WATCHING THE WORLD IT'S TOO EARLY TO WRITE OFF COAL

Natural gas producers have often told us how their fuel will take an increasing share of primary energy demand.

Coal is generally expected to be the big loser in a worldwide shift to greener" fuels.

However, one recent prediction showed it may be too early to write off coal as a viable competitor to gas.

Worldwide consumption of coal in 1993 amounted to 3.4 billion metric tons, says Gordon Summers, general manager of the coal division of Shell Australia Ltd.

Coal currently provides 27% of world primary energy demand. Summers said recent International Energy Agency figures showed coal is expected to increase its share of primary energy demand to reach 29% in 2010.

Shell's own view is more pessimistic, with Summers estimating coal will account for 23% of world energy demand by 2020.

CONFIDENCE

So confident is Shell Australia of a substantial future market for coal that it has built interests in coal projects first acquired in the 1970s, taking over an operator's role in 1988.

"After the ultragreen period of the 1980s," said Summers, "people have changed their attitude toward coal and increasingly realize they must consider alternatives.

"Natural gas is complicated to produce, whereas coal production is much more responsive to changing needs. And there is continual improvement in the environmental performance of coal burning operations."

Shell is Australia's third largest coal producer after BHP and Coal & Allied.

Shell has five mines in production near the coast of Queensland and New South Wales, as well as two development prospects.

Its South Bulli mine has produced coal for 120 years and now yields 1.3 million metric tons/year. The German Creek mine produces 4.5 million metric tons/year. Callide mine production is 4.5 million metric tons/year, while Drayton output is 3. million metric tons/year.

BEST BUY

In October, Shell shipped the first coal from its Dartbrook mine, where production is expected to reach 4 million metric tons/year. The North Moranbah prospect is slated for start-up in 1999, with production expected at 3 million metric tons/year. The Theodore prospect is expected to begin production in less than 5 years at a rate of 4 million metric tons/year.

"The Japanese offer the best price for Australian coal," said Summers. "Because of its small natural resources, Japan is very exposed to world markets and is keen to guarantee supplies and quality."

Coal prices are set by competition among coal producers, not by comparison with other fuels as happens with gas, which is linked to oil prices. Fuel buyers like the stability coal brings to costs.

"Coal is the most attractive way to buy BTUs on an international basis, " said Summers. "Coal price volatility is negligible in comparison with oil price fluctuations, and coal is priced very attractively in comparison with other fuels."

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