TRANSNATIONAL TRADE OF COAL FUTURE OUTLOOK FOR ASIA

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TRANSNATIONAL TRADE OF COAL FUTURE OUTLOOK FOR ASIA

  1. 1. 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
  2. 2. COST OF GENERATION OF ELECTRIC POWER THROUGH THERMAL(COAL) GENERATION UNIT COST OFELECTRICITY=FIXED FIXED COST IS DEPENDENT ON COST+VARIABLE COST COST OF INSURANCECAPITAL COST O&M COST DEPRECIATION MONEY COST 3rd Asia Energy Security Summit, 2 Bangkok, 1st March 2013
  3. 3. These Costs Depend On: Demand Financialand Supply Inflation Market Position 3rd Asia Energy Security Summit, 3 Bangkok, 1st March 2013
  4. 4. Variable Cost Varies as per Cost of Consumables andCost of Coal Spares THESE COSTS DEPEND ON DEMAND ANDSUPPLY SITUATION OF COAL WHICH IN TURN DEPEND ON DEMAND AND SUPPLY OF OTHER FUELS LIKE OIL,GAS AND NUCLEAR 3rd Asia Energy Security Summit, 4 Bangkok, 1st March 2013
  5. 5. Characteristics of Coal Thermal Properties of Coal Composition Calorific Non Coking ValueCoking Coal Coal Carbon Ash Sulfur For Steel For Power Making Generation Moisture Volatile Matter 3rd Asia Energy Security Summit, 5 Bangkok, 1st March 2013
  6. 6. Coal is a major source of primary energy Coal Coal use hasRanked 2nd production grown the highest than after Oil was 7.2 any other with 28% Billion primary share tonnes energy (2010) source 3rd Asia Energy Security Summit, 6 Bangkok, 1st March 2013
  7. 7. Trend of Coal use EU China India Non OECD declined account account OECD remain by 14% ed for ed for increaseunchanged in last 84% 12% by 94% decade growth growth 3rd Asia Energy Security Summit, 7 Bangkok, 1st March 2013
  8. 8. DEPENDENCE ON COAL FOR POWER GENERATIONSouth 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% 3rd Asia Energy Security Summit, 8 Bangkok, 1st March 2013
  9. 9. 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 withreasonable 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 isthe length of time that those remaining reserves would last if production were to continue at that rate. 3rd Asia Energy Security Summit, 9 Bangkok, 1st March 2013
  10. 10. Proved Coal reserve at end 2011 Anthracite Sub- Share Million tonnes and bituminous Total R/P ratio of total bituminous and lignite 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* More than 500 years.◆ Less than 0.05%.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 thatthose remaining reserves would last if production were to continue at that rate. 3rd Asia Energy Security Summit, 10 Bangkok, 1st March 2013
  11. 11. Proved Coal reserve at end 2011 Anthracite Sub- Share Million tonnes and bituminous Total R/P ratio of total bituminous and lignite 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* More than 500 years.◆ Less than 0.05%.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 thatthose remaining reserves would last if production were to continue at that rate. 3rd Asia Energy Security Summit, 11 Bangkok, 1st March 2013
  12. 12. Proved Coal reserve at end 2011 Anthracite Sub- Share Million tonnes and bituminous Total R/P ratio of total bituminous and lignite 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* 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 withreasonable 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 isthe length of time that those remaining reserves would last if production were to continue at that rate. 3rd Asia Energy Security Summit, 12 Bangkok, 1st March 2013
