TRANSNATIONAL TRADE OF COALFUTURE OUTLOOK FOR ASIA

TRANSNATIONAL TRADE OF COAL
FUTURE OUTLOOK FOR ASIA
Asok Dasgupta
President- Independent Power Producers
Association of India (IPPAI)
3rd Asia Energy Security Summit

Bangkok,Thailand: 1st March, 2013

COST OF GENERATION OF ELECTRIC
POWER THROUGH THERMAL(COAL)
GENERATION

UNIT COST OF
ELECTRICITY=FIXED
FIXED COST IS DEPENDENT ON
COST+VARIABLE
COST

COST OF INSURANCE
CAPITAL COST O&M COST DEPRECIATION
MONEY COST

3rd Asia Energy Security Summit,
2
Bangkok, 1st March 2013

These Costs Depend On:

Demand
Financial
and Supply Inflation
Market
Position

3

Variable Cost Varies as per

Cost of Consumables and
Cost of Coal
Spares

THESE COSTS DEPEND ON DEMAND AND
SUPPLY SITUATION OF COAL WHICH IN TURN
DEPEND ON DEMAND AND SUPPLY OF
OTHER FUELS LIKE OIL,GAS AND NUCLEAR

4

Characteristics
of Coal Thermal
Properties
of Coal
Composition
Calorific
Non Coking Value
Coking Coal
Coal
Carbon

Ash

Sulfur
For Steel For Power
Making Generation Moisture

Volatile
Matter

5

Coal is a major source of
primary energy
Coal Coal use has
Ranked 2nd production grown the
highest than
after Oil was 7.2
any other
with 28% Billion primary
share tonnes energy
(2010) source

6

Trend of Coal use

EU China India
Non
OECD declined account account
OECD
remain by 14% ed for ed for
increase
unchanged in last 84% 12%
by 94%
decade growth growth

7

DEPENDENCE ON COAL FOR POWER
GENERATION
South Africa 93 % Israel 65%
•
Czech Republic 56%
Poland 90%

Morocco 55%
China 79%

Greece 55%
Australia 76%

USA 45%
Kazakhstan 70%

Germany 44%
India 69%
8

Proved Coal reserve at end 2011
Anthracite Sub-
Share
Million tonnes and bituminous Total R/P ratio
of total
bituminous and lignite
US 108501 128794 237295 27.6% 239
Canada 3474 3108 6582 0.8% 97
Mexico 860 351 1211 0.1% 77
Total North
112835 132253 245088 28.5% 228
America
Brazil - 4559 4559 0.5% *
Colombia 6366 380 6746 0.8% 79
Venezuela 479 - 479 0.1% 55
Other S. &
45 679 724 0.1% *
Cent. America
Total S. & Cent.
6890 5618 12508 1.5% 124
America
* More than 500 years.
◆ Less than 0.05%.
Notes: Proved reserves of coal – Generally taken to be those quantities that geological and engineering information indicates with
reasonable certainty can be recovered in the future from known deposits under existing economic and operating conditions.
Reserves-to-production (R/P) ratio – If the reserves remaining at the end of the year are divided by the production in that year, the result is
the length of time that those remaining reserves would last if production were to continue at that rate.
9

Anthracite Sub-
Share
of total

Bulgaria 2 2364 2366 0.3% 64
Czech Republic 192 908 1100 0.1% 19
Germany 99 40600 40699 4.7% 216
Greece - 3020 3020 0.4% 53
Hungary 13 1647 1660 0.2% 174
Kazakhstan 21500 12100 33600 3.9% 209
Poland 4338 1371 5709 0.7% 41
Romania 10 281 291 ◆ 8

Reserves-to-production (R/P) ratio – If the reserves remaining at the end of the year are divided by the production in that year, the result is the length of time that
those remaining reserves would last if production were to continue at that rate.

10

Anthracite Sub-
Share
of total

Russian
49088 107922 157010 18.2% 471
Federation
Spain 200 330 530 0.1% 81
Turkey 529 1814 2343 0.3% 30
Ukraine 15351 18522 33873 3.9% 390
United
228 - 228 ◆ 12
Kingdom
Other Europe
1440 20735 22175 2.6% 238
& Eurasia
Total Europe &
92990 211614 304604 35.4% 242
Eurasia

Reserves-to-production (R/P) ratio – If the reserves remaining at the end of the year are divided by the production in that year, the result is the length of time that
those remaining reserves would last if production were to continue at that rate.

