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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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Sunday, 28 November 10
FREIGHT MARKET SEEMS TO BE NERVOUS - VISTAAR
COALspot.com - The freight market continued to remain uncertain even though only cape index was down by 8.31 pct.
Overall the market seems to be ...
Friday, 26 November 10
INDIA WILL IMPORT 100 MLN TONS OF COAL BY 2012 - LAKSHMINARAYANA
COALspot.com – “India’s coal shortfall will reach 100 million mt by 2011-12”, said Lakshminarayana, Vice Preside ...
Friday, 26 November 10
CHINAS COAL INVENTORY STAYS HIGH FOR 22 MONTHS AT 220 MLN T, ASSOCIATION
Xinhua News Agency reported that, China’s coal inventory has stayed high and unchanged for 22 months to be around 220 million tonnes, reflecti ...
Friday, 26 November 10
DR WOLFGANG CIESLIK TO HEAD GERMAN COAL IMPORTERS ASSOCIATION
COALspot.com – (Press Release): The Management Board of the German Coal Importers Association (Verein der Kohlenimporteure e.V.) has elected D ...
Thursday, 25 November 10
ANALYSIS: COAL SECTOR: VALUE EMERGENCE - THE JAKARTA POST
Coal demand will remain firm due to a build-up of coal-fired power plants in India, China and Indonesia. As a result, we have upgraded our coal pric ...
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- Central Java Power - Indonesia
- Price Waterhouse Coopers - Russia
- Sical Logistics Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Siam City Cement PLC, Thailand
- Central Electricity Authority - India
- Ind-Barath Power Infra Limited - India
- Cement Manufacturers Association - India
- Banpu Public Company Limited - Thailand
- Mintek Dendrill Indonesia
- Bhatia International Limited - India
- White Energy Company Limited
- IEA Clean Coal Centre - UK
- Binh Thuan Hamico - Vietnam
- Star Paper Mills Limited - India
- Antam Resourcindo - Indonesia
- Ministry of Finance - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Pendopo Energi Batubara - Indonesia
- Coal and Oil Company - UAE
- SMC Global Power, Philippines
- VISA Power Limited - India
- Maheswari Brothers Coal Limited - India
- Aditya Birla Group - India
- Pipit Mutiara Jaya. PT, Indonesia
- Rashtriya Ispat Nigam Limited - India
- Directorate Of Revenue Intelligence - India
- Kobexindo Tractors - Indoneisa
- Holcim Trading Pte Ltd - Singapore
- Anglo American - United Kingdom
- Bulk Trading Sa - Switzerland
- Gujarat Mineral Development Corp Ltd - India
- Chamber of Mines of South Africa
- Grasim Industreis Ltd - India
- LBH Netherlands Bv - Netherlands
- Bhoruka Overseas - Indonesia
- Makarim & Taira - Indonesia
- Thai Mozambique Logistica
- GN Power Mariveles Coal Plant, Philippines
- The State Trading Corporation of India Ltd
- European Bulk Services B.V. - Netherlands
- Independent Power Producers Association of India
- Simpson Spence & Young - Indonesia
- Therma Luzon, Inc, Philippines
- Barasentosa Lestari - Indonesia
- Aboitiz Power Corporation - Philippines
- Ministry of Transport, Egypt
- Renaissance Capital - South Africa
- CIMB Investment Bank - Malaysia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Intertek Mineral Services - Indonesia
- Indonesian Coal Mining Association
- PTC India Limited - India
- Gujarat Sidhee Cement - India
- Tata Chemicals Ltd - India
- McConnell Dowell - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Siam City Cement - Thailand
- Ministry of Mines - Canada
- Economic Council, Georgia
- Global Business Power Corporation, Philippines
- GVK Power & Infra Limited - India
- AsiaOL BioFuels Corp., Philippines
- Indian Oil Corporation Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Agrawal Coal Company - India
- Bharathi Cement Corporation - India
- Uttam Galva Steels Limited - India
- OPG Power Generation Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Mercuria Energy - Indonesia
- Borneo Indobara - Indonesia
- Posco Energy - South Korea
- Orica Australia Pty. Ltd.
