Clean Coal and our Energy Future by cwj21439

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									                                                                                                          Jindalee Rotary Club
                                                                                                            McLeod Golf Club,
                                                                                                    Gertrude McLeod Crescent
                                                                                                                   Middle Park
                                                                                                               14 August 2007



                                             Clean Coal and our Energy Future

                                                    Presentation by Jim Devine
                                                     Director Communications
                                                   Queensland Resources Council




President Chris, Rotarians and guests.

Without wishing to sound melodramatic, the issues I am going to canvass tonight are of
significant importance to Queensland, Australia…and the world.

Let me put that into some context for you.

In the midst of a growing debate in developed countries over climate change and its links to
the use of fossil fuels, around one third of the world's population are going about their
business today without access to electricity.

In the midst of the climate change debate in Australia, there are calls to close down the
country's most valuable export industry, and essentially walk away from around 800 years'
worth of energy security.

Tonight, I want to share some insights into the challenges and opportunities ahead for
Australia, as we all come to terms with the concept of a low carbon economy.

First, a quick overview of the Queensland Resources Council and its role.


   Alcan                  AMCI Holdings              Moggie Mining          Monadelphous
   Anglo American         Anglo Coal                 Monto Minerals         New Hope Coal
   Aust. China Clays      Barrick Gold               Newmont Pajingo        Noranda Pacific
   BHP-Billiton           BMA Coal                   NQ Metals              Northern Energy Corp.
   Birla Mt Gordon        Burgowan                   Paladin Resources      Peabody Pacific
   Cape Alumina           Cape Flattery Silica       QNI                    Qld Energy Resources
   Cement Australia       Citigold                   Queensland Gas         Rio Doce Australia
   Consolidated Rutile    Copperco                   Rio Tinto Aluminium    Rio Tinto Coal
   Custom Mining          Diatreme Resources         Roche Mining           Santos Coal Seam Gas
   Ensham Resources       Felix Resources            Scarborough Minerals   Summit Resources
   Foxleigh               Gladstone Pac. Nickel      Southern Cross Fert.   Southern Uranium
   Golding Contractors    Jellinbah Resources        Stanwell Corporation   CVRD Australia
   Lagoon Ck Resources    Macarthur Coal             Superior Coal          Syntech Resources
   Macmahon Holdings      Macmin Ltd                 Tarong Energy          Thiess
   Metallica Minerals     Millennium Coal            Universal Resources    Wesfarmers Energy
   Millmerran Power Mgt   Mitsubishi Development     Xstrata Coal           Xstrata Copper
   Origin Energy          Mega Uranium               Xstrata Zinc           Zinifex Century Mine


                                           QRC full members 2007


The QRC is a not-for-profit, peak representative body for minerals and energy sector
companies operating in Queensland. Membership is voluntary, and despite being called a
Council, we have escaped amalgamation. Our members' interests cover exploration, mining,
minerals processing, oil and gas production and electricity generation.

That's the A to Z of resources in Queensland, from Alcan to Zinifex and all points in between.
At the moment, we represent 64 full member companies, including Chris Hopkins' New Hope
Coal, which is at the forefront of the industry's expansion into the Surat Basin, west of
Toowoomba.


                                                                                                                            1
We also have some 75 service member companies with a direct interest in the fortunes of this
sector, and you'll soon see why they are so interested.
The QRC's objective is to ensure that the state's resources are developed profitably and
competitively, in a socially and environmentally responsible way.




       Resources in Queensland
    à Mining value of production: $25.3 billion             (2007)
       (>15% of Queensland economy)
       Coal = $18 billion
       Minerals/petroleum = $7 billion
    à Major minerals processing centres
       Mount Isa, Gladstone, Townsville (14% merchandise exports, 20,000 direct jobs)
    à Petroleum     (05-06)
       Oil = 2.5m barrels
       Conventional & coal seam gas sales = 181 PJ (CSG sales 30.9→60.9 PJ in 1 yr)
    à Electricity
       10,600 MW installed capacity (+ Kogan Ck 750MW, Braemar 630MW)



This financial year, the value of minerals and energy production in Queensland is expected to
exceed 25 billion dollars, representing a little over 15 per cent of the state’s economy.

A couple of stand-out points here - Queensland is the world’s largest seaborne exporter of
coal, with sales realising around 18 billion dollars last financial year. Queensland is also
Australia's leading producer of copper, lead, zinc and silver.

