(EnergyAsia, May 16 2011, Monday) — With domestic natural gas reserves in decline, coal will be the fuel of choice for power generation in Southeast Asia by 2030, said Scotland-based consulting firm Wood Mackenzie.

In a report titled “Can coal deliver to Southeast Asia?”, Graham Tyler, the firm’s Head of South East Asia Gas and Power Service, said the region will choose coal to fuel much of its 190 gigawatts (GW) of new power-generation capacity by 2030 to maintain economic growth.

Wood Mackenzie has forecast Southeast Asia’s aggregate Gross Domestic Product (GDP) to grow at 5.2% annually over the next decade, significantly above the global average of 3.5%.

The additional 190 GW of new generating capacity is akin to rebuilding Thailand’s current capacity six times over which is currently the largest consolidated power market in the region.

Mr Tyler said: “A shift to coal in the region’s fuel mix has already started with 35 GW of committed coal-fired plant being developed in Indonesia, Malaysia, Thailand, Vietnam and even on a smaller scale in Singapore. 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.

“Local gas reserves in decline will be insufficient to match existing production levels to feed the domestic markets. 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. The era of cheap local and abundant gas reserves is over. This leaves coal to meet demand.”

The report considers the three main arguments by sceptics against the growth prospects for coal in the region but said these key factors are not long-term obstacles for the development of coal-fired plants. These include the introduction of carbon abatement policies, coal’s negative impact on air quality, and the lack of available infrastructure.

Mr Tyler said: “Governments have expressed that reducing carbon emissions should not come at the expense of developing their economies. As such, we do not expect them to take the lead on carbon abatement without internationally agreed measures, especially considering their absolute carbon emissions fall well below China and US.

“Regarding concerns of air quality, coal-fired power is only one of the factors that can contribute to air pollution.

Furthermore, this can be reduced with increased energy efficiency and improvements in technology to reduce pollution from coal. The implementation cost will still make coal-fired plants more economical than LNG.”
On the lack of coal infrastructure, he 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. Even if port infrastructure is required, the import requirements in Indonesia, Malaysia, Thailand and Vietnam are still easily accommodated with only one or two ports needed in each country.”