by Gwyneth Cravens published by Alfred Knopf and sons New York 2007. Read it and I promise you that you will become pro-nuclear. Very best wishes Margaret.

  29. PL my wild arsed guess was $2 per GJ not 60c for brown coal. No wonder it is a virtual goldmine and they think Melbourne will accommodate 5m people.

    I’ll peruse the AEMO site to see if there is info on what aluminium smelters pay for electricity.

  30. Peter Lang is right. The gas lovers[David Knox etc] know that nuclear is the major threat to them because it’s the only one that can provide base load/ peak power, whatever, without greenhouse emissions. And gas can’t. Barry is right also in exposing more realistic figures for the longevity of gas. Gas lovers will continue to make exaggerated claims about what it can deliver just as the renewables devotees will continue to make equally exaggerated claims about what they can deliver. Giles Parkinson in an article on gas etc in the weekend Australian has affirmed that by 2030 wind will give Australia 18% of it’s energy needs. That’s 2% more than the current world total of nuclear power [16%]. Wind capacity at best might reach 25-30%. My own recent experience of wind power suggests that figure is pretty close to the mark. In 10 passings of wind farms [Cleve, Snowtown and Hallett] in SA, all of the rotors were still, and I mean still on 8 of those occasions. No wind equals no power. And our government is all gung ho on building more of the useless things. All wind/solar around the world need 100% backup. Why spend twice for your electricity supply. It doesn’t make sense.

  31. Wind will be lucky if it can reach 18% availability end over end, but it will never supply 30% of a country like Australia’s electricity needs. Wind and solar are Trojan horses for gas -’bottoming cycles’ are just another name for baseload in the world of gas-backed renewables.

  32. Some follow up thoughts on Victorian brown coal and why the ETS was scuttled.

    If brown coal contains about 10 GJ per tonne and the average cost is 60c per GJ then generators would seem to be paying $6 per tonne.

    If brown coal creates 25% more CO2 than bituminous or black coal it would seem to generate 2.4 X 1.25 = 3 tonnes of CO2 per tonne of coal. Garnaut’s alternative to the ETS was a carbon tax of $20 per tonne of CO2. That would add 3 X $20 = $60 per tonne of brown coal burned if there were no freebies.

    Thus without carbon tax generators pay $6 per tonne of brown coal used. With carbon tax they pay in effect $66 which is why carbon pricing makes a big difference.

  33. John,

    Yes. Carbon pricing makes a big difference to the cost of electricity. However, as I have pointed out on numerous previous posts, why would we want to raise the cost of electricity – with all the negative consequences that has, including for the environment, health and CO2 emissions world wide – when the rational alternative is to remove the cost imposts on nuclear which are making nuclear more expensive than coal?

    You may also want to look some more at the ACIL-Tasman report on the AEMO web site because it has not only the fuel costs, but also capital costs, operating costs, financing costs, and the short run and long run cost of electrcity sent out. And it has all this with and without a cost of carbon. The cost of carbon is based on the Treasury modelling and increases from $23/tonne in 2011 to $55/tonne in 2029.

    Just for interest, for Brown Coal generation in the Latrobe Valley, the carbon cost would increase the Short Run Marginal Cost (SRMC) of electricity sent out in 2011 from $6.59/MWh to $27.54/MWh. The Long Run Marginal Cost (LMRC) would increase from $50/MWh to $71.90/MWh. (refer to tables 50 to 53 here: )

  34. I’ve recently been reading a book, “Biodiversity: Integrating conservation and production”, and in chapter 4 by Barney Foran, he mentioned in the Q&A section, that without the use of natural gas to create fertiliser, human population would have been limited to around 3 billion (relying on legumes and compost). I’ve since asked for a reference to this and began reading all I can regarding this situation.
    What I find most troubling is the sheer stupidity in burning it up as quickly as possible if it is so important to food supply, when there are other options.