These base metals are mined predominantly in North and North West Queensland. Coupled
with petroleum products from the southern half of the state, sales are worth around seven
billion dollars annually – although that figure is sure to be surpassed very soon.


                                  Advanced development:

                                  10 base metal projects
                                  10 other mineral projects
                                  7 gold projects
                                  17 coal projects
                                  3 petroleum projects

                                  Total costs: $5 billion




The Department of Mines and Energy reports that there are currently 10 base metal projects,
10 other mineral projects, 7 gold projects, 17 coal projects and 3 petroleum projects in an
advanced stage of development.

Total costs for the development of these 47 projects are estimated to be in excess of 5 billion
dollars. The 17 coal projects that you can see illustrated by the blue dots are focused on the
Bowen Basin in central Queensland, where around 85 per cent of the state's coal is produced
for both export and domestic consumption.

There are two major categories of coal in Queensland…hard coking coals are used in blast
furnaces for steel production, and Queensland is currently exporting around 100 million
tonnes a year of that category.




                                                                                               2
Thermal coals have characteristics suitable for their combustion and the generation of
electricity. Queensland exports a little over 40 million tonnes of thermal coal annually, as well
as supplying domestic power generators.

Coal seam gas has emerged as a major resource for both domestic and global energy
markets. Without venturing into the technicalities, coal seam gas is methane trapped in coal
seams. Methane is also a natural gas, and that's the name under which it is marketed to us.

In-situ, methane is a constant hazard in underground coal mining operations, responsible in
part or whole for the worst mining disasters in many parts of the world, including Queensland.

Extracting this gas for its energy potential before mining is even contemplated has obvious
advantages. Gas has been mandated in Queensland's recent energy policy to fuel up to 18
per cent of Queensland’s electricity generation by 2020.

Some would also be aware of plans by companies including Santos and Arrow Energy to
convert these reserves into liquid natural gas for export markets. LNG is usually associated
with Western Australia, but Santos's claims to around 5,000 petajoules of methane in the
Bowen and Surat Basins is creating predictable excitement.

To put the potential growth of coal seam gas into some perspective, production in 1998
totalled just two petajoules. You will also note from the slide that Queensland is about to have
its electricity generation capacity increased through two major additions – Kogan Creek and
Braemar.




        What resources mean to Queensland
     à Royalties   (06-07)
       Direct payments to state government =         $1.45 billion (coal $1.01 billion)
       Total (inc. indirect via GOC dividends) =     $2.05 billion
     à Employing
       40,000+ direct jobs
       Flow-on: 1 in 8 jobs in Queensland; Largest employer in regional Queensland
       $2.2 billion pa salaries; $6.8 billion pa Qld spending (QRC member survey)
     à Investing
       $1.5 billion pa = 20% Queensland’s capital investment
     à Saving
       Queensland taxpayers $1,000 per capita per annum

The payback for all this activity for the Queensland and national economies is reflected in this
slide.

It's important to note that the royalties from mining operations go straight to the Treasury.
There's no trade-off between royalties and state government infrastructure spending, as the
coal industry for example, is underwriting every single expansion in Queensland.

In terms of future energy resources, whether Queensland will benefit from its 20-plus billion
dollars worth of known uranium deposits is still a work in progress despite the ALP’s decision
nationally to rescind its ‘no new mines’ policy.

Irrespective of decisions made about the future of nuclear power in Australia, there are 31
countries already using it to produce 16 per cent of the world's electricity production, and they
are planning to boost their capacity.

The last operating uranium mine at Mary Kathleen near Mount Isa closed in 1982.

It is our view that the Queensland Government will find it irresistible to deny this state the
benefit of around one thousand direct jobs in construction and mining, and a substantial
indirect economic flow-on to the north and north west of the state.
                                                                                                    3
The government may also find it irresistible to forgo mineral royalties on actual production
conservatively estimated at 1 to 1.5 billion dollars a year.


    What is the greenhouse effect?
                                                                               Most of the energy we
                                                                               use for electricity and
                                                                               transport comes from
                                                                               fossil fuels such as coal,
                                                                               oil and gas.

                                                                               When fossil fuels are
                                                                               burned, they release
                                                                               carbon dioxide - the main
                                                                               greenhouse gas.