  13. 13. Proved Coal reserve at end 2011 Anthracite Sub- Share Million tonnes and bituminous Total R/P ratio of total bituminous and lignite 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* 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 withreasonable 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 isthe length of time that those remaining reserves would last if production were to continue at that rate. 3rd Asia Energy Security Summit, 13 Bangkok, 1st March 2013
  14. 14. MAJOR COAL EXPORTING COUNTRIES Indonesia Australia Russia Colombia South Africa USA 3rd Asia Energy Security Summit, Bangkok, 1st March 2013
  15. 15. 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 3rd Asia Energy Security Summit, 15 Bangkok, 1st March 2013
  16. 16. 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 3rd Asia Energy Security Summit, 16 Bangkok, 1st March 2013
  17. 17. MAJOR COAL IMPORTING COUNTRIES China India Japan Taiwan Germany Turkey UK Italy 3rd Asia Energy Security Summit, Bangkok, 1st March 2013
  18. 18. COAL DEMAND IN ASIAN REGION 3rd Asia Energy Security Summit, Bangkok, 1st March 2013
  19. 19. COAL DEMAND IN ASIAN REGION 3rd Asia Energy Security Summit, Bangkok, 1st March 2013
  20. 20. COAL DEMAND IN ASIAN REGION INDIA 3rd Asia Energy Security Summit, Bangkok, 1st March 2013
  21. 21. COAL DEMAND IN ASIAN REGION 3rd Asia Energy Security Summit, Bangkok, 1st March 2013
  22. 22. MODES OF COAL FLOWS - By Ship By Road Depended on Geography Depended on Geo Political Reasons 3rd Asia Energy Security Summit, Bangkok, 1st March 2013
  23. 23. GLOBAL COAL TRADE ACCOUNTED TO ONEBILLION TONNES IN 2010 WHICH IS 14.8%OF WORLD COAL PRODUCTION WHICHMEANS COAL IS SUPPLIED TO VICINITYHOWEVER COAL WITH LOW PRODUCTIONCOSTS AND FAVOURABLE LOCATIONS NEARTO SEAPORTS CAN BE DELIVEREDCOMPETITVELY TO OVERSEAS CONSUMERS 3rd Asia Energy Security Summit, Bangkok, 1st March 2013
  24. 24. IMPORTED HARD COAL TO EUROPECONTRIBUTES TO EU’S ENERGY SECURITYSEABORNE STEAM COAL TRADE GREW TO713 MILLION TONNES IN 2010 IN ADDITIN TO90 MILLION TONNES THROUGH CROSSBORDER 3rd Asia Energy Security Summit, Bangkok, 1st March 2013
  25. 25. MARKET FOR HARD COAL IN ASIA REGION ISDOMINATED BY AUSTRALIA AND INDONESIA 3rd Asia Energy Security Summit, 25 Bangkok, 1st March 2013
  26. 26. ENERGY USED TO GENERATEELECTRICITY REMAINS THE FASTEST GROWING SECTOR ACCOUNTING FOR 57% OF THE PROJECTED GROWTH IN PRIMARY ENERGY CONSUMPTION IN 2030 3rd Asia Energy Security Summit, Bangkok, 1st March 2013
  27. 27. • 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 3rd Asia Energy Security Summit, 27 Bangkok, 1st March 2013
  28. 28. 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. 3rd Asia Energy Security Summit, 28 Bangkok, 1st March 2013
  29. 29. World Coal Consumption increases by 50 per cent (2008- 139 Quadrillion Btu 2035 – 209 Quadrillion Btu) As perInternational EnergyOutlook (IEO), 2011 3rd Asia Energy Security Summit, 29 Bangkok, 1st March 2013
  30. 30. World Coal Consumption by Region (1980-2035) 3rd Asia Energy Security Summit, 30 Bangkok, 1st March 2013
  31. 31. 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 3rd Asia Energy Security Summit, 31 Bangkok, 1st March 2013
  32. 32. IEO projected that Electric Power Sector will witness adecline in Coal’s share of totalenergy consumption for Power Generation From 43 per cent in 2008 To 37 per cent in 2010 3rd Asia Energy Security Summit, 32 Bangkok, 1st March 2013
