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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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Tuesday, 26 October 10
DRY BULK MARKET TO KEEP RISING THIS WEEK ON STRONG CHINESE IRON ORE AND THERMAL COAL DEMAND - HELLENIC SHIPPING
Overcapacitated or not, the dry bulk market keeps its positive momentum as we move forward this week, with the Baltic Dry Index (BDI) rising by 0.77 ...
Monday, 25 October 10
TWO CHINESE COMPANIES INK DEAL TO TAP AUSSIE COAL RESERVES
China Daily reportd that, two Chinese coal firms have teamed up to explore and develop coal resources in an area in Australia that has forecast rese ...
Monday, 25 October 10
DRY BULK MARKET STILL HEAVILY DEPENDENT ON CHINA, POSTS SMALL WEEKLY LOSS OF 1.27% - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
With every twitch and turn from China’s metals industry, the dry bulk market is disproportionally affected, as evidenced by the course of the ...
Sunday, 24 October 10
SUPRAMAX VESSELS BEING FIXED AROUND $ 15 K PER DAY DELIVERY N. CHINA FOR TRIP VIA INDONESIA TO INDIA - VISTAAR SHIPPING
COALspot.com: The freight market this week remained almost at same levels with not much change. However the Far East/SE Asia market was quite soft w ...
Saturday, 23 October 10
HEAVY RAINS NO DAMPENER FOR 2010 COAL OUTPUT TARGET, MINISTRY SAYS - THE JAKARTA GLOBE
The Jakarta Globe reported that, National coal production would likely meet the target set by the Energy Ministry despite unusually heavy rain this ...
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Cement Manufacturers Association - India
- Oldendorff Carriers - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Asam (Persero) Tbk - Indonesia
- Aboitiz Power Corporation - Philippines
- Salva Resources Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indonesian Coal Mining Association
- Pipit Mutiara Jaya. PT, Indonesia
- Global Green Power PLC Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- McConnell Dowell - Australia
- Eastern Coal Council - USA
- Australian Coal Association
- International Coal Ventures Pvt Ltd - India
- Borneo Indobara - Indonesia
- Malabar Cements Ltd - India
- Toyota Tsusho Corporation, Japan
- Medco Energi Mining Internasional
- Karaikal Port Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Banpu Public Company Limited - Thailand
- Commonwealth Bank - Australia
- Sakthi Sugars Limited - India
- Chamber of Mines of South Africa
- Central Java Power - Indonesia
- Chettinad Cement Corporation Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Mintek Dendrill Indonesia
- Therma Luzon, Inc, Philippines
- Videocon Industries ltd - India
- Bhatia International Limited - India
- Thai Mozambique Logistica
- Mercator Lines Limited - India
- Trasteel International SA, Italy
- Indian Oil Corporation Limited
- LBH Netherlands Bv - Netherlands
- Meenaskhi Energy Private Limited - India
- Deloitte Consulting - India
- Ind-Barath Power Infra Limited - India
- Africa Commodities Group - South Africa
- Thiess Contractors Indonesia
- Grasim Industreis Ltd - India
- Timah Investasi Mineral - Indoneisa
- Parry Sugars Refinery, India
- Georgia Ports Authority, United States
- South Luzon Thermal Energy Corporation
- SMG Consultants - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- India Bulls Power Limited - India
- Aditya Birla Group - India
- Electricity Generating Authority of Thailand
- Ministry of Mines - Canada
- Holcim Trading Pte Ltd - Singapore
- Alfred C Toepfer International GmbH - Germany
- Directorate Of Revenue Intelligence - India
- IHS Mccloskey Coal Group - USA
- OPG Power Generation Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Mjunction Services Limited - India
- Kaltim Prima Coal - Indonesia
- PTC India Limited - India
- Attock Cement Pakistan Limited
- PowerSource Philippines DevCo
- Iligan Light & Power Inc, Philippines
- Siam City Cement PLC, Thailand
- Standard Chartered Bank - UAE
- Manunggal Multi Energi - Indonesia
- Agrawal Coal Company - India
- Sinarmas Energy and Mining - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Sarangani Energy Corporation, Philippines
- Tata Chemicals Ltd - India
- Renaissance Capital - South Africa
- IEA Clean Coal Centre - UK
- Anglo American - United Kingdom
- Wilmar Investment Holdings
- ICICI Bank Limited - India
- GVK Power & Infra Limited - India
- Straits Asia Resources Limited - Singapore
- Australian Commodity Traders Exchange
- Bhoruka Overseas - Indonesia
