Australia’s Alternative Energy Options –Gas Matthew Clemow ... · Australia’s Alternative Energy Options -Gas 25 Yallourn (TRUenergy), Hazelwood (IP), Loy Yang (part AGL), Southern

Australia’s Alternative

Energy Options – Gas

Matthew Clemow

28 February 2007

Australia’s Alternative Energy Options - Gas

2

What we will cover this evening …….

•Australian Energy Supply

•Electricity Market

• Forward Market

•Spot Price and Retail

•Gas Market

•Gas Supply Chain

•Gas Pricing and Contracting

•Gas Generation and Future Supply

•Other uses of Gas

•Environmental Effects


3

Australian Energy Market Size� 3% annual growth in gas

consumption

(1PJ=936Mcf)

� 2-3% annual growth in electricity consumption, 3-4% growth rates in summer peak demand periods

NorthernTerritory

Victoria

New South Wales

Tasmania

Queensland

South Australia

Western Australia

AUSTRALIA Total NEMNEM share of

Australia

Population (m) 20 17.1 87%Installed Capacity MW 45,330 36,700 81%GWh consumption 176,100 153,000 87%PJ consumption 1,000 610 61%

QUEENSLANDshare of Australia

share of NEM

Population (m) 3.7 19% 22%Installed Capacity MW 11,300 25% 31%GWh consumption 40,000 23% 26%PJ consumption 80 8% 13%

WESTERN AUSTRALIAshare of Australia

Population (m) 1.9 10%Installed Capacity MW 5,300 12%GWh consumption 12,000 7%PJ consumption 370 37%

NEW SOUTH WALES & ACT

share of Australia

share of NEM


VICTORIAshare of Australia

share of NEM


SOUTH AUSTRALIAshare of Australia

share of NEM


Note: In WA gas is a significant source for electricity generation.


Note: Gas consumption has been converted from PJ to GWh

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

NSW &

ACT

VIC

QLD

WA SA

TAS NT

Con

sum

ptio

n –

GW

heq

uiva

lent

LPGNatural GasElectricity

(LPG=Bottled Propane Gas)

Australian Energy Market Consumption by State


5

NEM generation by energy

Brown Coal29%

Gas6%

Hydro8%

Black Coal56%

Other0%

Wind1%

NEM Fuel type by capacityWind2%

Hydro17%

Gas10%

Brown Coal17%

Black Coal52%

Other2%

Current Usage of Gas in Electricity Generation

Gas, Hydro and Wind typically have a utilisation of 50%, vs. Coal, which usually targets 100% utilisation.


6

Competition & Ownership State by State

Closed

Queensland• Gas industry privatised• PNG pipeline expected 2010• Mass market opening 2007• Electricity public• Electricity Retail to privatise

2006

New South Wales & Snowy• Electricity public• Gas private• Gas & electric markets open• Privatisation uncertain

Victoria• Fully privatised• Market fully open

Tasmania• Electricity public• Gas being developed • Basslink completed

2006• No competition

South Australia• Fully privatised• Full retail competition

electricity & gas

Western Australia

• Electricity public

• Gas privatised• Comp starting

Partially Open

Open

Northern Territory• Electricity public• Market fully open • No competition


7

History of Australian Electricity

LocalReticulation

State governments

takeover, connect

state grids

Statemonopoly

6-8% Growth

1910-40 1940-60 1960-80

0-2% growthOversupply

Market Reform,Disaggregation

GovernmentsCorporatise

and/orPrivatise

1980-90 1990-2000 1995-2000

MarketConsolidation

2000-Present


8

The National Electricity Market

• Physical or Spot Market or “Pool”

• Gross pool model• 5 minute dispatch/pricing – Max $10,000/MWh & Min -$1,000/MWh• half-hourly pricing/settlement period

• Pricing Regions• intra-regional fixed MLFs – set annually• inter-regional dynamic MLFs – calculated every 5 minutes

• Energy market and Ancillary Services (FCAS) market

• Transmission “common carriage” & single market operator (NEMMCO)

• Forward Market or Contract Market• All transactions are financial (cash settled, no delivery)

