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October 2 - 8, 2009
Oil major Santos Ltd has
urged the South Australian
Government to adopt a "low
emission" target and said that
natural gas had an important part
to play in the reduction of carbon
emissions from power generation.
Speaking to an Australia Israel
Chamber of Commerce function in
Adelaide, Santos chief executive
David Knox called on the State
Government to aim for average
emissions from power generation of
no more than 0.4 tonnes of CO2 per
megawatt hour by 2020.
South Australia s current average
emissions stand at around 0.8
According to Mr Knox, fostering a
stable partnership between natural
gas and renewable sources was key
to achieving this reduction.
"Low-carbon natural gas offers
an immediate and proven way
to transform baseload power
generation away from high-carbon
coal," Mr Knox said.
Mr Knox said the introduction of
a low emissions target would bolster
the state s existing commitment to
tackling climate change.
"South Australia already
generates just over half of its power
from natural gas, with the rest of
the fossil fuel power generation
coming brown coal," Mr Knox said.
"Despite only providing 34 per
cent of South Australia s power,
nearly half of South Australia s
power emissions come from coal."
He added that replacing the
state s current coal-fired power
stations with new gas generators
was a feasible option.
"The cost of replacing SA s
ageing coal-fired power stations
with new gas-fired generation,
assuming a modest carbon price,
would be less than building new
generation coal power stations,
and that with our abundant gas
supply there is more than enough
gas to fuel a low emission South
Australia," Mr Knox said.
"Indeed, with eastern Australia s
large resource base, equivalent to
several hundred years of current
natural gas use, I would argue that
there is enough gas to fuel a low
Gas has role to play
A miner in a dispute with the
Defence Department over a planned
joint venture with a Chinese
company in a sensitive military
area has arranged for more time to
sort out the issue.
Western Plains Resources Ltd
says it and Chinese state-owned
company Wugang Australian
Resources Pty Ltd have extended
the condition precedent on their $48
million deal by three months, until
Wugang is a subsidiary of
China s Wuhan Iron and Steel
(Group) Co (WISCO) and, in a letter,
the Department of Defence said it
did not support the deal because it
concerned a prospect located in the
Woomera Prohibited Area.
"The extension of time has
been agreed in order for WPG and
WISCO to more fully assess the
impact of the position taken by the
Department of Defence ... and to
engage in further discussions with
Defence," Western Plains said.
Under the deal, WISCO would
take about an 11 per cent stake
in Western Plains for $3 million,
and would pay $45 million for a 50
per cent stake in the Australian
company s Hawks Nest magnetite
WISCO also would appoint a
member of the Western Plains
board under the proposed deal.
Western Plains executive
director Heath Roberts said the
company was yet to directly contact
Defence since receiving the letter.
"We will do so, I think, relatively
soon, but just for the moment we
had some things we needed to try
to get to the bottom of," Mr Roberts
"The Defence letter doesn t
address a number of points and it
raises some issues which needed
Eden Energy Ltd s plans to
develop its South Australian
geothermal interests have been
boosted after a deal announced
with Origin Energy Ltd.
Eden Energy, which has
investments in emerging
alternative energy technologies,
has agreed to sell Origin a 70 per
cent interest in its Geothermal
Licence Number 185 (GEL 185)
in South Australia s Cooper
Basin. Under the deal Origin
will pay Eden $1 million in cash
and bear the first $500,000 of
expenditure on the licence, after
which each party will contribute
proportionately to future costs.
Shares in Eden Energy surged
after the announcement.
GEL 185 adjoins geothermal
licences owned by Geodynamics
Ltd, which in 2007 entered an
agreement whereby Origin would
invest in a 30 per cent interest
in the licences. Eden chairman
Gregory Solomon said Eden
would still retain a strategic
interest in the broader Cooper
Basin geothermal licence area.
When dining in Adelaide last
week, I found myself sitting next
to an executive expert on South
Australian energy who explained to
me how Adelaide s industrial sector
has adapted to cope with electricity
It requires radical strategies,
and companies in the eastern
states should be planning similar
measures because the policy
vacuum in Canberra is likely to
cause brownouts in Victoria and
other states within four months,
with brownouts being almost a
certainty within 16 months.
To add to the farce, we have
two competing strategies to
overcome the problem, coal gas
from Queensland/ NSW and gas
produced from brown coal which
is being backed by the Chinese
and Australian private interests
reported to be linked to Kerry
Stokes. Both these techniques
are designed to produce much
lower carbon base-load power
to supplement investment in
renewables. In South Australia,
gas will be hard to beat (assuming
nuclear is out) but someone in
Canberra needs to make a decision.
When the Adelaide brownouts
occur, the price of power goes
through the roof, so the most
valuable asset a company can have
is a fixed-price power contract.
Many Adelaide factories have
these contracts so they can shut
down, keep paying workers and
make their money by selling
their power entitlement back
into the grid. Those with back-up
generators run the generators flat
out and sell the power back into the
grid. Consumers need to develop
alternative energy sources to
electricity. It s carbon madness.
The first term Rudd Government
is more interested in securing a
second term by using populist
carbon policy to corner Malcolm
Turnbull rather than addressing
key long-term issues that might
let Turnbull off the hook. Carbon
trading schemes win votes but when
adopted by a small nation alone are
more likely to increase rather than
reduce carbon emissions.
The new set of brownouts will
come because Victoria s brown
coal power stations, which provide
a quarter of the eastern states
power, run flat out in summer and
given that long term maintenance
has been curtailed because of the
carbon policy vacuum, they are
likely to fail.
The problem is that on the
basis of current technology all
non-nuclear base-load power
generation must be based on some
form of carbon. At the weekend,
HRL, the private company backing
the gas from brown coal project,
confirmed that its $750 million
demonstration plant project would
start construction next year and be
completed in 2013.
This is possible because the
Chinese want the technology for
their brown coal and are prepared
to invest about $500 million, plus
the Howard government committed
$100 million. Victoria will put in up
to $50 million.
David Knox at Santos would
claim that Queensland coal gas will
create less carbon, but it will be
costly to bring it all the way south.
Meanwhile in Copenhagen,
China appears set to show the world
a way to tackle carbon and not kill
the economy. If that happens, we
need to stop playing politics, listen
carefully and do likewise.
This article was first published in
Eureka Report. To start a 21-day free
trial visit www.eurekareport.com.au
Carbon trading schemes win votes, not hearts
Eden Energy announces deal with Origin
given time over
David Knox favours natural gas fired
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