ROYAL DUTCH SHELL and Anglo American will shelve their proposed $5 billion coal-to-liquids project in La Trobe Valley, Victoria, because of cost blow-outs.
Monash Energy, the company jointly owned by Shell and Anglo American, said the current market conditions made it unfeasible to move ahead with the project.
The Federal and Victorian governments have been promoting coal-to-liquids as a cleaner transport fuel because it produces fewer greenhouse gas emissions. It also reduces Australia's dependence on international fuel markets and creates export opportunities.
The Monash Energy project director, Roger Bounds, said the firm was not walking away from the project but would extend the concept assessment phase.
He said "critical requirements" for the project were "not yet in place", citing as reasons higher capital cost estimates and escalated construction costs.
The Monash project was the first to be nominated for development under a clean coal energy alliance formed in May 2006 between Europe's biggest oil company and the world's fourth-biggest diversified mining company.
The partners planned to invest almost $20 million in the two years from September 2006 on technical and commercial studies to identify the best way to set up the plant.
The Monash project involves converting brown coal from Anglo's deposits in the Latrobe Valley into synthetic gas for processing into zero-sulfur synthetic diesel.
Carbon dioxide emitted during the process would be extracted in a concentrated stream for transport to underground injection wells, using a carbon capture and storage technology.
As Monash Energy put its project on the backburner DME Clean Energy said it planned to build a demonstration plant in the Latrobe Valley in collaboration with HRL Limited that would convert brown coal into a liquid fuel called dimethyl ether.
The managing director of DME Clean Energy, Ron Delmenico, said that if the demonstration plant was successful it would look to build a number of plants in Victoria. "Each of these commercial DME plants will consume about 1500 tonnes of wet brown coal per day and will return $12 million to $15 million per year in economic benefits to the local community."
with Bloomberg