11

Anthracite Sub-
Share
of total

South Africa 30156 30156 3.5% 118
Zimbabwe 502 502 0.1% 202
Other Africa 860 174 1034 0.1% *
Middle East 1203 1203 0.1% *

Total Middle East
32721 174 32895 3.8% 126
& Africa

12

Anthracite Sub-
Share
of total
Australia 37100 39300 76400 8.9% 184
China 62200 52300 114500 13.3% 33
India 56100 4500 60600 7.0% 103
Indonesia 1520 4009 5529 0.6% 17
Japan 340 10 350 ◆ 275
New Zealand 33 538 571 0.1% 115
North Korea 300 300 600 0.1% 19
Pakistan 2070 2070 0.2% *
South Korea 126 126 ◆ 60
Thailand 1239 1239 0.1% 58
Vietnam 150 150 ◆ 3

Other Asia Pacific 1583 2125 3708 0.4% 88

Total Asia Pacific 159326 106517 265843 30.9% 53
13

MAJOR COAL EXPORTING COUNTRIES

Indonesia

Australia

Russia

Colombia

South Africa

USA


COAL IN ELECTRICITY GENERATION
Source: IEA Electricity Information 2011

Country Percentage
Botswana 100
Mongolia 96
South Africa 93
Poland 88
China 78
Australia 77
Kazakhstan 75
India 68
Czech Republic 56
Morocco 50
Denmark 49
15

COAL IN ELECTRICITY GENERATION
Source: IEA Electricity Information 2011

Country Percentage
Zimbabwe 46
USA 45
Korea 43
Germany 42
UK 29
Turkey 28
Japan 23
Netherlands 21
Vietnam 18
Russia 16
Canada 15
16

MAJOR COAL IMPORTING COUNTRIES

China
India
Japan
Taiwan
Germany
Turkey
UK
Italy


COAL DEMAND IN ASIAN REGION


COAL DEMAND IN ASIAN REGION
INDIA


MODES OF COAL FLOWS -

By Ship

By Road

Depended on Geography

Depended on Geo Political Reasons


GLOBAL COAL TRADE ACCOUNTED TO ONE
BILLION TONNES IN 2010 WHICH IS 14.8%
OF WORLD COAL PRODUCTION WHICH
MEANS COAL IS SUPPLIED TO VICINITY

HOWEVER COAL WITH LOW PRODUCTION
COSTS AND FAVOURABLE LOCATIONS NEAR
TO SEAPORTS CAN BE DELIVERED
COMPETITVELY TO OVERSEAS CONSUMERS


IMPORTED HARD COAL TO EUROPE
CONTRIBUTES TO EU’S ENERGY SECURITY

SEABORNE STEAM COAL TRADE GREW TO
713 MILLION TONNES IN 2010 IN ADDITIN TO
90 MILLION TONNES THROUGH CROSS
BORDER


MARKET FOR HARD COAL IN ASIA REGION IS
DOMINATED BY AUSTRALIA AND INDONESIA

25

ENERGY USED TO GENERATE
ELECTRICITY REMAINS THE FASTEST
GROWING SECTOR ACCOUNTING
FOR 57% OF THE PROJECTED
GROWTH IN PRIMARY ENERGY
CONSUMPTION IN 2030


• It was forecasted that Coal, Natural Gas and Nuclear power will continue
to hold their importance as a primary energy sources for electricity
generation till 2015.

• Total world power generation demand(P) – 24980 TWh (2015)
• A growth from 18,920 TWh in 2006.
• Coal-fired power stations increasing their share in total generation from
40% in 2006 to 44% in 2015.

• Gas-fired generation dropping marginally from 20% to 19% in 2015, as a
result of higher prices.

• Oil use in power generation continuing to decline from 6% to 4%

• Nuclear power suffering a fall in market share from 15% to 13% in 2015.