• largely between “natural” counter-parties, mostly OTC

• Futures Exchanges are becoming more active


9

Control of the NEM

• National Electricity Market (NEM) commenced on

13 December 1998

• Australian Energy Market Commission (AEMC)

• Responsible for decisions on National Electricity Rules (the Rules) changes

• Publishes the Rules

• Advises Government on NEM

• Australian Energy Regulator (AER)

• Enforces the Rules and the Electricity Law

• NEMMCO

• NEMMCO is both the System Operator and Market Operator under the

Rules

• Five State Governments are shareholders and appoint one Director each to

the NEMMCO Board

• NEMMCO operates on a self funding break even basis


10

Responsibilities of NEMMCO

• Maintain System Security

• Operate NEM

• Set spot prices, dispatch generating

units, etc

• Dispatch Frequency Control

Ancillary Service (FCAS) and set

prices

• Manage Reserves

• Settle Energy Market based on spot

price

• Coordinate network planning

• Develop NEM

• Register all Participants and ensure

conformance with the requirements of

the Rules

• NEMMCO also maintains a database of

all electricity customers in NEM area for

Full Retail Competition


11

Electricity Market Regions

Victoria8000 MW

Snowy3000 MW (gen) New South Wales

12500 MW

Queensland8000 MW

S Australia2800 MW

750 MW

-950 MW

QNI

180 MW

-180 MW

Directlink

460 MW

-300 MW

V-SA

220 MW

-220 MW

Murraylink

-1900 MW

1100 MW

V-SN

-1100 MW

3000 MW

Snowy1

Tasmania1700 MW

-420 MW

600 MW

Basslink


12

Forward Trading Activity

• Is largely “Over-the-Counter” (OTC) contracting

• through brokers or direct with counterparties

• Some via Futures - Sydney Futures Exchange & ASX Futures Exchange

• Generators, Retailers & Traders (about 30 participants)

• Relatively illiquid 3-4 years

• Credit an issue for non-government participants

• Generator to Retailer

• Back large customers or retail load

• Generator to Generator

• Cover outages

• Generators and retailers often have trading books

• Impacted by regulatory arrangements

• NSW Electricity Tariff Equalisation Fund (ETEF)

• Qld Benchmark Pricing Arrangement (BPA)


13

Contracts Traded

• Main forms

• Swaps (also called CfDs, 2-way hedges)

• Futures (standardised product through exchanges)

• Cap or Floor (Half-hourly options)

• Collars (Combination Cap & Floor)

• Swaption (Call or Put Options on Swap)

• Asian Options (average rate Call or Put options)

• Timeframes

• Monthly -> Quarters -> Calendar or Financial Years

• Peak (7am -10pm Business Days), Off-peak, Flat

• Locations

• NSW, Vic, Qld, SA nodes

• Inter-regional combinations


14

Ancillary Services

These are services that are essential to the management

of power system security, facilitate orderly trading in

electricity and ensure adequate quality of supply.

These include:

• Frequency Control - regulating capacity and contingency

control

• AGC, Governor, RGUL, RGUU and Load Shedding

• Reactive support - system voltage control.

• System Restart capability (Black Start) - to get the lights

back on.


15

Generation

~40%

Transmission132kV - 500kV

~10%

Distribution415V - 66kV

~40%

Retailing240V~10%

•Electricity units

• Power: kiloWatt (kW), MegaWatt (MW)

• Energy: kiloWatt hour (kWh) MegaWatt hour (MWh)

•1000kW =1 MW (e.g. Yallourn 1,450MW power station)

•Typical house load ~1 kiloWatt (kW) and 10MWh/year

Electricity Supply Chain


16

Generation Transmission132 - 500kV

Distribution415V - 66kV

Retailing

Electricity Supply Regulation

Regulated Natural Monopoly with

“open access”

