[Myanmar] Cheap Coal Tipped to Fuel Energy-Starved Burma

[News_Editor]

A Burmese laborer carries sacks of coal beside Rangoon River. (Photo: Reuters) http://www.irrawaddy.org/natural-resources/is-this-the-wrong-century-for-coal-to-be-king-in-burma.html

Burma’s future electricity needs are more likely to be fueled by coal than the oil and gas believed to be sitting beneath the seabed in offshore territorial waters, energy experts predict.

Coal is rapidly becoming the fuel of choice for companies investing in new power-generating plants across the 10 Asean member states because of cost and availability.

Collectively, the Asean countries will need to spend about US$440 billion on new power plants between now and 2035 to meet consumer demand, and 40 percent of this total will be spent on coal-fueled systems, the International Energy Agency (IEA) has predicted.

Over the next 20 years or so, energy demand in Southeast Asia will grow at more than double the world average, and to meet this need coal will fuel almost 50 percent of all electricity generated, the IEA said in a regional forecasting study.

By 2035, natural gas will fuel only 28 percent of all electricity generation in the region, down from 44 percent today.

The decline of gas as a power fuel will be due its high global cost, relative to coal, and also declining reserves in Indonesia, Malaysia, Thailand and Brunei.

“Burma is anticipating big new discoveries of natural gas from E&P [exploration and production] to come from the new offshore licenses due to be awarded soon, but there is no guarantee of this and even if there is, there will be strong pressure to sell a lot of it to foreign customers to boost the country’s GDP [gross domestic product],†regional energy industry consultant Collin Reynolds in Bangkok told The Irrawaddy this week.

“Selling natural gas to overseas customers has been a significant factor in helping the growth of the economies of Malaysia and Indonesia, which are today among the world’s top exporters of LNG [liquefied natural gas],†he said.

But both countries have already begun building more coal-driven power stations because of domestic gas shortages—caused by the imperative to sell gas overseas.

In 2012, Malaysia had to buy electricity from Singapore for several months because of a gas shortage and lack of alternative fuel-generating plants.

The IEA noted in its Southeast Asia Energy Outlook, published last week, that Burma was already planning to import expensive LNG via a floating dock terminal as a “short-term†energy gap solution.

Although Thailand produces both oil and natural gas from fields in the Gulf of Thailand, it imports about one-third of its gas needs from fields in Burmese waters.

“The Thais’ overdependence on natural gas for electricity generation was exposed earlier this year when one of its main Burma offshore suppliers for power plants for the Bangkok region had to shut down its operating platform for maintenance work,†said Reynolds. “The Thais bought electricity from Malaysia to cover the shortfall.

“Burma is in a much worse position than most of its Asean partners because it is starting out its economic expansion from a very, very low power generation base. There needs to be a rapid growth in electricity generating capacity and I would say that waiting for new gas or oil discoveries offshore is not an option in the short term or even the medium term.

“New gas fields take years to develop from exploration and discovery to production,†Reynolds explained.

The attraction of coal to investors contending with Southeast Asia’s insatiable demand for electricity could inadvertently be driven by the Chinese coal market, where low domestic coal prices coupled with government attempts to reduce coal to curb urban air pollution are undermining imports.

China imports coal from a number of countries in the Asia-Pacific region, including Vietnam, Indonesia and Australia.

Due to a slide in Chinese imports and a surfeit of coal coming onto the regional market from new suppliers such as the United States, coal prices are at their lowest in more than three years, according to global energy analysts Platts.

The glut is expected to continue: Indonesia alone has plans to double its production over the next decade, although much of this will be consumed at home—to help reduce natural gas use and costly crude oil imports.

The IEA estimates that the cost of producing electricity from coal over the next decade in Southeast Asia will be about 30 percent cheaper than gas.

The problem Burma faces is that while it might choose to assign domestically produced natural gas to fuel the country’s growth in electricity production, all gas is valued at international market rates.

The Malaysia state, for example, has spent billions of dollars over the last 15 years or more subsidising the country’s electricity generation by providing domestically produced gas at below market prices.

That’s another reason why Malaysia is now diversifying fuel to generate power with coal plants, said Reynolds.

“Coal is emerging as the fuel of choice because of its relative abundance and affordability in the region,†IEA Executive Director Maria Van der Hoeven said in Bangkok. “As long as fuel price differentials continue to favor coal over gas by a significant margin, Southeast Asia’s incremental power generation is set to be dominated by coal.â€

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Source: Irrawaddy.org