- Wood Mackenzie - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Bulk Trading Sa - Switzerland
- Port Waratah Coal Services - Australia
- CIMB Investment Bank - Malaysia
- Latin American Coal - Colombia
- Economic Council, Georgia
- Rio Tinto Coal - Australia
- VISA Power Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Barasentosa Lestari - Indonesia
- The University of Queensland
- Central Electricity Authority - India
- Jindal Steel & Power Ltd - India
- Indo Tambangraya Megah - Indonesia
- Jaiprakash Power Ventures ltd
- Interocean Group of Companies - India
- Xindia Steels Limited - India
- Essar Steel Hazira Ltd - India
- SMC Global Power, Philippines
- London Commodity Brokers - England
- Formosa Plastics Group - Taiwan
- Merrill Lynch Commodities Europe
- Bukit Baiduri Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- San Jose City I Power Corp, Philippines
- Ministry of Finance - Indonesia
- Kideco Jaya Agung - Indonesia
- Heidelberg Cement - Germany
- Kartika Selabumi Mining - Indonesia
- The Treasury - Australian Government
- Sical Logistics Limited - India
- Edison Trading Spa - Italy
- TNB Fuel Sdn Bhd - Malaysia
- Coastal Gujarat Power Limited - India
- Orica Australia Pty. Ltd.
- Bhushan Steel Limited - India
- Indian Energy Exchange, India
- PetroVietnam Power Coal Import and Supply Company
- TeaM Sual Corporation - Philippines
- Cigading International Bulk Terminal - Indonesia
- Semirara Mining Corp, Philippines
- Simpson Spence & Young - Indonesia
- Larsen & Toubro Limited - India
- AsiaOL BioFuels Corp., Philippines
- White Energy Company Limited
- Global Business Power Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Romanian Commodities Exchange
- Petron Corporation, Philippines
- Dalmia Cement Bharat India
- Makarim & Taira - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Gujarat Sidhee Cement - India
- Miang Besar Coal Terminal - Indonesia
- Mercuria Energy - Indonesia
- ASAPP Information Group - India
- GN Power Mariveles Coal Plant, Philippines
- Carbofer General Trading SA - India
- Samtan Co., Ltd - South Korea
- GMR Energy Limited - India
- Madhucon Powers Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Sree Jayajothi Cements Limited - India
- Indogreen Group - Indonesia
- Sojitz Corporation - Japan
- Tamil Nadu electricity Board
- Indika Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bukit Makmur.PT - Indonesia
- Intertek Mineral Services - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Vizag Seaport Private Limited - India
- Minerals Council of Australia
- Ceylon Electricity Board - Sri Lanka
- Siam City Cement - Thailand
- Ministry of Transport, Egypt
- PNOC Exploration Corporation - Philippines
- Pendopo Energi Batubara - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Metalloyd Limited - United Kingdom
- MS Steel International - UAE
- Meralco Power Generation, Philippines
- Global Coal Blending Company Limited - Australia
- Power Finance Corporation Ltd., India
- New Zealand Coal & Carbon
- Antam Resourcindo - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Energy Link Ltd, New Zealand
- Bayan Resources Tbk. - Indonesia
- SN Aboitiz Power Inc, Philippines
- Vedanta Resources Plc - India
- Electricity Authority, New Zealand
- Coalindo Energy - Indonesia
- Bharathi Cement Corporation - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- CNBM International Corporation - China
- Marubeni Corporation - India
- Globalindo Alam Lestari - Indonesia
- Bangladesh Power Developement Board
- Coal and Oil Company - UAE
- European Bulk Services B.V. - Netherlands
- Lanco Infratech Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Posco Energy - South Korea
- Kumho Petrochemical, South Korea
- Star Paper Mills Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Sindya Power Generating Company Private Ltd
- Kepco SPC Power Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Baramulti Group, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Uttam Galva Steels Limited - India
- Parliament of New Zealand
- Krishnapatnam Port Company Ltd. - India
- Energy Development Corp, Philippines
- Eastern Energy - Thailand
- Maheswari Brothers Coal Limited - India
- Altura Mining Limited, Indonesia
- Orica Mining Services - Indonesia
- Savvy Resources Ltd - HongKong
- Binh Thuan Hamico - Vietnam
- Planning Commission, India
- The State Trading Corporation of India Ltd
- Singapore Mercantile Exchange
- Independent Power Producers Association of India
- Goldman Sachs - Singapore
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