Competition where it is possiblePrice regulation and open access where it isn’t


17

Generation Dispatch

• Energy is dispatched based on Participant bids, the cheapest generating

unit will be dispatched first, based on offer price and loss factor

• Market Ancillary Services (Frequency control) are also dispatched based on

Participant bids

• There are several timeframes to be considered

• 6 second, covers the trip of a generating unit (contingency) and limits the drop

in frequency

• 60 second, ensures that frequency recovers from its minimum following a

contingency

• 5 minute, ensures that frequency returns to the Normal Operating level following

a contingency

• Regulation, controls frequency within a dispatch interval

• Each of these timeframes needs to be managed for both raise (managing

generator events) and lower (managing load events)

• This gives a total of 1 energy and 8 FCAS markets

• The total cost of all 9 markets is minimised by NEMDE


18

Typical Generator Offer

(For every 1/2 hour)

250 350 660160

$/MWh

$50

$20

0

MW-$15

$35


19

Price Setting

$0 & 400 MW

$15 & 400 MW

$16 & 40MW

$17 & MW

$18 & 350 MW

$19 & 40 MW

$20 & 450 MW

$22 & 40 MW

$28 & 60 MW

$29 & 20 MW

$30 & 200MW

$400 & 40 MW

$410 & 60 MW

$420 & 40 MW

$0 & 400 MW

$15 & 400 MW

$16 & 40MW

$17 & MW

$18 & 350 MW

$19 & 40 MW

$20 & 450 MW

$22 & 40 MW

$28 & 60 MW

$29 & 20 MW

$30 & 200MW

$400 & 40 MW

$410 & 60 MW

$420 & 40 MW

$0 & 400 MW

$15 & 400 MW

$16 & 40MW

$17 & MW

$18 & 350 MW

$19 & 40 MW

$20 & 450 MW

$22 & 40 MW

$28 & 60 MW

$29 & 20 MW

$30 & 200MW

$400 & 40 MW

$410 & 60 MW

$420 & 40 MW

Pool Price Setat $29.00/MWh

Time

Demand

Offer stacks

$0 & 400 MW

$15 & 400 MW

$16 & 40MW

$17 & 250 MW

$18 & 350 MW

$19 & 40 MW

$20 & 450 MW

$22 & 40 MW

$28 & 60 MW

$29 & 20 MW

$30 & 200MW

$400 & 40 MW

$410 & 60 MW

$420 & 40 MW


20

10

90

50

30

15

500

Offer$/MWh

11:00 1:0012:0011:30 2:0012:30 1:30

am pm

100

500

400

300

200

600

0

Generator 1

Generator 4

Generator 5

Generator 3

Generator 6

Generator 2

Load forecast - price taking “bid”MW


21

10

90

50

30

15

500

Offer$/MWh

11:00 1:0012:0011:30 2:0012:30 1:30

am pm

100

500

400

300

200

600

0

Generator 1

Generator 4

Generator 5

Generator 3

Generator 6

Generator 2

MW

10

15

15

40

90


22

10

500

50

30

15

Offer$/MWh

11:00 1:0012:0011:30 2:0012:30 1:30

am pm

100

500

400

300

200

600

0

Generator 1

Generator 4

Generator 6

Generator 3

Generator 2

MW

VoLL

500


23

Retail Pricing

Network & Distribution

Cost

NEM Fees

PassThrough

Energy

Cost

PortfolioManagement

RetailCost to Serve

Retail Margin

Retail

~$40/MWh

$30-$60/MWh

$5-$20/MWh


24

Forward Market

Hedge $

Trader

Hedge $

FuturesExchange Pool

Retailer

Pool $

Pool $

Spot Market

Bill $

NetworkCharges

$

ConnectionCharges

$Transmission

Grid

DistributionNetwork

End Use Customer

Grid

Generator

Ret

ail

Who

lesa

leMonopoly

Electricity Market Structure


25

Yallourn (TRUenergy), Hazelwood (IP), Loy Yang (par t AGL), Southern Hydro (AGL)

NEMMCO

TRUenergy, Origin, AGL, Red, PowerDirect

VENCorp/SP AusNet

Powercor, MultiNet,CitiPower, SP AusNet

Domestic, Commercial & Industrials e.g. Ford, Shell

Pool $

Pool $

Hedge $

Westpac

GridSpot MarketForward Market

Bill $

NetworkCharges

$

Hedge $

SFE

ConnectionCharges

$

Example: Victoria


26

• Gas from coal before electricity (gasometers)

• 1960’s moved to natural gas direct from oil fields

• Vic 60’s, NSW/SA/SE Qld 70’s, WA 80’s, NT 90’s, Tas 2002

• Domestic & Industrial use large in Vic, SA & WA.

