The objective of the present paper is to propose a new variant of the oxy-fuel combustion for carbondioxide (CO2) sequestration in which steam is used to moderate the flame temperature. In this process, pure oxygen is mixed with steam and the resulting oxidant mixture is sent to the boiler for combustion with a fossil fuel. The advantage of this method is that flue gas recirculation is avoided and the volumetric flow rates through the boiler and auxiliary components is reduced by about 39% when compared to the conventional air-fired coal combustion power plant leading to a reduction in the size of the boiler. The flue gas, after condensation of steam, consists primarily of CO2 and can be sent directly for compression and sequestration. Flame structure analysis has been carried out using a 325-step reaction mechanism of methane-oxidant combustion to determine the concentration of oxygen required to ensure a stable flame. Thermodynamic exergy analysis has also been carried out on SMOC-operated CO2 sequestration power plant and air-fired power plant, which shows that though the gross efficiency increases the absolute power penalty of 8% for CO2 sequestration when compared to air-fired power plant. (C) 2010 Elsevier Ltd. All rights reserved.