  35. Terry Krieg trolled as follows:

    I had plenty hurled at me by the AGW believers a month or so ago. I’ve done lots of reading on that subject since and the more I read, the more I’m convinced that the AGW believers are wrong

    Assuming the claim I’ve done lots of reading on that subject since is accurate, this only means that what you were reading was unadulterated twaddle. There is no body of scientifically literate material on this subject that would found your conclusion.

    Even the AGW-denier and persistent dissembler Lindzen acknowledges that CO2 drives temperature, so you can’t even have read him. So too does the denier, Spencer. You can’t have read him either.

    Plainly, you are the one with a closed mind on this matter.

  36. What I find most troubling is the sheer stupidity in burning it up as quickly as possible if it is so important to food supply, when there are other options.

    True, but before natural gas was used for fertiliser production, the hydrogen nedessary was obtained by electrolysing hydrogen from water. This is quite expensive, so the plants were usually (I think) run from hydroelectric stations.

    With the advent of cheap, widespread nuclear power, we can pruduce as much as we need after the natural gas is exhausted, but that’s no excuse for wasting it in the meantime.

  37. Cheers for that Finrod, although I think Barney was addressing the problem of nitrogen fixation. You’re right – there is no excuse for wasting time. The same could be said for many of issues regarding sustainability… It tends to get me annoyed.

  38. PL I’ve downloaded the ACIL Tasman report and I tend to think their fossil fuel prices could be on the low side. For example I suspect black thermal coal prices will skyrocket due to Chinese imports in a few years, noting their domestic demand is 10X Australia’s total exports to all countries. After a domestic peak China will scour the world for thermal coal and fall short or meet resistance. I’m annoyed China is now importing Tasmanian old growth logs ..they should use their own.

    At $10 a GJ natural gas works out about 50c per kilogram. Synthetic (Sabatier) methane made from nuclear hydrogen and biocarbon must surely cost several times that. When we’ve used up all our gas the replacement will be expensive. I doubt there will ever be anywhere near enough biogas since I heard the Swedish railways were pinching it from the bus service.

  39. You’re wrong Ewen. I’ve read Lindzen and he makes good sense to me, along with a whole heap of other people.I thought my comments to Margaret would stir you up. You didn’t let me down. I promise not to bother you again.

  40. Terry; you can find an interesting write up on Lindzen on logicalscience. If you like what you’ve read from him, I encourage you to read work by Tim Ball and even Monkton’s self-published work is fantastic (and largely baseless).
    But all this “debate” just adds more hot-air to the mounting problems. If you don’t like climate change as a reason for moving away from fossil fuels, what not the increasing acidification of oceans, or perhaps the inevitable depletion of our fossil fuel supply, how about air and water quality, or why not simply because with all this extra energy available in it’s myriad or forms, we are becoming lazier, fatter and population growth is getting beyond the joke?

  41. Mothincarnate,
    Climate change is a fact of the earth’s atmospheric behaviour. Has been, is and always will be. Present warming [despite last 10 years of cooling] is probably happening. Mankind’s contribution to that warming is at best,miniscule. For the past ten years, I’ve been talking loud and long to all and sundry especially politicians, business leaders, professional groups and ordinary folk about these related issues, climate change, future energy and saving the Murray/Darling. I’ve been doing this, regardless of what effect or not man has had on global warming, because, there is no doubt about the disastrous effects man has had on the world and Australian environments, especially the Murray/Darling Basin.And we have to stop burning coal, if not to check global warming if it’s happening, then certainly to stop killing tens of thousands from the toxic waste spewed out by coal power stations [24,000 in the US alone die of the effects of burning coal]. I had an idea which I had hoped to put at Rudd’s talkfest. I wasn’t invited because I would have mentioned the word nuclear. I’ve presented the speech to two groups so far with very positive feedback [the last group have nominated me for PM -fair dinkum]. Want to read my idea? Send me your address and I’ll post you a hard copy. It’s hard to be heard living as I do on the edge of the universe here in Port Lincoln. But I’ve persisted over the past ten years and I reckon in another ten we’ll have woken up to the fact that if we want secure affordable safe, greenhouse free energy, clean air and water and hydrogen, then we’ll have to get nuclear power in our energy mix. Every other developed country has already got nuclear in their mix. You’d think that with the world’s biggest uranium reserves, world’s best waste disposal site, we’d already have it in our own mix. As James Lovelock said here three years ago, “It doesn’t make sense that we haven’t. Cheers