• Main Power station fuel in SA, WA & NT

• Minor non-industrial in NSW & Qld

• Whole supply chain by private monopolies (e.g. AGL in NSW)

• Except Vic had government transmission, distribution and retailing

monopoly

• Gas & Fuel. Production was Esso/BHP Gippsland

• In late 90’s Vic created a gas market and privatised the pipes and

retailing

• Encouraged new producers elsewhere, e.g. Otway, Yolla

• 2000-4 Vic, NSW & WA introduced gas markets

• Coal Seam Methane an established alternative

History of Australian Gas Supply


27

Gas Market Characteristics

•Domestic – poor load factor <50% in Victoria due to

domestic heating demand in winter

•Other states more steady due to lower domestic usage

• Industrial & Commercial – variable but large loads can have

very favourable load factors >80%

•Electricity Generation – peaky in Victoria but intermediate to

peaky in SA. Demand for peak generation will continue to

grow (summer vs. winter) due to air conditioning use.

•Mandated 13% electricity generation from gas in Queensland

•Construction of gas fired power stations in NSW


28

No National Gas Market

• While there is some short-term contractual trading around the

longer-term contracts, there is no transparent national market for

short-term trading in gas

• The Gas Market Leaders Group (GMLG) was established by the

Ministerial Council on Energy (MCE) in December 2005, and have

drafted a “National Gas Market Development Plan”

• The Plan has been developed to: “deliver on the MCE’s objectives

for a competitive, reliable and secure natural gas market

delivering increased transparency, promoting further efficient

investment in gas infrastructure and providing efficient

management of supply and demand interruption”


29

Gas Market Reform Plans

• Establishment of a Bulletin Board (BB) covering all major gas

production fields, major demand centres and transmission pipeline

systems

• Implementation of a Short-Term Trading Market (STTM) for all

States (except Victoria, which already has a gas spot market)

• Formation of a national Gas Market Operator to manage both the

wholesale and retail gas markets throughout Australia

• Administer the BB and the STTM

• Produce an annual national gas supply/demand statement

• The Market Operator would assume the gas retail market functions of

GMC and REMCo and the gas functions of VENCorp


30

Changing the Victorian Gas Market Rules

Governor in CouncilAEMC Decision

Process Who

Consultation GMCC

Advise VENCorp Board VENCorp

Victorian Government Government

Proposal Anyone

AEMC process AEMC


31

Gas - What is it?

•CH4 - methane (a hydrocarbon)

•Raw Gas contains a mixture methane and variable

proportions of LPG, Condensate, water, inert gases (e.g. N2,

CO2) and non-hydrocarbons (eg H2S)

•Sales Gas (depending on specification required) generally

contains >90% CH4, <7% inerts, and minimal water and

condensate

•Hydrocarbons are a product formed by geological processes

and have a predictable occurrence


32

Gas - Where is it found?

•Hydrocarbons – predominantly thermogenic

•Sedimentary basins – thick sequence of accumulated

sediments (up to 3km)

•Specific conditions required for hydrocarbons to form and

accumulate

• source rock (organic matter)

• heat of burial

• reservoir (porous & permeable rock)

• seal and trap (impervious barrier that allows

hydrocarbons to accumulate)


33

Conventional vs. Coal Seam Methane

Conventional gas is stored

within the centre of pores

and forms the continuous

phase

CSM is adsorbed onto

surfaces of microporosity

within coal. It is not in the

gaseous state until pore

pressure is loweredSource: BHP Billiton


34

Well Production Profile Comparison

Source: BHP Billiton


35

So what is Coal Seam Methane?