                                                                               Broad scientific
                                                                               consensus is that
                                                                               greenhouse gas
                                                                               molecules trap and
                                                                               recycle radiation into the
                                                                               atmosphere.




So, let's turn to climate change and the implications for this country as a net exporter of
energy. In a nutshell, this is what it's all about – the trapping by carbon molecules in the
earth's atmosphere of solar radiation that should be leaving in larger quantities.

This is actually the enhanced greenhouse effect. Without the atmospheric retention of heat,
the planet's temperature would be around minus 18 degrees Celsius. What I will run you
through now are some slides which formed the basis for linking increased carbon emissions
with global warming.


    Carbon dioxide levels in the atmosphere
                                    380
                                                                          Mauna Loa
                                                                          Observatory
        CO 2 concentration ( ppm)




                                    360                                     Hawaii

                                    340

                                    320

                                    300

                                    280
                                             ice cores
                                    260
                                      1700       1750    1800   1850   1900     1950         2000

    UK Met Office (Hadley Centre)



Carbon dioxide levels in the atmosphere, generated it is said, by our use of fossil fuels have
risen sharply since the 1970s. There is a parallel between this graph of carbon dioxide levels
and…..




                                                                                                            4
    Global mean temperature
                 14.9

                 14.7
                                                          0.7oC increase
                 14.5
                                                             observed
                                                            observed
                 14.3                                        most of the warming
                                                         “… most of the warming
      DegreesC




                 14.1                                     observed over the last
                 13.9
                                                          50 years is attributable
                                                             human activities…”
                                                          to human activities…”
                 13.7
                                                         Intergovernmental Panel
                                                         Intergovernmental Panel
                 13.5
                                                            on
                                                            on Climate Change
                 13.3
                   80

                   90

                   00

                          10

                          20



                                 40

                                 50



                                            70

                                            80

                                            90

                                            00
                                  0




                                             0
                                 3




                                            6
                 18

                 18

                 19

                        19

                        19



                               19

                               19



                                          19

                                          19

                                          19

                                          20
                                9




                                           9
                               1




                                          1




                          Source: Worldwatch Institute




The movement in the global mean temperature over roughly the same period. This has led
the United Nations Intergovernmental Panel on Climate Change – among others – to
conclude that 'most of the warming over the past 50 years is attributable to human activities'.


    Global temperatures – past and future?




Across a broader timeframe, you can see on this representation that the climate has been
changing for the last 20 thousand years, and indeed, will continue to fluctuate with or without
human intervention.

The future predictions and their implications for life as we know it on this planet vary
significantly. While there is a school of thought that we are experiencing a natural
phenomenon, there is growing scientific consensus that our reliance on carbon emitting fossil
fuels, along with land clearing and other activities are the root cause of the problem.

I use the word problem here in a broad sense, as there are tens of millions of people across
northern Europe for whom the prospect of global warming is welcome. This is especially the
case in Russia, where millions of hectares of currently frozen tundra could become valuable
farming land.




                                                                                                  5
         Regional Shares in World Primary Energy
                                                  2002                                         2030


                                                                                                                 43%
                                38%

                                                                  52%

                                                                             48%

                                          10%
                                                10 200 Mtoe                                                 9%
                                                                                             16 325 Mtoe
                                                     OECD     Transition economies   Developing countries

        Two-thirds of the increase in world demand between 2002 and
          2030 comes from developing countries, especially in Asia

       IEA WEO 2004

Ladies and gentlemen, this is what lies ahead of us in terms of primary energy demand.
Remember, I mentioned that about a third of world's population doesn't have access to
electricity at this time.

Another point worth making is that this projection is probably very conservative, particularly
against the backdrop of continuing strong economic growth in China and India, representing
as they do, some 37% of the world's population.

The graph indicates a 50 per cent increase in primary energy needs by 2030.


                          World primary energy supply 2002-2030
                                18000

                                16000           Other renewables
         Mt of oil equivalent




                                14000
                                                Hydro
                                                Nuclear
                                12000
                                                Coal
                                10000           Natural gas
                                 8000           Oil
                                 6000


                                 4000

                                 2000

                                      0



                                                  1970                     2000                        2030
                          Fossil fuels will continue to dominate the global energy mix,
                                        while oil remains the leading fuel
     Source: IEA WEO 2004

From the same source, the International Energy Agency, their conclusion that based on
current technologies and the availability of more diversified energy sources, fossil fuels will
continue to underpin supply.

