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Friday, 19 November 10
WE'LL THINK ABOUT COAL TOMORROW - ANALYSIS
 The future of coal generation in Russia is in question. The largest energy companies have abandoned their initial plans to switch their thermal power stations over to solid fuel. Experts think that the power-plant operators' unquenchable love for gas is not only destroying the coal industry, it is threatening the country's energy security. A correspondent for RusBusinessNews armed himself with statistics and delved into the causes and possible consequences of yet another victory of the blue flame over coal.
A COAL RENAISSANCE
Up until the 1980's, the Soviet generation actively burned coal. Then they took a so-called "gas break," and solid fuel was gradually squeezed out by gas. This "break" was supposed to last no more than 10-15 years - the amount of time energy engineers and scientists needed to develop new, more economical, and environmentally friendly ways of burning coal. But the reforms of the 1990's upset those plans and the process of returning to coal production dragged on for another decade.
The beginning of the 21st century could be called the coal renaissance era. The energy industry could barely keep up with the growing needs of Russia's reviving industrial sector. An urgent need arose to construct new facilities and rebuild older ones. Gazprom's increased exports caused a gas shortage on the domestic market, which prompted power-plant operators to resurrect the idea of returning to coal production. In addition, there was an economic incentive - in the mid-2000's, gas and coal were approximately equal in price.
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In 2006, RAO UES of Russia promised to reduce the percentage of gas in the country's fuel balance from 69% to 67% over the course of four years, and to bring it down to 60% by 2015. They planned to increase the percentage of solid fuel from 27% to 37% in the next nine years. The work begun by RAO was continued by its "daughter" companies: OGK and TGK (Wholesale Generation Company and Territorial Generation Company). A few years ago, TGK-10 (the public corporation Fortum) was planning to switch three of its thermal power stations in the Chelyabinsk region to solid fuel. This coal strategy was developed by KES-Holding, OGK-1, and OGK-3. OGK-3 was also actively buying up coal.
Although the power-plant operators' plans were frozen by the economic crisis in 2008, by 2009 and early 2010, coal was revived by the price increase of gas and began once again nipping at gas's heels. "The price of gas has increased 25% almost every year for the past three years. If this hike continues, we will actively seek to increase the percentage of coal we use," claimed Mikhail Slobodin, the president of KES-Holding, last April. The company expects to save a billion cubic meters of gas at its power plants in the Sverdlovsk region by the end of 2010.
But six months later, KES and other energy companies reversed course. "The fuel balance structure will remain as it is for now. The Chinese demand for high-energy coal prompted a jump in the price of solid fuel. In addition, there is currently a surplus of gas on the market," said Eduard Smelov, the executive vice president of KES, in October of 2010.
Analysts note that this "surplus" is the result of setbacks Gazprom has experienced with its exports. According to Igor Yushkov, an expert with the Foundation for National Energy Security, the gas giant lost its European market this year because of the "shale" revolution in the US. "This enormous Russian company had recently devised big plans to enter markets in the East and West. However, after the US dramatically increased its production of gas in early 2010, Europe reduced the amount of gas it imports from Russia. Gazprom must now increase its presence on the domestic market," notes Igor Yushkov.
This change in the market for the monopoly's products has forced power-plant operators to adjust their fuel plans, pushing coal projects into the background.
A FUEL IMBALANCE IN AN UNDERDEVELOPED ENERGY INDUSTRY
The fuel used by Russian electric plants consists of 70% gas and only 28% coal. No other country uses a mix like that. According to data from the Institute for Energy Research, coal production accounts for an average of 39% of the fuel used in power plants throughout the world. In many countries, it accounts for half of energy companies' fuel portfolios: in Poland - 96%, India - 81%, China -79%, USA - 54%, and Germany - 51%. In recent years coal has become even more attractive for Europe, due to doubts about the reliability of gas shipments caused by the energy disputes between Russia and Ukraine.
Russia has enormous reserves of solid fuel - 192.3 billion tons of categories A+B+C1, and 78.5 billion tons of category C2. 80% of these supplies consist of steam coal. The Kuznetsk basin is the largest supplier of coal, producing 55% of all of the country's solid fuel. Every year Russia produces over 300 million tons of coal.
About 20 coal-gas plants operate in the country. It's estimated that a full changeover of these plants to coal will save up to 27 billion cubic meters of gas per year. "When we burn gas, we're burning our future, our currency, and new technology. Gas should be used very sparingly - we should be getting our energy from coal," confidently claims Ivan Mokhnachuk, the chairman of the independent union of coal-industry workers.
