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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 $100 per kilowatt of installed capacity," claim representatives of the private company E4-SibKOTES.
These constraints are only part of a long list of problems connected with retrofitting the Russian energy industry. Leonid Solovjev notes that using solid fuel is financially viable as long as gas is two or three times as expensive as coal (currently the difference is 20-30%). Nor does Petr Erokhin see an economic reason for this fuel revolution. But he is certain that the development of coal production is vital to the country's energy security.
However, a number of experts believe that it's not worth it for Russia to change its gas habit. Igor Yushkov notes that the country has enough gas reserves to last a long time, and all the talk about an impending shortage is just Gazprom being devious.
The existing technological and financial obstacles, global economic trends, business interests, plus Gazprom's administrative resources all give one confidence that Russia's energy industry will be focusing on gas for the next five years. Perhaps coal will gain the upper hand once the price of gas equalizes on the foreign and domestic markets. But in any event, should the fuel revolution actually happen, it will be consumers who will have to pay for it.
Source: RusBusiness News
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Monday, 13 December 10
ICE FUTURES EUROPE TO LAUNCH IHS MCCLOSKEY INDONESIAN SUB-BITUMINOUS FOB MARKER COAL CONTRACTS - MONDOVISIONE
Mondovisione reported that, IntercontinentalExchange (NYSE: ICE), a leading operator of global regulated futures exchanges, clearing houses and over ...
Monday, 13 December 10
NALCO TO START WORK ON RS 18K CR ($ 4,010,695,091) INDONESIAN PROJECT BY JUNE - MSN
MSN reported that, State-owned NALCO today said it has selected UAE-based RAK Minerals as JV partner for its Rs 18,000 crore (US$ 4,010,695,091 ...
Monday, 13 December 10
DEUTSCHE BANK RAISES COAL FORECASTS ON MARKET SHORTAGE - BLOOMBERG
Deutsche Bank AG raised price forecasts for thermal coal by as much as 17 percent on expectations that a shortage of the fuel will widen over the ne ...
Monday, 13 December 10
K SERA SERA TO SPEND RS325CR TO BUY COAL,OIL & GAS FIRMS STAKE - LIVE MINT
The company might have to dole out around Rs 225 crore (US$ 50,122,522) for picking up the majority stake in the coal mine in Indonesia and around R ...
Thursday, 09 December 10
OVERSUPPLY OF SHIPS BOUND TO KEEP DRY BULK FREIGHT RATES SUBDUED DURING 2011 SAYS BIMCO - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
An oversupply of vessels is expected to keep freight rates from flying as high as in recent years said a relative shipping report from BIMCO’s ...
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- Gujarat Mineral Development Corp Ltd - India
- Directorate Of Revenue Intelligence - India
- Price Waterhouse Coopers - Russia
- Sarangani Energy Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Makarim & Taira - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Electricity Generating Authority of Thailand
- Orica Mining Services - Indonesia
- Samtan Co., Ltd - South Korea
- Indika Energy - Indonesia
- Economic Council, Georgia
- Videocon Industries ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Australian Commodity Traders Exchange
- Gujarat Sidhee Cement - India
- Pendopo Energi Batubara - Indonesia
- Ambuja Cements Ltd - India
- Ministry of Mines - Canada
- Alfred C Toepfer International GmbH - Germany
- Mercator Lines Limited - India
- Wilmar Investment Holdings
- Mercuria Energy - Indonesia
- Bukit Makmur.PT - Indonesia
- Mintek Dendrill Indonesia
- Eastern Energy - Thailand
- OPG Power Generation Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Anglo American - United Kingdom
- ASAPP Information Group - India
- Medco Energi Mining Internasional
- PNOC Exploration Corporation - Philippines
- Interocean Group of Companies - India
- Energy Development Corp, Philippines
- Manunggal Multi Energi - Indonesia
- Savvy Resources Ltd - HongKong
- The State Trading Corporation of India Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- SMG Consultants - Indonesia
- Xindia Steels Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- White Energy Company Limited
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- PowerSource Philippines DevCo
- TeaM Sual Corporation - Philippines