• Conversely renewable generation (including hydro) is expected to rise
from 18% in 2006 to 20% in 2015

27

Reasons for Continuation of Coal Use Despite Existing and
Future Policies to Mitigate Greenhouse Gas Emission
 Coal is plentiful, widely distributed and likely to be available

 Coal has consistently outperformed oil and gas on an equivalent-
energy basis, and despite a potential cost of carbon, coal is likely to
remain the most affordable fuel for power generation in many
developing and industrialised countries for several decades.

 Coal is considered relatively affordable and has less price volatility
compared to oil and gas.

 The use of indigenous reserves or the ability to access a well-
provided and affordable international market can enhance a
country’s energy security and provide affordable reliable power to
drive economies and development.

 The greatest increase in the demand for coal will be in the
developing countries, especially in developing Asia, where reserves
are large and low-cost. OECD coal use is likely to grow modestly.
28

World Coal Consumption
increases by 50 per cent
(2008- 139 Quadrillion Btu
2035 – 209 Quadrillion Btu)

As per
International
Energy
Outlook (IEO),
2011
29

World Coal Consumption by Region
(1980-2035)

30

Coal accounted for 28 per cent of world energy
consumption
60% shipped to
Electricity
Producers

World
production
of Coal in 4% shipped to
36% shipped 2008 Residential &
to Industrial Commercial
consumers Sector
31

IEO projected that Electric
Power Sector will witness a
decline in Coal’s share of total
energy consumption for Power
Generation
From 43 per
cent in 2008
To 37 per cent
in 2010

32

International Coal Trade Growth :
21.2 quadrillion Btu in 2009 to
35.2 quadrillion Btu in 2035.
The share of total world coal consumption
accounted for by internationally traded coal
has increased from 15 percent in 2009 to a
steady rate of 17 percent as per IEO
projection.

Stability on share of coal trade primarily
reflects the ability of the world’s largest coal
consumers, China and India, to meet
substantial portions of their future coal
demand with domestic production.
33

COAL SHARE OF WORLD ENERGY
CONSUMPTION BY SECTOR (%)

34

OECD COAL CONSUMPTION BY
REGION (Quadrillion Btu)

35

NON-OECD COAL CONSUMPTION BY
REGION (Quadrillion Btu)

36

Coal Price
US Central
US dollar per Northwest Europe Japan coking coal Japan steam coal
Appalachian coal
tonne Market Price import cif price import cif price
shot price index

1991 42.80 29.01 60.45 50.30
1992 38.53 28.53 57.82 48.45
1993 33.68 29.85 55.26 45.71
1994 37.18 31.72 51.77 43.66
1995 44.50 27.01 54.47 47.58
1996 41.25 29.86 56.68 49.54
1997 38.92 29.76 55.51 45.53
1998 32.00 31.00 50.76 40.51
1999 28.79 31.29 42.83 35.74
2000 35.99 29.90 39.69 34.59

37

Coal Price
US Central
US dollar per Northwest Europe Japan coking coal Japan steam coal
Appalachian coal
tonne Market Price import cif price import cif price
shot price index

2001 39.03 50.15 41.33 37.96
2002 31.65 33.20 42.01 36.90
2003 43.60 38.52 41.57 34.74
2004 72.08 64.90 60.96 51.34
2005 60.54 70.12 89.33 62.91
2006 64.11 62.96 93.46 63.04
2007 88.79 51.16 88.24 69.86
2008 147.67 118.79 179.03 122.81
2009 70.66 68.08 167.82 110.11
2010 92.50 71.63 158.95 105.19
2011 121.54 87.38 229.12 136.21

38

Reserve-to-Production ratios

3rd Asia Energy Security Summit, 39

Distribution of proved reserves in
1991, 2001 and 2011


Coal Production
2011

Million tonnes oil equivalent Total
North America 600.00

South & Central America 64.8

Europe & Eurasia 457.1

Africa 146.6

Middle East 0.7

Asia Pacific 2686.3

Total World 3955.5


Coal Consumption
2011

Million tonnes oil equivalent Total
North America 533.7

South & Central America 2.4

Europe & Eurasia 499.2
Africa 99.8

Middle East 8.7

Asia Pacific 2553.2
Total World 3724.3

42

Production & Consumption by region


World fuel consumption


IMPORT REQUIREMENT


Transnational trade between importing countries –
China, India, South Korea, Japan, Taiwan, Germany, Turkey,
United Kingdom, Italy, Malaysia and exporting countries -
Australia, Indonesia, Russia, Colombia, South Africa, USA