- Cigading International Bulk Terminal - Indonesia
- Globalindo Alam Lestari - Indonesia
- India Bulls Power Limited - India
- Meralco Power Generation, Philippines
- Thiess Contractors Indonesia
- Orica Mining Services - Indonesia
- Jaiprakash Power Ventures ltd
- Leighton Contractors Pty Ltd - Australia
- Kapuas Tunggal Persada - Indonesia
- Indo Tambangraya Megah - Indonesia
- Electricity Generating Authority of Thailand
- Kaltim Prima Coal - Indonesia
- Mjunction Services Limited - India
- Riau Bara Harum - Indonesia
- TeaM Sual Corporation - Philippines
- New Zealand Coal & Carbon
- Malabar Cements Ltd - India
- Sindya Power Generating Company Private Ltd
- Savvy Resources Ltd - HongKong
- Metalloyd Limited - United Kingdom
- Timah Investasi Mineral - Indoneisa
- Manunggal Multi Energi - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Global Green Power PLC Corporation, Philippines
- Petron Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Salva Resources Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Neyveli Lignite Corporation Ltd, - India
- Samtan Co., Ltd - South Korea
- Sinarmas Energy and Mining - Indonesia
- Parry Sugars Refinery, India
- Kartika Selabumi Mining - Indonesia
- Global Coal Blending Company Limited - Australia
- Xindia Steels Limited - India
- MS Steel International - UAE
- Karbindo Abesyapradhi - Indoneisa
- Iligan Light & Power Inc, Philippines
- Formosa Plastics Group - Taiwan
- Port Waratah Coal Services - Australia
- GAC Shipping (India) Pvt Ltd
- Merrill Lynch Commodities Europe
- London Commodity Brokers - England
- Kalimantan Lumbung Energi - Indonesia
- Australian Coal Association
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Marubeni Corporation - India
- PetroVietnam Power Coal Import and Supply Company
- Heidelberg Cement - Germany
- Energy Development Corp, Philippines
- Sojitz Corporation - Japan
- Carbofer General Trading SA - India
- Planning Commission, India
- Bhushan Steel Limited - India
- Kideco Jaya Agung - Indonesia
- Semirara Mining Corp, Philippines
- Bukit Baiduri Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- South Luzon Thermal Energy Corporation
- Latin American Coal - Colombia
- Baramulti Group, Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- PowerSource Philippines DevCo
- Coastal Gujarat Power Limited - India
- Rio Tinto Coal - Australia
- Trasteel International SA, Italy
- GMR Energy Limited - India
- SN Aboitiz Power Inc, Philippines
- Georgia Ports Authority, United States
- ASAPP Information Group - India
- CNBM International Corporation - China
- Madhucon Powers Ltd - India
- Mercator Lines Limited - India
- Wood Mackenzie - Singapore
- ICICI Bank Limited - India
- Romanian Commodities Exchange
- Indogreen Group - Indonesia
- Karaikal Port Pvt Ltd - India
- Vedanta Resources Plc - India
- Medco Energi Mining Internasional
- Larsen & Toubro Limited - India
- Minerals Council of Australia
- Jorong Barutama Greston.PT - Indonesia
- Sarangani Energy Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Gujarat Electricity Regulatory Commission - India
- Commonwealth Bank - Australia
- Standard Chartered Bank - UAE
- Oldendorff Carriers - Singapore
- Bayan Resources Tbk. - Indonesia
- Vizag Seaport Private Limited - India
- Interocean Group of Companies - India
- Krishnapatnam Port Company Ltd. - India
- SMG Consultants - Indonesia
- Kumho Petrochemical, South Korea
- Eastern Coal Council - USA
- Straits Asia Resources Limited - Singapore
- Wilmar Investment Holdings
- Directorate General of MIneral and Coal - Indonesia
- Indian Energy Exchange, India
- Toyota Tsusho Corporation, Japan
- Power Finance Corporation Ltd., India
- Sakthi Sugars Limited - India
- Goldman Sachs - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Parliament of New Zealand
- Jindal Steel & Power Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Maharashtra Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- Deloitte Consulting - India
- Ambuja Cements Ltd - India
- Eastern Energy - Thailand
- San Jose City I Power Corp, Philippines
- Ceylon Electricity Board - Sri Lanka
- IHS Mccloskey Coal Group - USA
- Dalmia Cement Bharat India
- Bangladesh Power Developement Board
- The Treasury - Australian Government
- Semirara Mining and Power Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Indika Energy - Indonesia
- International Coal Ventures Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Tamil Nadu electricity Board
- Asmin Koalindo Tuhup - Indonesia
- The University of Queensland
- Lanco Infratech Ltd - India
- Africa Commodities Group - South Africa
- Kepco SPC Power Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Sree Jayajothi Cements Limited - India
- Singapore Mercantile Exchange
- Attock Cement Pakistan Limited
- Australian Commodity Traders Exchange
- Electricity Authority, New Zealand
- Edison Trading Spa - Italy
- Coalindo Energy - Indonesia
- Altura Mining Limited, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- PNOC Exploration Corporation - Philippines
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