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Australasian Investment Review: Gas/Coal to Oil

EXTRACT: The Victorian Government has just given the greenlight to a 50-year mining licence for a $5 billion joint project by from Shell Oil Group and Anglo American to convert Latrobe Valley brown coal into diesel fuel.

THE ARTICLE

Sydney, Sept 25, 2006 (ACN Newswire) – You are going to hear a lot about gas/coal to liquids technology in Australia in coming years and it could very well end up supplanting the likes of ethanol and biodiesel as a source of energy in competition with oil.

South Africa has used it for years (Sasol), the Germans used similar technology during World War Two and intensive studies are being made to use it to process natural gas in the Middle East, the US and even Australia’s north west shelf.

The Victorian Government has just given the greenlight to a 50-year mining licence for a $5 billion joint project by from Shell Oil Group and Anglo American to convert Latrobe Valley brown coal into diesel fuel.

This is more like the processes used by the South African company, Sasol (Anglo American is a South African mining giant now based in London). It will use Shell technology.

Latrobe Valley brown coal is currently used to generate power from a complex of power stations.

The Victorian Government’s approval requires the project to capture and store underground – a process known as geosequestration – carbon dioxide produced during the process.

Coinciding with the licence approval to the operator, Monash Energy, Shell Gas and Power and Anglo American also signed a joint development agreement to advance the project.

The Monash Energy plant is forecast to produce 60,000 barrels of synthetic diesel daily when it comes on stream by the middle of the next decade.

The statement from the two companies said:

“Shell Energy Investments Australia Pty Ltd (Shell) and Anglo American plc today announced the signing of a joint development agreement (JDA) for the two companies to further advance the Monash Energy clean coal-to-liquids project in the state of Victoria, Australia. This agreement is the first under a clean coal energy alliance formed by Shell and Anglo American in May 2006.

“The JDA covers a number of project development phases. In the initial concept phase, which is expected to conclude during 2007, Monash Energy in conjunction with technical advisers from Anglo American and Shell will carry out a study of the commercial and technical aspects, including carbon capture and storage. If successfully concluded, the study would form the basis for the feasibility phase and demonstration activities.

“The Monash Energy project would involve the gasification – via Shell’s proprietary coal gasification process – of Anglo American’s brown coal from Victoria’s Latrobe Valley for further conversion into clean transportation fuels, including virtually zero sulphur, synthetic diesel, using Shell’s proprietary gas-to-liquids technology. A number of locations have been identified as potential sites for the storage of CO2 from the process.”

These potential storage sites for the carbon dioxide have been located already, including in the Bass Strait gas fields which lie at the end of the rock formations in which the Latrobe Valley brown coal is found.

The synthetic diesel, said to be of a higher and cleaner quality because it contains fewer impurities including almost no sulphur, will not necessarily be sold in the state.

Shell is investing $US 6 billion in gas to liquids technologies over 10 years with four plants. It announced in October 2000, agreement with the Egyptian government for a 75 000 barrels a day (3.8 million tones per annum) facility and a similar plant for Trinidad & Tobago.

In April 2001, it announced interest for plants in Australia, Argentina and Malaysia at 75 000 barrels a day costing $US 1.6 billion.

But the Shellprojectand a number of others slated for Western Australia have been withdrawn or deferred: Shell now says Australia ranks well behind the Qatar project in the Middle East which will use gas from, the world’s biggest gas field.

In background material on the various company websites it was explained that

Anglo Coal is a member of the FutureGen Industrial Alliance, a public-private partnership involving the US Department of Energy that aims to build a near zero emission coal-fired power plant employing carbon capture and storage technology. Anglo Coal Australia participates in the Coal21 Fund, established by the black coal mining industry to develop technologies for reducing greenhouse gas emissions from coal utilisation.

The Monash Energy project is helping to meet the challenges of energy security and climate change by applying to brown coal advanced drying and gasification technologies to produce large volumes of ultra-clean synthetic diesel. Critically, the technologies chosen by the Monash Energy project enable separation of a concentrated stream of CO2 that can be transported to injection wells in deep underground geological formations for secure storage. The core of the project is a large-scale commercial plant in Victoria’s Latrobe Valley, drawing coal from Anglo American’s mine and then drying and gasifying the coal for conversion into transport fuels.

Monash Energy is the short form name for Monash Energy Holdings Ltd, a member of the Anglo American group of companies. The company initiated the Monash Energy Project which was named after General Sir John Monash, the first Chairman (1921 – 1931) of the State Electricity Commission of Victoria, and supporter of the development of the Latrobe Valley’s brown coal resources. Monash Energy Holdings Ltd is focused on the development of the Monash Energy Project and has no other significant activities. Anglo American has had an interest in the Monash Energy Project since 2003 and acquired 100% ownership at the end of 2004. Prior to this time the company was known as “Australian Power and Energy Ltd” (APEL), and had started to develop the project in 1999.

Shell Gas & Power is one of the four main businesses of Royal Dutch Shell plc. and is engaged in natural gas activities in more than 30 countries. In addition to its clean coal energy activities, it holds leading positions in all three key natural gas markets (Asia Pacific, Europe and North America) and owns interests in six operating LNG joint ventures that together produced approximately one-third of the world’s LNG in 2005. Through the Pearl gas to liquids (GTL) project in Qatar, Shell Gas & Power is also building on its leading position in the emerging GTL sector.

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About Australasian Investment Review

Australasian Investment Review (AIR) is a free daily news service with a weekly online magazine covering global financial markets with a focus on Australia, New Zealand and Asia.

Each morning (Sydney time) AIR’s team of experienced journalists present you with a concise digest of expert opinions and analysis on trends and backgrounds that matter in these markets. AIR is available free of charge.

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