Sunday, August 24, 2008

Oman in need of importing coal and Oman's gas shortage

Oman is continuing its push for coal fired power, according to officials at the Ministry of Oil and Gas. This is because there is not enough gas, and compared to the prices for imports, coal is supposedly a reasonable option (although expensive, requiring a huge upfront capital investment) - see article below quoting one 'Zaid Al Siyabi director general of exploration at the MOG'. [Actually this is Dr. Al Siyabi, and he's director general of oil and gas development at the MOG. I find it also a bit strange that such reports are coming from the Ministry of Oil and Gas, as coal is neither gas nor oil, and electricity I thought was somebody elses problem... Anyhow.]

Hence the expectation of having to get overseas investors to build the plant, and take the risk on coal prices. What will be interesting is what kind of coal plant - ie a big old school beast, or a high tech so-called clean coal plant (lots more expensive to build)? The emissions will just sail across the Indian Ocean anyhow, and Oman is not constrained by Kyoto limits.

One crafty option is for the Government to plan to build a big smelly old type, and then sell the carbon credits to the developed Kyoto countries for the upgrade to the actual clean technology, getting a nice cheque in the process.

This will be an interesting project to track as it progresses as to who gets involved. The other advantage of a coal plant is a lot more of the cost is spent with internal building contractors compared to a small General Electric gas turbine power station.

Note that Oman does not have any significant coal resources. It'll all have to be imported.

Arabia News Reuters
Oman turns to coal for power
Muscat: Mon, 18 Aug 2008

Oman plans to build coal-fired power plants to beat a shortage of gas to fuel future projects for economic diversification, an Oil and Gas Ministry official said on Monday.

The Gulf is the world's biggest oil exporting region, but has been slow to develop massive gas reserves. Rapid economic growth has absorbed fuel supplies and left all the countries in the region except Qatar short of gas.

"It makes a lot of sense to build coal-fired power plants as an alternative to gas since we don't have enough gas to fuel all of our future projects," Zaid Al Siyabi, director general of exploration at the ministry, told Reuters.

"This is the future. Coal is cheaper to import and at the same time we can use our gas for other purposes like the export of LNG," he added.

Faced with spiralling power demand, regional governments are considering alternatives to gas to generate electricity, such as nuclear and coal plants. Oman's neighbour the United Arab Emirates became the first Gulf country to move ahead with plans for a coal plant last month.

Oman exports nearly 10 million tons of liquefied natural gas (LNG) per year from four trains, but has struggled to meet its LNG contract commitments as domestic demand rises. LNG is gas chilled to liquid form for export on specially-designed tankers.

Oman wants foreign investors to build its first 1,000 megawatt coal-fired plants at Duqm, where the sultanate is developing an industrial zone. - Reuters

Of course, Oman has chosen to also use its gas for other purposes than LNG as well, like the subsidised aluminum smelter and the methanol plants. The gas for these projects, my sources tell me, has been sold at much, much lower prices than the equivalent cost of importing coal for power, the price of imported gas, or than is paid for the LNG exports.

And I wonder who is going to pay for the expensive (compared to current power prices)power from the coal fired station?

The Economist has a nice article giving a pretty balanced view on coal. At international prices, coal - even after recent price rises - is the cheapest way to generate electricity per BTU, but the capital costs make it a finely balanced proposition. And its also by far the most polluting way, even with updated designs of standard plant. And worryingly, coal supply is getting pretty tight, not because of resources, but because we're currently digging it up about as fast as we can with current infrastructure.
Apparently even China is now a net importer of coal, despite being the world's largest producer. The big proven reserves of the stuff are in Australia, China, Russia, and the largest in USA (ironically enough). (actually, if you're willing to pay a lot for the plant, the most green friendly coal solution is to first the gassify the coal and then use a hydrogen gas turbine to generate electricity. The advantage of this design is not only is it clean, but you get a relatively pure CO2 source for sequestration, which is very expensive in a standard plant because most of the flue gas is Nitrogen. But I suspect its waaaay to expensive for Oman...).

And for these reasons not everyone thinks coal is a good idea.
Building more coal-fired power plants: big mistake

Environmental expert explains why investors and power companies getting fired up for coal growth will get burned financially
By Tobin Hack

The coal industry may be a ticking time bomb for energy investors, power companies, and taxpayers, says a new report entitled “Don’t Get Burned: The Risks of Investing in New Coal-Fired Generating Facilities.” Prepared for the Interfaith Center on Corporate Responsibility, an international coalition of 275 faith-based institutional investors, by Synapse Energy Economics, Inc, the report warns against Bush’s proposal to grant $8 billion in subsidies to coal, and opposes the roughly 130 new US coal-fired power plants slated for construction over the next two decades. Michael Dworkin, director of University of Vermont Law School’s Institute for Energy and the Environment, wrote a foreword for the report. Dworkin helped present the report to security generals, investors, and members of the media in New York this February at a briefing for the New York Society of Security Analysts. Plenty caught up with him, to discuss coal’s potentially bleak horizons.

What risks does coal-industry growth pose for American taxpayers?

There are two, maybe three kinds of risk here. One is that there will be a lot of money lost. Another is that there will be significant harm to the climate because of carbon emissions. A third is that other environmental harms will result from increased coal combustion. That includes mercury, asthma, tuberculosis, and other problems associated with lung diseases. Most high carbon coals have a lot of mercury within them, so when it’s burned, the mercury is released in the atmosphere. In fact, the major source of mercury in the air is the combustion of coal for fossil-fired plants.

Is carbon regulation the main reason the report calls coal a risky investment from here on out?

Carbon regulation is the biggest and most obvious factor, but not the only one. The rising costs of plant construction and coal transportation are also a major factor: New cost estimates are far higher than the old cost estimates. Coal-fired power plants were expected to cost approximately $1 billion apiece to build, but the big ones are costing closer to $3 billion apiece. Early cost estimates looked at what would happen if each plant was built by itself, but if we build dozens at a time, the competition for engineers and steel and concrete becomes very acute. So there’s major international competition going on.

In terms of fuel price, a lot of these plants are being built because people estimated that the price of coal would be relatively low for years to come, but coal prices today are about twice what they were two years ago. And US coal is now being sold overseas—put on ships and taken to markets that really need it and are willing to bid a higher price than we’ve been used to seeing. That’s a problem especially because when analysts predict that these plants are cost-effective, they’re assuming 30-50 years to pay off the bonds raised to construct them. In other words, the plants only make sense if you think that the fuel will be accessible for the next 40-50 years.


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  2. Seems like Oman's coal fired energy project may have taken a back seat.
    'Muscat Signs Nuclear Deal With Moscow'

    It is already 'evaluating' the use of coal for the planned Duqm independent water and power project.

  3. UD,

    Do you have any more updates on coal use in Oman?

    Where can I get more information about the use of coal for power generation in Oman?


    Waiting in Vain


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