•Methane gas stored in coal

seams

•Methane generated as

coals are buried, heated

and compressed

•Gas bonds to the surface

of coal

•Extracted via wells which

pump water from coal

cleats thereby “liberating”

the gas

Source: BHP Billiton


36

Conventional Drilling Rigs


37

Coal Seam Methane Drilling Rig


38

Production,Processing &

Storage~50%

Transmission(High Pressure)

~5%

Distribution(Low Pressure)

~35%

Retailing~10%

•Gas units

• GigaJoules (GJ), TeraJoules (TJ=1000GJ), PetaJoules (PJ=1000TJ)

•Typical average house consumption ~ 100 GJ/year

•Typical gas supply facility capacity ~100-1000 TJ/day

Gas Supply Chain


39

Gas Supply Regulation

Production,Processing &

Storage“Competitive”Unregulated

Transmission(High Pressure)

Partially Regulated

Distribution(Low Pressure)

Regulated Natural Monopoly

RetailingCompetitive


40

Retail Pricing

Transmission & Distribution

Cost

VENCorp Fees

PassThrough

Gas Commodity

Cost

PortfolioManagement

RetailCost to Serve

Retail Margin

Retail

~$2/GJ

$3-$6/GJ

$2-$3/GJ


41

Victorian Gas Market

• Total Annual Demand – 220,000 TJ

• Winter: peaks above 1000 TJ/day (Record is 1206 TJ) with prices

peaking at over $6.00/GJ

• Summer: lower demand dropping below 300 TJ/day, price dips to

$2.20/GJ during market oversupply


42

How the Victorian Gas Market Price is set

Market Price = $2.72/GJ

“Infinite Tank”

Retailer A

Retailer B

Retailer A

Trader X

Retailer C

100

300

0

600200

400500

700

TJs

Forecast Demand = 550TJ

Source: VENCorp


43

Gas System Operation


44

Ancillary Services

• Similar to in the Electricity Market, these are services that

are essential to the management of gas system security,

and ensure adequate supply during intra-day peaks.

• These include:

• Out of Merit gas injections

• Peak Shaving (LNG)

• Uplift is levied on the Market to recover the monies paid out

to the suppliers of Ancillary Services.

• Uplift is payable by Market Participants that exceed their

AMIQ – their capacity right to use the Transmission System.

• AMIQ can be traded and assigned.


45

Capacity and Gas Storage

Vic + SA Demand Profile

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

TJs

Total Demand

AQ

TOP 80%

Use of storage

swing


46

Why Gas Storage?

• Similar to the Electricity Market, the Gas Market must have

sufficient injection capacity to meet demand on the coldest days.

• Producers such as EssoBHP Longford and Otway Gas Plant have

limited capacity

• Production facilities are more complex, therefore expensive. A

plant like the Otway gas plant has a capacity of approx. 200

TJ/day but costs $500-700 million

• A Gas Storage facility with a capacity of 300 TJ/day has a cost of

around $200 million, so despite the cost of reinjecting gas into a

reservoir it can provide cheaper capacity ($135-190/GJ/year)

• Interstate Gas Pipelines and the Dandenong LNG facility also

provide but cannot provide sustained injections as they have

limited gas inventory holdings


47

Upstream Gas Price

•Crude Oil

- ~US$60/bbl (~A$80/bbl)

- West Texas Intermediate, Brent, Tapis

•Condensate

- Can generally command a premium to crude ~US$1-2/bbl

•Gas

- Henry Hub ~US$6.00/GJ ~A$8.00/GJ (~US$35/boe)

- Victorian Spot Market ~A$3/GJ (~US$13/boe)

• In Australia coal, the abundance of gas as well as limited

market development help suppress the gas price relative to the

US and Europe.


48

Matching Supply to Demand

•Supply Contract

• ToP, MDQ (swing), renomination

•Transportation

• MDQ, park and loan/flex/imbalance

•Storage

• Underground Storage, LNG

•Substitution

• Oil (generation)

•Curtailment


49

Gas Supply Contracts

Key Terms (1)

- Volume (total contract qty, annual qty)

- Swing = MDQ/ADQ = 1/Load Factor

- Term

- Price (fixed, variable component, CPI, Review)

- Take-or-pay (make-up provisions)

- Interruptions

- Permitted - Force Majeure, maintenance

- Non-permitted – Shortfall (penalties)