The message from this is that there is no silver bullet solution to the dilemma of increasing
energy demand and growing pressure to reduce greenhouse gas emissions. From an
Australian coal industry perspective, the science of climate change is no longer a subject for
debate.




                                                                                                                       6
        Australia’s emissions profile

      1.4% of world’s emissions
      48% - stationary energy (eg power stations)
      17% - agriculture (mostly methane from animals)
      14% - transport (vehicles)
      10% - land use change (land clearing)
      11% - fugitive gases, garbage tips, industrial processes




Action is not only warranted in addressing genuine public concerns over greenhouse gas
emissions, but also a valuable investment in energy security by improving efficiency.

There is twice the amount of energy contained in the world's coal reserves than in oil and gas
reserves combined. Coal is mined around the world in more than 50 countries, with the
largest reserves being in the United States, Russia, China, India and fifth on the list, Australia.

For electricity generation, coal is proven to be safe, reliable, plentiful and cheap. Australian
coal is, in fact, a very small part of the global emissions profile. The use of coal in Australia
accounts for 0.4 per cent of global emissions and the coal we export accounts for another 1.3
per cent of global emissions.

Having said that, we are not going to walk away from the challenge. Our greatest contribution
to global development could come from within the ranks of our own scientific community.




In March 2006, Queensland and New South Wales coal producers announced a voluntary
levy on production called the COAL21 Fund.

Its aim was to raise 300 million dollars over five years to invest directly in the demonstration of
emerging clean coal technologies. In May this year, the COAL21 Fund partners announced
an indefinite extension of the voluntary levy.

Removing the time limit means that over the course of the next 10 years, around one billion
dollars will be put on the table – by Australian coal companies – to support the development
and deployment of technologies designed to reduce and eventually eliminate greenhouse gas
emissions from coal-fired power stations.

No other industry, anywhere in the world, has committed as much to fight climate change. No
other industry, anywhere in the world, has done so voluntarily.

In addition, the COAL21 Fund will direct funds raised from Queensland coal producers to
support clean coal technology projects in Queensland. This is expected to total in the order of
600 million dollars over the next 10 years.

The state government has committed a further 300 million dollars to clean coal technology
projects – part of the proceeds from the sale of the retail arms of Energex and Ergon.




                                                                                                 7
      CO2 capture & storage (for coal & natural gas)




                                                     Deep coal seams with
                                                      coal seam methane
             Depleted Oil                                  recovery
              and Gas                                            Saline
                                                               reservoirs
             Reservoirs



The key to clean coal technology is improving both the efficiency and the environmental
acceptability of coal extraction, preparation and use.

On the end use side of the ledger for thermal coal, the focus is on increasing the amount of
energy gained from each tonne of coal and marrying those advances to techniques which fall
under the category of carbon capture and storage.

Separating and cleaning the gases created before, during and after combustion is a key
component of research work being undertaken, among others, by the CSIRO, the Centre for
Low Emission Technologies and two Cooperative Research Centres in Brisbane.

As well as consigning carbon dioxide to underground storages where it can be safely held
indefinitely, there is a bonus in the form of the hydrogen that can be separated from coal and
gas. The hydrogen economy of the future is most likely to be delivered by coal and gas.

Technologies to gasify coal and separate the various gas streams are well established but not
yet integrated into a system that would result in the permanent underground storage of
carbon dioxide from a coal-fired facility.




       Emission-free utilisation of coal and gas




BP and Rio Tinto are among major global companies showing faith.

They are funding a $50 million feasibility study and planning for a $2 billion dollar industrial
scale near-zero emissions power plant in Western Australia, using coal gasification
technology. This plant would capture 90% of the CO2 produced for permanent storage under
the seabed of the Perth Basin.




                                                                                                 8
This graphic, by the way, is not from the proponents of the West Australian project, but the
Norwegian state-owned company Statoil, which already pipes CO2 underground to assist in
the recovery of oil and gas.

The question is, with all this R&D under way, is do we in Queensland have to wait decades
for near zero-emission coal fired power generation?

The good news is no, we don’t. Queensland can be at the forefront of this new era of power
generation, but there is also an important role for the national government in cooperation with
the states.