- Central Electricity Authority - India
- Deloitte Consulting - India
- Bayan Resources Tbk. - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Electricity Authority, New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- London Commodity Brokers - England
- Neyveli Lignite Corporation Ltd, - India
- Bukit Baiduri Energy - Indonesia
- Iligan Light & Power Inc, Philippines
- Merrill Lynch Commodities Europe
- Vedanta Resources Plc - India
- Standard Chartered Bank - UAE
- Agrawal Coal Company - India
- New Zealand Coal & Carbon
- Aboitiz Power Corporation - Philippines
- PTC India Limited - India
- Jindal Steel & Power Ltd - India
- Indogreen Group - Indonesia
- Thiess Contractors Indonesia
- Altura Mining Limited, Indonesia
- Sakthi Sugars Limited - India
- Bulk Trading Sa - Switzerland
- Port Waratah Coal Services - Australia
- Indian Oil Corporation Limited
- Oldendorff Carriers - Singapore
- Goldman Sachs - Singapore
- Riau Bara Harum - Indonesia
- Australian Coal Association
- Attock Cement Pakistan Limited
- IHS Mccloskey Coal Group - USA
- Eastern Coal Council - USA
- Tata Chemicals Ltd - India
- Singapore Mercantile Exchange
- Parry Sugars Refinery, India
- Straits Asia Resources Limited - Singapore
- Indonesian Coal Mining Association
- Toyota Tsusho Corporation, Japan
- Lanco Infratech Ltd - India
- Bhoruka Overseas - Indonesia
- Antam Resourcindo - Indonesia
- Parliament of New Zealand
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- SN Aboitiz Power Inc, Philippines
- Mjunction Services Limited - India
- Ministry of Finance - Indonesia
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- GN Power Mariveles Coal Plant, Philippines
- McConnell Dowell - Australia
- CIMB Investment Bank - Malaysia
- Jaiprakash Power Ventures ltd
- Bahari Cakrawala Sebuku - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Independent Power Producers Association of India
- Star Paper Mills Limited - India
- Tamil Nadu electricity Board
- Globalindo Alam Lestari - Indonesia
- Metalloyd Limited - United Kingdom
- Bharathi Cement Corporation - India
- Aditya Birla Group - India
- European Bulk Services B.V. - Netherlands
- Kumho Petrochemical, South Korea
- LBH Netherlands Bv - Netherlands
- Global Business Power Corporation, Philippines
- Georgia Ports Authority, United States
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- India Bulls Power Limited - India
- International Coal Ventures Pvt Ltd - India
- Minerals Council of Australia
- Semirara Mining and Power Corporation, Philippines
- VISA Power Limited - India
- The Treasury - Australian Government
- Kartika Selabumi Mining - Indonesia
- Bhushan Steel Limited - India
- Energy Link Ltd, New Zealand
- Vizag Seaport Private Limited - India
- Billiton Holdings Pty Ltd - Australia
- Chamber of Mines of South Africa
- IEA Clean Coal Centre - UK
- TNB Fuel Sdn Bhd - Malaysia
- Rio Tinto Coal - Australia
- Trasteel International SA, Italy
- Renaissance Capital - South Africa
- Karaikal Port Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Edison Trading Spa - Italy
- Thai Mozambique Logistica
- GMR Energy Limited - India
- Maharashtra Electricity Regulatory Commission - India
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- Global Coal Blending Company Limited - Australia
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- Pipit Mutiara Jaya. PT, Indonesia
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- Dalmia Cement Bharat India
- Wood Mackenzie - Singapore
- Kepco SPC Power Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Commonwealth Bank - Australia
- Uttam Galva Steels Limited - India
- Africa Commodities Group - South Africa
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- Intertek Mineral Services - Indonesia
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- Planning Commission, India
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- MS Steel International - UAE
- Timah Investasi Mineral - Indoneisa
- Miang Besar Coal Terminal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Binh Thuan Hamico - Vietnam
- Ind-Barath Power Infra Limited - India
- Holcim Trading Pte Ltd - Singapore
- Formosa Plastics Group - Taiwan
- San Jose City I Power Corp, Philippines
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- Larsen & Toubro Limited - India
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- Sojitz Corporation - Japan
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