Determining the economic consequences of natural gas substitution

Resource depletion is a key aspect of sustainability, because the consumption of finite resources impacts on their availability for future generations. There are many proposed methods for accounting for the depletion of a particular resource, amongst which include the proportion of the resource depleted, the rate of resource depletion, and the energy, exergy, or monetary cost of extraction as the resource becomes harder to find or extract. Life Cycle Assessment (LCA) is used to help determine the environmental burdens based on the use of different raw materials. However, LCA does not provide any indication of the economic differences between products and processing routes. This study investigates the economic consequences of using resources such as natural gas, black coal and coal seam gas. The capital and operating costs are calculated both for upstream fuel and downstream production of electricity, hydrogen and ammonia. These are based on a commercial scale of operation, using the same basis for the economic modelling for each case. Black coal was found to have the lowest transfer price among the three feedstocks, but has the highest capital and operating costs in the downstream processes. Conventional gas produced slightly higher selling prices and downstream costs compared to coal seam gas. Conventional gas and coal seam gas was shown to have favourable economics and is expected to increase in demand, running the risk of a shortage. The economic consequence of a shortage of either resource will be a penalty in capital and operating costs to produce the three products after substitution with black coal. Substitution between the two natural gas types is unlikely in Australia because of the geographical location of these resources.