  42. Terry,
    I agree with much of what you said. We differ in the view of our actions in relation to the atmosphere. I just find the debate slightly beyond the joke and increasingly irrelevant – especially what you hear on various blogs. Certain names pop-up as references constantly…
    My attitude is largely that we are in need of change and as you added as well – there’s far more than just climate change behind the logic. In my previous position in air quality, I saw enough here in SA to feel concerned about what gets in our lungs. Then there were other issues.. I felt rotten being cooped up there.
    I hope you’re right about us waking within a decade. Cheers

  43. Something that Australians probably did not experience, but serves as a warning when looking a gas is the experience of many in Canada, and the Northern US with ‘Off Oil’ programs, in the late Seventies and early Eighties.

    In what was advertised as a way to reduce dependency on foreign oil, many governments, local, state, and national, offered rebates, subsidies and other inducements to get people to change their home heating to gas or electric. For most of these regions, electric was too dear, so the default choice was gas. Even better, it seemed that gas was the less expensive fuel, and hot water heaters could use it too, making for significant savings.

    I goes without saying that once this market was saturated, the price of gas started to rise, and rise considerably. Those that had converted, found that their bills had gone up well past what they had been paying for heating oil.

    I see the same thing happening hear all over again with the current move in Canada to convert coal generation to gas, once this is done the fuel costs will rise.

    This is why cost estimates of the price of electricity from gas fired generators should be taken with a grain of salt.

  44. Future prices are extraordinarily hard to predict since coal, oil and gas are both substitutes and complements. For example shipping costs (oil based) may affect manufacturing energy demand (coal based) in China. Some substitutions like coal-to-liquids have long ramp times so perhaps can be ignored. Gas producers want price escalator clauses based on oil prices implying they see oil and gas as complements rather than substitutes but I think they could have it badly wrong.

    Note that crude oil’s 2008 price peak of $US147 per barrel coincided with the apparent production peak of all liquids – oil, biofuel, condensates, tar sands. Now oil is $83 per barrel yet all-liquids is either declining or in an undulating plateau. Some posters on the Oil Drum believe that the oil price may stay relatively low even as it declines due to negative feedbacks on aggregate income. This is a market failure because it fails to send an early signal to look for oil replacements.

    Therefore I conjecture we are being lured into the ‘gas trap’. Petrol prices may stay modest while retired coal plant is replaced with gas fired behind a facade of renewables. The sometime perhaps around 2015 the world has a panic attack over the liquid fuel outlook, the quantity if not the price. A sudden swing to CNG as a transport fuel then adds perhaps 30-40% to gas demand. Voila the price of gas fired electricity skyrockets because everybody now wants gas.

    The answer of course is to generate as much electricity as practical with NP and save gas for CNG, process heat, ammonia and so on. However our captains of industry and their captive politicians seem hellbent on taking us into this gas trap.

  45. Great final point John Newlands. The pollies and others are blinded by this perceived never ending supply of gas/coal seam gas. They just gloss over the fact that gas is a fossil fuel. Use of it for power should be zero Use gas for other things . The same goes for coal for that matter. I think we need to keep asking pollies why it is that so much of the developed and developing world are increasing or including nuclear in their energy mix. Currently, I’m trying to get an invitation to speak at the SACOME Uranium open day. They are doing their best to sideline me but one way or another I shall be there and I WILL get a word in.

  46. There is talk of replacing Hazelwood power station with a gas power station. Here is a better idea:

    If we replaced Hazelwood with a nuclear power station we would reduce Australia’s CO2 emissions by 3% with just this one substitution. There are many more such opportunities.

