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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, 21 November 10
THE FREIGHT MARKET MAY SLIGHTLY FIRM UP NEXT WEEK - CAPT. REDDY
COALspot.com: The freight market continued its down fall with BDI down by 6.83 pct and closed at 2,155 points.
According to Vistaar Shipping of S ...
Saturday, 20 November 10
ITALIAN STEAM COAL MARKET HAS RECOVERED - ITALIAN COAL ASSOCIATION
Press Release - This year Italy will import 17 million tons of steam coal, up 3% from 2009, and 5.5 million tons of coking coal and PCI, up 37% over ...
Friday, 19 November 10
DRY BULK MARKET ON THE ROPES WITH BDI PLUNGING TO 2,164 POINTS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
With the panamax markets suffering the most this week, but a ray of hope for the capesize market, which appears to be stabilizing after days of fall ...
Thursday, 18 November 10
WORLD COAL ASSOCIATION WELCOMES NEW CHAIRMAN & SHENHUA GROUP AS NEW MEMBER 17 NOVEMBER 2010
Press Release – The premier global coal industry association marks its 25th anniversary with a new Chairman and welcomes China’s lar ...
Thursday, 18 November 10
MUNDRA PORT AWARDED BEST PRIVATE PORT - COMMODITY ONLINE / HELLENIC SHIPPING
Adani Group owned, Mundra Port has been awarded the Annual Indian Maritime Gateway Award for the Best Private Port of the Year for the third consecu ...
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- McConnell Dowell - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- LBH Netherlands Bv - Netherlands
- CIMB Investment Bank - Malaysia
- Globalindo Alam Lestari - Indonesia
- Trasteel International SA, Italy
- Commonwealth Bank - Australia
- Semirara Mining Corp, Philippines
- Coastal Gujarat Power Limited - India
- Savvy Resources Ltd - HongKong
- Madhucon Powers Ltd - India
- Ministry of Transport, Egypt
- The University of Queensland
- Lanco Infratech Ltd - India
- Borneo Indobara - Indonesia
- Makarim & Taira - Indonesia
- Kideco Jaya Agung - Indonesia
- CNBM International Corporation - China
- Altura Mining Limited, Indonesia
- Merrill Lynch Commodities Europe
- Siam City Cement PLC, Thailand
- Alfred C Toepfer International GmbH - Germany
- Mercuria Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Deloitte Consulting - India
- South Luzon Thermal Energy Corporation
- Samtan Co., Ltd - South Korea
- Leighton Contractors Pty Ltd - Australia
- Ministry of Mines - Canada
- Sakthi Sugars Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Miang Besar Coal Terminal - Indonesia
- Mercator Lines Limited - India
- New Zealand Coal & Carbon
- Power Finance Corporation Ltd., India
- Sarangani Energy Corporation, Philippines
- ICICI Bank Limited - India
- Jindal Steel & Power Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- The Treasury - Australian Government
- Directorate General of MIneral and Coal - Indonesia
- Minerals Council of Australia
- Parry Sugars Refinery, India
- The State Trading Corporation of India Ltd
- Bukit Baiduri Energy - Indonesia
- Indonesian Coal Mining Association
- Australian Commodity Traders Exchange
- Petron Corporation, Philippines
- Orica Australia Pty. Ltd.