But experts note that the Russian energy industry might not be ready for a "coal" revolution. "The declaration by energy companies that they were switching to coal was just a game of chicken that Gazprom started. It costs an enormous amount of money to retrofit a plant to use a different type of fuel, and the power-plant operators will never do it voluntarily. It's not at all realistic to try to force them to build modern coal facilities," a representative from one energy company told RusBusinessNews.
According to him, a coal power unit is 33% more expensive than a gas unit, amounting to about $2,000 for one kilowatt of energy. It also costs a lot of money to build an ash-disposal site, a water-intake structure, and treatment facilities. And in addition, one has to regularly pay penalties for air pollution and adopt expensive Western technology to burn coal with less environmental damage. Unfortunately, Russian science and industry cannot provide power-plant operators with their own technology. And the technology that they managed to create in the USSR before the era of perestroika is now hopelessly outdated.
"In the last twenty years, Europe has made huge technological breakthroughs for using coal energy. But we're still stuck in the 1980's," claims Leonid Solovjev, the chief engineer at the Sverdlovsk branch of TGK-9.
THAT DEVIOUS GAZPROM...
Compared to other regions, the fuel component of the energy industry in the Urals seems balanced. According to information from Petr Erokhina, the director of the Joint Dispatch Office for Urals Energy Systems (ODU Ural), the ratio of gas to coal in the Urals Federal District is 50/50, and even 40/60 in some areas. However, gas has recently been slowly squeezing out its competitor in the Sverdlovsk and Chelyabinsk regions. For obvious reasons, coal is not even discussed in the oil- and gas-rich Tyumen region, Yugra, and Yamal.
Much of the energy in the industrial areas of the Urals Federal District comes from burning coal from Ekibastuz (Kazakhstan) as well as local coal. The latter is of very low quality. "The thermal power station in Bogoslovsk consumes about one million tons of Volchansk coal every year. It's really filthy to burn. But if we refuse to use it, the miners will be out of work," explained Leonid Solovjev. The Forum corporation, in turn, is not ruling out gradually replacing Korkinsk coal (Chelyabinsk region) with an imported variety.
Nor does the Ekibastuz coal meet the requirements of Urals power-plant operators. "Half of every 100 cars of coal isn't coal at all - it's ash, which damages the equipment and which we have to find somewhere to store. For comparison: in Europe you're only allowed to have 10% ash, because the fuel there is treated right at the production site," notes Leonid Solovjev.
Coal in Russia is treated as well, but as a rule, the higher-quality energy resources are saved for export. The paradox is that our domestic thermal power stations are not designed for high-energy fuel. They can only burn untreated coal at a low level of efficiency and create kilowatt hours with a high production cost. "A review of our fuel options would require changes to the way we burn coal and a strict compliance with the technology. We would need serious investment to modernize our plants - up to $100 per kilowatt of installed capacity," claim representatives of the private company E4-SibKOTES.
These constraints are only part of a long list of problems connected with retrofitting the Russian energy industry. Leonid Solovjev notes that using solid fuel is financially viable as long as gas is two or three times as expensive as coal (currently the difference is 20-30%). Nor does Petr Erokhin see an economic reason for this fuel revolution. But he is certain that the development of coal production is vital to the country's energy security.
However, a number of experts believe that it's not worth it for Russia to change its gas habit. Igor Yushkov notes that the country has enough gas reserves to last a long time, and all the talk about an impending shortage is just Gazprom being devious.
The existing technological and financial obstacles, global economic trends, business interests, plus Gazprom's administrative resources all give one confidence that Russia's energy industry will be focusing on gas for the next five years. Perhaps coal will gain the upper hand once the price of gas equalizes on the foreign and domestic markets. But in any event, should the fuel revolution actually happen, it will be consumers who will have to pay for it.
Source: RusBusiness News
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Wednesday, 15 December 10
LARGE ORDERBOOK TO HINDER 2011 DRY BULK MARKET REBOUND DESPITE INCREASED DEMAND SAYS PARAGON SHIPPING - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
A large orderbook which currently stands at 53% of the existing fleet is expected to render 2011 another challenging year for the dry bulk marke ...
Wednesday, 15 December 10
SMALLER DRY BULK VESSELS ARE LOOKING UP, LARGER ONES FAIL TO DELIVER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market lost further ground at the beginning of the week, in what could prove one of the slowest periods ship owners have been faced. Ye ...