INITIATIVES REQUIRED TO
FORMULATE AN ACCEPTED NORM
FOR PRICING OF COAL
FORMATION OF AN ASSOCIATION
SIMILAR TO EURACOAL


BENEFITS OF TRANSNATIONAL
TRADE OF COAL
• Suggested steps for transnational trade of coal
• Bilateral arrangements between regional countries
• Formation of regional/countrywise coal import/export
agencies/bodies
• Formation of association like euracoal
• Exploring all modes of transport -sea - river-road
• Creation of regional/countrywise coal regulator
• Long tem coal contracts
• Pooling of coal resources


BENEFITS OF TRANSNATIONAL
TRADE OF COAL

• Win win situation for exporting and importing
countries
• Coal based electricity tariff under control to some
extent
• Improved relationship between countries in region


Necessity of
Coal Regulator

50

AFTER THAT THE RISE
WILL DEPEND ON
POPULATION GROWTH

51

International Coal Prices- Past &
Present
Coal Prices in USD Per Metric Ton (Approx)
Countries 2009 2010 2011 2012
Imp Exp Imp Exp Imp Exp Imp Exp

Australia -- $78.65 -- $78.8- -- $117- -- $115.14
$115 $141
China $73 -- -- -- $130 -- $120 --

India $38 -- $110 - -- $98- -- $79- --
$114 $128.5 $119
Indonesia -- $66.46 -- $75 -- $ 119.03 -- $111.58

South Africa -- -- -- $105.78 -- $106.3 -- $104.83

USA $63.91 $101.44 $71.77 $120.41 $86- $139- -- --
$112 $155.8

52

AUSTRALIAN COAL INDEX

Bangkok, 1st March 2013 53

AUSTRALIA Coal Price Change in 2011

54

INDONESIAN COAL INDEX



The Ministry of Energy & Mineral Resources of Indonesia sets the
coal’s spot price for February 2013 at US$ 88.35 per ton, US$
0.80 higher than January 2013 bench mark Price.

This coal benchmark price was calculated based on calorific value
of 6,322 kcal/kg (GAR), stated to be using formula based on the
December 2012 index average of ICI-1 (Indonesia Coal Index)
25%, Platts-5900 25%, NEX (Newcastle Export Index) 25%, and GC
(globalCoal Index) 25%.



According to the Energy & Mineral Resources department,
Indonesian coal output would increase by 1.2 percent to 391
million tons from 386 million tons last year (2012).

The country’s average HBA last year only reached $95.5 per ton,
far below the average price level of $118.4 per ton throughout
2011. The January 2013 Indonesia coal reference price (HBA) has
jumped by US$ 5.80 per MT or 7.09% from December 2012 price
and the February 2013 price has up only by 0.91 percent M-O-M.
If HBA continues its journey on this trend then, it may reach
government prediction within end 2nd quarter 2013.


The Indonesian Government declared reference price for eight
brands of Indonesia's coal, which are most commonly traded in
the market. Those eight brands are acted as the benchmark and
used to calculate other 62 coal types with a quality similar to the
coal price markers.

The coal reference price, which has been established to fulfil the
requirement of mining law 04/2009 and latest ministerial decree
17/2010 and also aims to increase government revenue from
royalties from coal producers. According to industry, all existing
coal supply agreements with Indonesian coal mining companies
have been revised to comply with new coal pricing regulation,
which was fully implemented on 23 September 2011.



The government has recently introduced export duty for
unprocessed minerals but coal was missing in the recent
regulation. According to Mining law 04/2009, the coal
producers of Indonesia were asked to add value for their
product such as washing, crushing, blending and upgrading to
have a higher-value product prior to eye on the export market
and avoid proposed export ban. However the industry players
are in opinion that, the government may not proceed further
with LOW GCV coal export ban by early next year as planned
earlier.


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3rd Asia Energy Security Summit, Bangkok,
1st March 2013 67

TRANSNATIONAL TRADE OF COALFUTURE OUTLOOK FOR ASIA

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