    Near term demand and supply of electricity - Qld
                  14000

                  12000

                  10000
      Megawatts




                  8000

                  6000

                  4000

                  2000

                     0
                          2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12
                          Current Generation Capacity    Kogan Creek         Peak Demand




It is calculated that Queensland needs 3000 megawatts of new power generation capacity
between next year and 2015, to meet demand growth and the expected retirements of
existing plant.

That is 3000 megawatts on top of our existing capacity of just over 10,600 megawatts. The
new Queensland energy policy released a couple of months ago has dropped a previous ban
on the construction of new coal-fired power stations, favouring instead what industry has
always advocated – environmental performance over fuel type.

There is no doubt that gas-fired power generation can and will continue to make an important
contribution to meeting this state’s power needs. The bonus for them is that conventional
gas-fired power stations produce around 40 per cent less carbon dioxide per megawatt of
power than conventional coal-fired power generation.

However, low emission coal-fired technology is not science fiction. Using the latest
commercially available technology, we can build in Queensland a highly efficient, so-called
ultra super critical, coal-fired power plant.



                     Ultra super critical coal combustion

                              O2
                                                            Steam         Steam
   Coal                                      Boiler
                                                                         turbine

                                                  CO2


                                     Geo-sequestration                  Electricity




                                                                                                            9
In essence, the greater efficiency comes from being able to burn pulverized coal at much
higher temperatures than we do now. Added to that plant could be the latest in systems to
remove most of the oxides of sulphur (Sox), and substantially reduc e nitrogen oxide (NOx)
emissions.

We can then take advantage of the latest in chemical filters to capture most of the CO2
emissions. All of these add-ons cost more, but their economic viability will become apparent
when Australia moves, as it inevitably must, to embrace a carbon pricing scheme.

While it is important that future power plants are capable of reaching near zero emissions, if
we are going to make serious inroads into the emissions from coal-fired power plants, we
need to be doing something with the existing Australian inventory.

If new power generation technology is able to promise serious inroads into carbon emissions,
then there is an important task ahead for the federal and state governments. We should not
be leaving the task to individual state governments and individual project proponents. We
need a nationally coordinated approach to clean coal technologies.

This should start with a national plan to complete the search for commercially viable storage
sites capable of many decades of storage of CO2.




             Potential geological storage sites for CO2




We need a plan for a national common user pipeline to transport the CO2 to major storage
sites. This plan also needs to come up with the best match between power station locations
and this common user infrastructure.

This national plan for managing carbon needs to be seen as a vital nation-building exercise
and will need cooperation and support of all jurisdictions. And this plan needs to be seen as
urgent. Industry and governments need to be planning for the infrastructure that will safely
pipe and store the CO2 that can be captured from these power plants.

And this new common user infrastructure is not just about coal. The combustion of all fossil
fuels emits carbon and so, current and planned gas-fired power plants will also need this
infrastructure if we are to make a substantial dent in emissions.

This infrastructure will need to be seeded and planned for by governments, but be in no doubt
that the private sector is already alive to the commercial possibilities. We are talking about a
pipeline network rivaling the scale of the nation's current gas pipeline infrastructure.

We are talking about an underground storage industry with the potential to become as large
as the one currently extracting oil and gas from reservoirs deep within the earth’s crust.

So, let me be clear about the messages.

    •   First, clean coal technology is real and it is going to be a huge business opportunity,
        especially in the transport and storage of carbon dioxide.

    •   Secondly, the use of coal in electricity generation has a long-term future through the
        roll-out of these clean coal technologies.

                                                                                                 10
             Electricity generation options
                     Geothermal     Nuclear

    Wind
                                                              Hydro
    Solar
                                                              Tidal

Biomass                                                       Wave
                            Fossil fuels
                      (Coal, Oil & Natural gas)


The world is currently adding 250,000 new people every day or 1.75 million every week. As
you've seen already, global energy demand will be 50 per cent higher than it is today, mostly
driven by developing countries.

We are going to need every available energy source to meet those expectations – coal, gas,
oil, uranium and renewable energy in all its forms. Long-term growth in demand for
Australia’s minerals and energy commodities will continue.


            Why the demand outlook is strong




Prices may be coming off the boil, but according to our members, this is being compensated
for in terms of volume.

Much has been said and will continue to be spoken about the economic rise of China.

It is driving a fundamental shift in the global balance of power that ‘the west’ has enjoyed for
the past 300 years.

The figures speak for themselves.

Ladies and gentlemen, thank you for your attention, and I will make every effort to answer any
questions that you have.

ENDS




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