Tuesday, 14 December 10
COAL IMPORTS MAY INCREASE 78% TO CHINA, INDIA: ENERGY MARKETS - BUSINESS WEEK
Business Week reported that, China and India may increase imports of coal by 78 percent to 337 million metric tons next year, further driving up pri ...
Tuesday, 14 December 10
BANPU PLANNING PRODUCTION BOOM - BANGKOK POST
Australian, Indonesian output to lead growth
Bangkok Post reported that, Banpu Plc, Asean's largest coal miner, wants to nearly double its coal ...
Tuesday, 14 December 10
THE FREIGHT RATES FROM INDONESIA TO INDIA AND CHINA REMAINED FIRM - CAPT. REDDY
COALspot.com - The freight market continued to be soft with the Cape sector most effected which was down by 289 points and closed at 2,694 poi ...
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- Jindal Steel & Power Ltd - India
- Tata Chemicals Ltd - India
- Kartika Selabumi Mining - Indonesia
- Ministry of Finance - Indonesia
- Carbofer General Trading SA - India
- Kapuas Tunggal Persada - Indonesia
- Georgia Ports Authority, United States
- Deloitte Consulting - India
- San Jose City I Power Corp, Philippines
- Port Waratah Coal Services - Australia
- The Treasury - Australian Government
- Uttam Galva Steels Limited - India
- Indo Tambangraya Megah - Indonesia
- Binh Thuan Hamico - Vietnam
- Borneo Indobara - Indonesia
- Parliament of New Zealand
- Karbindo Abesyapradhi - Indoneisa
- Bangladesh Power Developement Board
- Energy Link Ltd, New Zealand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- White Energy Company Limited
- Renaissance Capital - South Africa
- Semirara Mining and Power Corporation, Philippines
- Star Paper Mills Limited - India
- Jaiprakash Power Ventures ltd
- Ambuja Cements Ltd - India
- Maheswari Brothers Coal Limited - India
- Chamber of Mines of South Africa
- Bahari Cakrawala Sebuku - Indonesia
- Meralco Power Generation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Bhushan Steel Limited - India
- Manunggal Multi Energi - Indonesia
- Romanian Commodities Exchange
- SMG Consultants - Indonesia
- Makarim & Taira - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Heidelberg Cement - Germany
- International Coal Ventures Pvt Ltd - India
- Xindia Steels Limited - India
- GMR Energy Limited - India
- GVK Power & Infra Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Jorong Barutama Greston.PT - Indonesia
- London Commodity Brokers - England
- Aditya Birla Group - India
- Thai Mozambique Logistica
- Timah Investasi Mineral - Indoneisa
- India Bulls Power Limited - India
- Semirara Mining Corp, Philippines
- PowerSource Philippines DevCo
- Rashtriya Ispat Nigam Limited - India
- Bukit Baiduri Energy - Indonesia
- MS Steel International - UAE
- SN Aboitiz Power Inc, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Anglo American - United Kingdom
- Singapore Mercantile Exchange
- Africa Commodities Group - South Africa
- Power Finance Corporation Ltd., India
- Leighton Contractors Pty Ltd - Australia
- Aboitiz Power Corporation - Philippines
- Interocean Group of Companies - India
- Wilmar Investment Holdings
- Indika Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- Sree Jayajothi Cements Limited - India
- Coalindo Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Bharathi Cement Corporation - India
- Formosa Plastics Group - Taiwan
- Directorate Of Revenue Intelligence - India
- New Zealand Coal & Carbon
- Ministry of Mines - Canada
- Tamil Nadu electricity Board
- Gujarat Mineral Development Corp Ltd - India
- Bukit Makmur.PT - Indonesia
- The State Trading Corporation of India Ltd
- Simpson Spence & Young - Indonesia
- Global Green Power PLC Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Wood Mackenzie - Singapore
- IEA Clean Coal Centre - UK
- Coastal Gujarat Power Limited - India
- Kepco SPC Power Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Bulk Trading Sa - Switzerland
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Riau Bara Harum - Indonesia
- Latin American Coal - Colombia
- Indonesian Coal Mining Association
- Savvy Resources Ltd - HongKong
- Kohat Cement Company Ltd. - Pakistan
- Medco Energi Mining Internasional
- Sinarmas Energy and Mining - Indonesia
- Posco Energy - South Korea
