Gas pricing in the news

Last week, both The Australian newspaper and the industry journal Platts Coal Trader International led reports of a reversal in Australian energy sector trends. The Age has also joined the chorus with an article  yesterday.

The message:

With increasing prices for natural gas driven by demand from Asia, coupled with a very competitive thermal coal market, Queensland generator Stanwell Corp. have elected to restart their previously mothballed coal fired Tarong generating unit, while withdrawing from service its gas fired Swanbank E unit.

The economic drivers are clear.

Stanwell advised they will be able to create significant financial benefits by providing lower marginal cost electricity from their Tarong plant, while selling their gas allocations from the curtailed Swanbank E unit.

Essentially, it’s more profitable to export the gas than use it for electricity generation here.

As the domestic electricity market sits, the margin on coal-based electricity generation outperforms its gas-based counterpart.

This is a double lift for Stanwell, delivering higher margin on both businesses.

This is not an isolated event. In the article in The Australian newspaper, it noted that this trend of coal fired generation returning to service and displacing other generating means is gaining momentum in such advanced economies as Germany. It noted “Germany is shifting back to more coal-fired electricity generation, reopening some of its dirtiest brown-coal mines that have been closed since reunification, despite having spearheaded Europe’s push into renewable energy.”

While these trends signal increasing focus on the economic cost of electricity generation, thankfully it does not appear to mean a return to the carefree attitudes of decades past with respect to CO2 emissions. To the contrary, it signals that the energy market is becoming more flexible, with a focus on not only cost, but a balanced approach covering both cost and emissions intensity.

ECT view this growing maturity as an opportunity for Coldry technology deployment in those advanced economies, which ECT are preparing to approach as we advance our demonstration program in India.

Opportunities for advanced lignite utilisation become increasingly viable in light of an increased gas price.

In this context, Coldry can act as the ideal gateway technology, a cost-effective enabler of downstream upgrading processes that can see the likes of Victoria’s world-class lignite resource used to underpin economic security, energy security and climate security.

Lignite can be cost effectively gasified if dried efficiently using the Coldry process, providing an alternative to natural gas for the longterm energy security in markets with lignite reserves.

The diagram below illustrates the typical upgrade path for lignite and the opportunities for Coldry.

Lignite upgrading routes