Coal to power southeast Asia growth in long-term - Wood MacKenzie

12 May 2011 06:22  [Source: ICIS news]

By Pearl Bantillo

Indonesia is the worldSINGAPORE (ICIS)--Coal, the cheapest fossil fuel, will likely dominate southeast Asia as a major energy source that will overtake gas by 2030, given the region’s substantial requirement to power its strong economic growth, industry consultant Wood MacKenzie said on Thursday.

“A shift to coal in the region’s fuel mix has already started, with 35GW of committed coal-fired plants being developed in Indonesia, Malaysia, Thailand, Vietnam and even on a smaller scale in Singapore,” said Graham Tyler, head of southeast Asia gas and power service at Wood MacKenzie.

“We think that while there are opportunities for gas suppliers, the trend towards more coal-fired power in southeast Asia will continue beyond 2020, despite arguments against it,” Tyler said.

Wood Mackenzie forecasts that over the next decade, southeast Asia’s aggregate GDP will grow at an annual rate of 5.2%, much higher than the 3.5% global average.

The region will then require an additional 190GW of generating capacity by 2030, with an expected tripling of power demand, it said.

“That is akin to rebuilding Thailand’s current capacity six times over, which is currently the largest consolidated power market in southeast Asia. To meet this demand, there must be an increase in all fuel types, especially in coal and gas that can operate at baseload,” Wood MacKenzie said.

Gas reserves in the region are declining and will not be enough to meet growing demand going forward, Tyler said, adding that an “era of cheap local and abundant gas reserves is over”.

“Reserve replacement is an issue, with a number of production areas such as Java/Sumatra, Gulf of Thailand and the Malay Basin maturing. LNG is a potential solution but it is too costly for a region used to low and often subsidised gas prices.… This leaves coal to meet demand,” he said.

Environmental concerns on the use of coal, a high-polluting fuel, can be addressed with increased energy efficiency and technological improvements, Tyler said.

“The implementation cost will still make coal-fired plants more economical than LNG,” he added.

The region can tap the huge coal reserves of Indonesia, the world’s biggest producer of the fossil fuel, for its requirements, Tyler said.

“Southeast Asia’s power markets benefit from their proximity to Indonesia, which has sufficient supply to meet domestic and Asia-Pacific export market demand growth to 2030. This proximity provides the option of barging coal directly from Indonesian mines to regional markets, rather than depending on port infrastructure,” the Wood MacKenzie analyst said.

In case there is a need for port infrastructure, Tyler said that the import requirements in Indonesia, Malaysia, Thailand and Vietnam can be accommodated, with one to two ports in each country.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Pearl Bantillo
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