- Toyota Tsusho Corporation, Japan
- Indian Energy Exchange, India
- Price Waterhouse Coopers - Russia
- Miang Besar Coal Terminal - Indonesia
- Malabar Cements Ltd - India
- The University of Queensland
- Alfred C Toepfer International GmbH - Germany
- Meenaskhi Energy Private Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Vedanta Resources Plc - India
- Ceylon Electricity Board - Sri Lanka
- Pendopo Energi Batubara - Indonesia
- Cement Manufacturers Association - India
- Karaikal Port Pvt Ltd - India
- Sical Logistics Limited - India
- Gujarat Electricity Regulatory Commission - India
- Australian Coal Association
- Rio Tinto Coal - Australia
- Commonwealth Bank - Australia
- Economic Council, Georgia
- Coal and Oil Company - UAE
- SMC Global Power, Philippines
- Standard Chartered Bank - UAE
- Samtan Co., Ltd - South Korea
- Offshore Bulk Terminal Pte Ltd, Singapore
- Therma Luzon, Inc, Philippines
- ASAPP Information Group - India
- Petrochimia International Co. Ltd.- Taiwan
- Globalindo Alam Lestari - Indonesia
- Electricity Authority, New Zealand
- VISA Power Limited - India
- Minerals Council of Australia
- Independent Power Producers Association of India
- Mintek Dendrill Indonesia
- GAC Shipping (India) Pvt Ltd
- Central Electricity Authority - India
- Agrawal Coal Company - India
- Larsen & Toubro Limited - India
- Essar Steel Hazira Ltd - India
- Mercator Lines Limited - India
- Kaltim Prima Coal - Indonesia
- Edison Trading Spa - Italy
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indogreen Group - Indonesia
- Global Business Power Corporation, Philippines
- Marubeni Corporation - India
- Mjunction Services Limited - India
- Oldendorff Carriers - Singapore
- Lanco Infratech Ltd - India
- Madhucon Powers Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Planning Commission, India
- Kumho Petrochemical, South Korea
- AsiaOL BioFuels Corp., Philippines
- Altura Mining Limited, Indonesia
- Barasentosa Lestari - Indonesia
- Sakthi Sugars Limited - India
- Petron Corporation, Philippines
- Indian Oil Corporation Limited
- Energy Development Corp, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Siam City Cement - Thailand
- Sarangani Energy Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Bayan Resources Tbk. - Indonesia
- Trasteel International SA, Italy
- Ind-Barath Power Infra Limited - India
- CNBM International Corporation - China
- Eastern Coal Council - USA
- Antam Resourcindo - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Gujarat Sidhee Cement - India
- IHS Mccloskey Coal Group - USA
- Asmin Koalindo Tuhup - Indonesia
- Mercuria Energy - Indonesia
- Vizag Seaport Private Limited - India
- Eastern Energy - Thailand
- Goldman Sachs - Singapore
- Dalmia Cement Bharat India
- PTC India Limited - India
- Bhoruka Overseas - Indonesia
- Sojitz Corporation - Japan
- Banpu Public Company Limited - Thailand
- Orica Australia Pty. Ltd.
- Ministry of Transport, Egypt
- Sindya Power Generating Company Private Ltd
- European Bulk Services B.V. - Netherlands
- Holcim Trading Pte Ltd - Singapore
- Thiess Contractors Indonesia
- Attock Cement Pakistan Limited
- CIMB Investment Bank - Malaysia
- Iligan Light & Power Inc, Philippines
- Metalloyd Limited - United Kingdom
- Orica Mining Services - Indonesia
- Siam City Cement PLC, Thailand
- Electricity Generating Authority of Thailand
- TeaM Sual Corporation - Philippines
- Baramulti Group, Indonesia
- Kobexindo Tractors - Indoneisa
- Parry Sugars Refinery, India
- Grasim Industreis Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Bhatia International Limited - India
- Merrill Lynch Commodities Europe
- ICICI Bank Limited - India
- Australian Commodity Traders Exchange
- Global Coal Blending Company Limited - Australia
- Straits Asia Resources Limited - Singapore
- PNOC Exploration Corporation - Philippines
- Kalimantan Lumbung Energi - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- Central Java Power - Indonesia
- LBH Netherlands Bv - Netherlands
- Vijayanagar Sugar Pvt Ltd - India
- McConnell Dowell - Australia
- South Luzon Thermal Energy Corporation
- Krishnapatnam Port Company Ltd. - India
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