- Gas Specification


50

Gas Supply Contracts

Key Terms (2)

- Nominations process

- Source of supply (reserves)

- Taxes, billing

- Financial circumstances (change in conditions, parent

company guarantee, pre-payment)

- Default, suspension, termination

- Liabilities

- Dispute resolution (expert, arbitration)


51

Gas Transportation Contracts

Key Parameters

- Capacity (MDQ and throughput)

- Operating Pressure (input considerations, delivery)

- Tariff (fixed, variable)

- Scale (extra compression, looping)

Typical Transportation Tariffs

- Victorian Market Carriage $0.16/GJ

- Interstate Pipelines – range $0.50 to 0.80/GJ


52

Gas Supply


53

Gas Transportation


54

Trading Functions vs. Time Horizon


55

Key Gas Market Trends

• Increasing Gas fired generation demand

• Increasing peak demand requirement

•Reducing availability of flexible supply contracts (limited swing

and high ToP commitment)

• Interconnected markets – value driven, short term supply

•Multiple gas supply sources

• Increased Wholesale trading as participants try to match their

demand requirements

•Transmission system hitting capacity constraints

•Availability of gas commodity and capacity on interruptible

basis.


56

Transport energy as molecules or electrons?

• Technical Comparisons are never easy, but lets give it a go:• SEA Gas was 700km, cost $500m and transfers 320TJ/day

• Equivalent to 1800 Electrical Megawatts when put through a powerstation

• i.e. Cost $400 per MW per km of energy transfer capability.• The SNI (NSW->SA electricity interconnector) project was about the same length, cost $110m for 250MW• i.e. Cost $650 per MW per km• Other interconnectors more expensive, e.g. Basslink ~$3,000 per MW per km!

• That’s why the old central planners put their gas power stations in cities!• But today, power stations pay for pipelines, but not for electricity transmission• Someone else pays for that!

• So, it is more commercial to locate at the fuel source than at the load

OR


57

Electricity Generation Comparison

• Brown Coal most capital intensive,

cheapest fuel, therefore plants

run continuously, and receive

premium most times

• Open Cycle GT less capital, but

dearer fuel, so only run a few

hours per year

• Load shedding zero capital, huge

marginal cost, reflected in price

cap $10,000/MWh

Time

Price$/MWh

Price Cap

Load Shed

Open Cycle Gas Turbine (~$50/MWh)

Combined Cycle Gas Turbine (~$40/MWh)

Black Coal ($9-15/MWh) Brown Coal ($3-5/MWh)$30-40

Average Price

$10,000


58

Key Gas Supply Trends

• Existing, large flexible contracts will expire over the next

few years

• Replaced by less flexible and higher take contracts

• This increases the demand for flexible services such as Gas

Storage

• New supply sources competing (Otway, CSM)

• Northern (PNG or Timor Sea) or Western (NWS, Browse,

Gorgon) supply unlikely to be needed until mid to late next

decade


59

GippslandBasin5 Tcf

OtwayBasin1.5 Tcf

YollaField

TRUenergy Gas StorageVIC

SA

QLD

NT

NSW

WA

Sydney

Canberra

Perth

Brisbane

Adelaide

Darwin

MoombaGas Plant

Ballera

Bayu/Undan

LNG

Wallumbilla

Longford Gas Plant

Thylacine/Geographe Fields

Melbourne

Minerva Field

Casino Field

Kipper Field

CooperBasin1.8 Tcf

Coal Seam Methane Projects

2.6Tcf (potentially 5-10 Tcf)

Basin Discovered Gas Resource

Gas Field - undeveloped or under development

Townsville

Gladstone

Gas Processing Plant

Minerva Gas Plant

Otway Gas Plant*

* Under construction

Bass Gas Plant

Orbost Gas Plant

Proposed PNG Pipeline

Greater NorthWest Shelf

90Tcf

Browse Basin 30Tcf

Timor Sea 25Tcf

Papua New Guinea (PNG) 10Tcf Existing pipeline

Proposed pipeline

1Tcf=1068PJ(Vic uses ~250PJ p.a.)