    According to Hazelwood is Australia’s and the world’s highest CO2 emitting power station per MWh of electricity sent out.

    Hazelwood is a 1600MW brown coal power station in Victoria. It produces 1.53 t CO2e/MWh or electricity sent out (, Table 22, p32). According to the Wikipedia article it supplied 12,000 GWh in 2003.

    The eight 200MW units were commissioned between 1964 and 1971. So the oldest unit is 46 years old and the newest is 39 years old.

    Hazelwood was privatised in 1996 for $2.35 billion. The new owners have invested $400 million since.

    If the government hadn’t sold it, it planned to close it down in 2005. Of course that is easy to say; but it it probably wouldn’t have happened.

    Two (and a half!) Enhanced CANDU 6’s (EC6) could substitute for Hazelwood. (let’s say two for now since Hazelwood is on its last legs anyway).

    What would be the capital outlay to substitute a two unit EC6 power station for Hazelwood?

    Let’s assume the government (community) bought back Hazelwood for say $0.5 billion. Alternatively, we could say, we’ll not approve any more upgrades and it must be decommissioned when the nuclear plants are commissioned.

    Let’s also assume we (the community/government) carries both the investment risk premium and the First of a Kind (FOAK) costs for the two EC 6 Units. We can take on the investor risk premium at no cost to the tax payer. In fact there would be a saving if we removed impediments such as the RET, feed in tariffs and subsidies for renewables. We could expect to contribute 10% to 15% to the capital cost for the FOAK costs

    The two unit EC6 would then be built and funded by investors.

    We’d have started our journey to clean electricity at a cost competitive with new coal (if we take the appropriate actions to remove the cost imposts).

  47. Pingback: Santos chief’s gassy vision Part 2 – is gas almost as good as nuclear? « BraveNewClimate

  48. Peter Lang I see from the link that Hazelwood gets its cooling water from both river and groundwater sources. I presume you propose to put the NPPs on the Hazelwood site. While that may use existing transmission and water I think it is a bad look to associate NP with the filth and grime of coal burning.

    I have no idea of additional transmission costs but I suggest Victoria’s first NPP could be on the Gippsland coast using sea water for cooling. Note Australia’s biggest desal (drawing 102 MW) is under construction at Wonthaggi with dodgy claims that grid induced CO2 will be offset by a yet to be built wind farm. I think it is good PR to have NPPs and desals co-located on the coast even if there are extra costs.

  49. Absolutely correct John Newlands. In a submisson to BHP Billiton,I suggesed a cogeneration nuclear power/desal plant should be built at/near Ceduna and an appropriate sized NPP [some gas cooled PBMR's would be a good idea] on site at Olympic Dam. Those two together provide the extra water for OD development,and Eyre Peninsula, power for OD and some for the grid and together they negate the Whyalla desal plant and the 275,000Kv powerline using Cooper Basin gas for OD development. That would please the prawn and other fishermen, the cuttlefish etc.

  50. I see the main players in the TV show ‘The Cook and The Chef’ have gone into bat against the Whyalla desal. Note the locals actually want a coastal desal just somewhere else but also much bigger.

    Are these smaller NPPs ready to buy?

  51. John,

    I agree. My preference is for all NPP’s tpo be on the coast. However, if a brownfield site is lower cost, then I want the lowerst cost option. I advocate we really need to focus on providing least cost clean electricity.

  52. John, I’m pretty sure that Small PBMR’s are available. Ask Barry. He knows more than anyone about various types of reactors. I know that Hitachi/GE are marketing mid-sized reactors [400-600MWe] and the build time is about 34 months for them. The PBMR’s take a couple of years to build and because they are modular, units can be added as necessary. That seems like a good idea for BHP as their Olympic Dam development proceeds.

  53. Pingback: TCASE 12: A checklist for renewable energy plans « BraveNewClimate

  54. Pingback: Switching from coal to natural gas would do little for global climate « BraveNewClimate

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