- Bahari Cakrawala Sebuku - Indonesia
- Kobexindo Tractors - Indoneisa
- Gujarat Electricity Regulatory Commission - India
- Standard Chartered Bank - UAE
- PowerSource Philippines DevCo
- Vijayanagar Sugar Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Simpson Spence & Young - Indonesia
- Indika Energy - Indonesia
- Karaikal Port Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Holcim Trading Pte Ltd - Singapore
- Price Waterhouse Coopers - Russia
- Attock Cement Pakistan Limited
- Iligan Light & Power Inc, Philippines
- GAC Shipping (India) Pvt Ltd
- Meralco Power Generation, Philippines
- Formosa Plastics Group - Taiwan
- Carbofer General Trading SA - India
- Energy Link Ltd, New Zealand
- Anglo American - United Kingdom
- Port Waratah Coal Services - Australia
- Jaiprakash Power Ventures ltd
- International Coal Ventures Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Timah Investasi Mineral - Indoneisa
- Gujarat Sidhee Cement - India
- Chamber of Mines of South Africa
- Gujarat Mineral Development Corp Ltd - India
- Indian Energy Exchange, India
- Planning Commission, India
- Bangladesh Power Developement Board
- Orica Mining Services - Indonesia
- Dalmia Cement Bharat India
- Africa Commodities Group - South Africa
- VISA Power Limited - India
- Kaltim Prima Coal - Indonesia
- Tata Chemicals Ltd - India
- Bukit Makmur.PT - Indonesia
- Barasentosa Lestari - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Bhatia International Limited - India
- ASAPP Information Group - India
- PNOC Exploration Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Grasim Industreis Ltd - India
- Thai Mozambique Logistica
- Edison Trading Spa - Italy
- Banpu Public Company Limited - Thailand
- PTC India Limited - India
- Uttam Galva Steels Limited - India
- Binh Thuan Hamico - Vietnam
- Georgia Ports Authority, United States
- Rio Tinto Coal - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sinarmas Energy and Mining - Indonesia
- Global Green Power PLC Corporation, Philippines
- Star Paper Mills Limited - India
- Electricity Generating Authority of Thailand
- Ministry of Finance - Indonesia
- Kartika Selabumi Mining - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Straits Asia Resources Limited - Singapore
- Independent Power Producers Association of India
- Antam Resourcindo - Indonesia
- Bhushan Steel Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Romanian Commodities Exchange
- Eastern Energy - Thailand
- Intertek Mineral Services - Indonesia
- Marubeni Corporation - India
- GN Power Mariveles Coal Plant, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indogreen Group - Indonesia
- Electricity Authority, New Zealand
- Pendopo Energi Batubara - Indonesia
- Latin American Coal - Colombia
- AsiaOL BioFuels Corp., Philippines
- Xindia Steels Limited - India
- Bayan Resources Tbk. - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Aboitiz Power Corporation - Philippines
- Bhoruka Overseas - Indonesia
- Indian Oil Corporation Limited
- SN Aboitiz Power Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Posco Energy - South Korea
- Therma Luzon, Inc, Philippines
- Medco Energi Mining Internasional
- Coal and Oil Company - UAE
- Malabar Cements Ltd - India
- Bulk Trading Sa - Switzerland
- Kalimantan Lumbung Energi - Indonesia
- Siam City Cement - Thailand
- Ceylon Electricity Board - Sri Lanka
- Aditya Birla Group - India
- Riau Bara Harum - Indonesia
- Vizag Seaport Private Limited - India
- Tamil Nadu electricity Board
- Singapore Mercantile Exchange
- London Commodity Brokers - England
- Cement Manufacturers Association - India
- European Bulk Services B.V. - Netherlands
- GMR Energy Limited - India
- Billiton Holdings Pty Ltd - Australia
- Global Coal Blending Company Limited - Australia
- Eastern Coal Council - USA
- Karbindo Abesyapradhi - Indoneisa
- Sree Jayajothi Cements Limited - India
- Mjunction Services Limited - India
- San Jose City I Power Corp, Philippines
- Metalloyd Limited - United Kingdom
- TeaM Sual Corporation - Philippines
- Salva Resources Pvt Ltd - India
- Videocon Industries ltd - India
- Larsen & Toubro Limited - India
- Wood Mackenzie - Singapore
- Essar Steel Hazira Ltd - India
- Meenaskhi Energy Private Limited - India
- Economic Council, Georgia
- Heidelberg Cement - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Central Java Power - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Central Electricity Authority - India
- SMG Consultants - Indonesia
- Indo Tambangraya Megah - Indonesia
- SMC Global Power, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Bharathi Cement Corporation - India
- Mintek Dendrill Indonesia
- Agrawal Coal Company - India
- Baramulti Group, Indonesia
- Coalindo Energy - Indonesia
- GVK Power & Infra Limited - India
- Global Business Power Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Energy Development Corp, Philippines
- India Bulls Power Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Sical Logistics Limited - India
- Ambuja Cements Ltd - India
- Chettinad Cement Corporation Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Sindya Power Generating Company Private Ltd
- Kapuas Tunggal Persada - Indonesia
- Goldman Sachs - Singapore
- Ind-Barath Power Infra Limited - India
- OPG Power Generation Pvt Ltd - India
- Renaissance Capital - South Africa
- Parliament of New Zealand
- Sojitz Corporation - Japan
- Kepco SPC Power Corporation, Philippines
- Kumho Petrochemical, South Korea
- White Energy Company Limited
- Interocean Group of Companies - India
- Maheswari Brothers Coal Limited - India
- Wilmar Investment Holdings
- Manunggal Multi Energi - Indonesia
- Australian Coal Association
- Thiess Contractors Indonesia
- Vedanta Resources Plc - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Oldendorff Carriers - Singapore
- IEA Clean Coal Centre - UK
- MS Steel International - UAE
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