Australia has Significant Gas Reserves


60

Global Gas Resources also Plentiful but…

• Gas Reserves (2004) = 6300TCF (180TCM); “underexplored”

• About 40% of gas (2500TCF) is stranded (Russia, Qatar, Australia, PNG)

• R/P ratio: ~70 years (versus oil at ~35)

• Associated gas is re-injected or flared

Source: bp


61

Flaring of Associated Gas (Red ~15 bcf/day?)

Source: bp


62

Remote Gas Monetisation Options

PIPELINE PUSHING THE LIMITS ($25B)

LNG TECHNOLOGY OF CHOICE TODAY

GTL (FT, Fischer-Tropsch ) BIRTH OF A NEW INDUSTRY

METHANOL TRANSITION FROM CHE MICAL TO FUEL

DME “SYN-LPG”, RAPID GROWTH IN CHINA

CNG A NICHE FOR SMALL & SHORT (EnerSea)

GAS BY WIRE DC TRANSMISSION COS T DECREASING

HYDRATES MOVING A LOT OF WATER

Source: bp


63

Simple Conversion Chemistry

Dimethyl-ether(DME)

Methanol

Hydrogen Carbon Oxygen

“Diesel”


64

About DME

• Di-methyl Ether

• Easily made from methanol

• Physical properties: like LPG

• Clean bill of health

• Multi-purpose fuel

• LPG extender (commercial)

• Diesel alternative (fleet demos)

• Power production

• Other: olefins, hydrogen, gasoline

Source: bp


65

LNG to GTL Supply Chain Comparison


66

GTL – a Large Unconstrained Market

Source: bp


67

Economics of GTL vs. LNG

Key Issues :• Oil:gas price relationship;

gas capped by coal

• LNG capex: plant only or value chain capex?

• Strategic value :

• Revenue diversification• Value added in-country • LNG and GTP

LNG EconomicallyAdvantaged

GTL EconomicallyAdvantaged

Oil

Pric

e ($

/bbl

)

20

40

60

80

100

106 8LNG Price ($/mmbtu)

4

Net Present V

alue

Source: bp


68

Environmental Impacts

•Open Cycle Gas Turbine generates ~80 MWh/TJ of Gas, a

Steam Generator Unit ~100 MWh/TJ, and a Combined

Cycle Gas Turbine 110-120 MWh/TJ

•This results in up to 50% less CO2 per MW than a brown

coal power station

•However, methane traps 20 times more heat than CO2

(although it only lasts 10 years in the atmosphere), so

venting and fugitive emissions need to be controlled


69

Environmental Impacts

Institute for Sustainable Futures, UTS


70

Reality Check – Is Gas the Answer?

•Victoria’s four Brown Coal Power Stations generate at least

6000 MW

•To generate this electricity from natural gas would require

approx. 1400 TJ/day (assuming 100MW/TJ)

•Victoria’s Peak Day gas capacity is around 1200 TJ/day,

meaning that existing production and transmission capacity

would need to be doubled

•NSW’s Coal Power Stations generate approx. 10,000 MW,

which would require over 2000 TJ/day of natural gas

•Moomba gas supply is in decline, so this level of supply

would require a major new supply source (e.g. PNG, NWS)


71

Torrens Island Power Station(gas, 1280MW)

Yallourn Power Station&Mine(coal, 1480MW)

SEA Gas Pipeline

Ecogen Hedge

(gas, up to 966MW)

Gas Storage Facility

(12 PJ)

Tallawarra Power Station

(greenfield, gas, 400MW)

Otway Basin gas contracts

(long-term)

Gippsland Basin

gas contracts

(long-term)

• 2760MW generation owned, 966MW under contract, 400MW under construction

• Underground gas storage and pipeline owned, large gas supply under contract

• 600,000 electricity retail customers & 500,000 gas retail customers

•Mostly in Vic, but growing organically elsewhere-best in SA

TRU Who?


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Documents

Australia’s Alternative Energy Options –Gas Matthew Clemow ... · Australia’s Alternative Energy Options -Gas 25 Yallourn (TRUenergy), Hazelwood (IP), Loy Yang (part AGL), Southern