  33. 33. International Coal Trade Growth : 21.2 quadrillion Btu in 2009 to 35.2 quadrillion Btu in 2035.The share of total world coal consumptionaccounted for by internationally traded coalhas increased from 15 percent in 2009 to asteady rate of 17 percent as per IEOprojection. 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. 3rd Asia Energy Security Summit, 33 Bangkok, 1st March 2013
  34. 34. COAL SHARE OF WORLD ENERGY CONSUMPTION BY SECTOR (%) 3rd Asia Energy Security Summit, 34 Bangkok, 1st March 2013
  35. 35. OECD COAL CONSUMPTION BY REGION (Quadrillion Btu) 3rd Asia Energy Security Summit, 35 Bangkok, 1st March 2013
  36. 36. NON-OECD COAL CONSUMPTION BY REGION (Quadrillion Btu) 3rd Asia Energy Security Summit, 36 Bangkok, 1st March 2013
  37. 37. Coal Price US CentralUS 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 3rd Asia Energy Security Summit, 37 Bangkok, 1st March 2013
  38. 38. Coal Price US CentralUS 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 3rd Asia Energy Security Summit, 38 Bangkok, 1st March 2013
  39. 39. Reserve-to-Production ratios 3rd Asia Energy Security Summit, 39 Bangkok, 1st March 2013
  40. 40. Distribution of proved reserves in 1991, 2001 and 2011 3rd Asia Energy Security Summit, 40 Bangkok, 1st March 2013
  41. 41. Coal Production 2011Million 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 3rd Asia Energy Security Summit, 41 Bangkok, 1st March 2013
  42. 42. Coal Consumption 2011Million 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 3rd Asia Energy Security Summit, 42 Bangkok, 1st March 2013
  43. 43. Production & Consumption by region 3rd Asia Energy Security Summit, 43 Bangkok, 1st March 2013
  44. 44. World fuel consumption 3rd Asia Energy Security Summit, 44 Bangkok, 1st March 2013
  45. 45. IMPORT REQUIREMENT 3rd Asia Energy Security Summit, Bangkok, 1st March 2013
  46. 46. 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 3rd Asia Energy Security Summit, Bangkok, 1st March 2013
  47. 47. INITIATIVES REQUIRED TOFORMULATE AN ACCEPTED NORM FOR PRICING OF COALFORMATION OF AN ASSOCIATION SIMILAR TO EURACOAL 3rd Asia Energy Security Summit, Bangkok, 1st March 2013
  48. 48. 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 3rd Asia Energy Security Summit, Bangkok, 1st March 2013
  49. 49. 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 3rd Asia Energy Security Summit, Bangkok, 1st March 2013
  50. 50. Necessity of Coal Regulator3rd Asia Energy Security Summit, 50 Bangkok, 1st March 2013
  51. 51. AFTER THAT THE RISEWILL DEPEND ONPOPULATION GROWTH 3rd Asia Energy Security Summit, 51 Bangkok, 1st March 2013
  52. 52. 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 ExpAustralia -- $78.65 -- $78.8- -- $117- -- $115.14 $115 $141China $73 -- -- -- $130 -- $120 --India $38 -- $110 - -- $98- -- $79- -- $114 $128.5 $119Indonesia -- $66.46 -- $75 -- $ 119.03 -- $111.58South Africa -- -- -- $105.78 -- $106.3 -- $104.83USA $63.91 $101.44 $71.77 $120.41 $86- $139- -- -- $112 $155.8 3rd Asia Energy Security Summit, 52 Bangkok, 1st March 2013
  53. 53. AUSTRALIAN COAL INDEX 3rd Asia Energy Security Summit, Bangkok, 1st March 2013 53
  54. 54. AUSTRALIA Coal Price Change in 2011 3rd Asia Energy Security Summit, 54 Bangkok, 1st March 2013
  55. 55. INDONESIAN COAL INDEX 3rd Asia Energy Security Summit, 55 Bangkok, 1st March 2013
  56. 56. INDONESIAN COAL INDEXThe Ministry of Energy & Mineral Resources of Indonesia sets thecoal’s spot price for February 2013 at US$ 88.35 per ton, US$0.80 higher than January 2013 bench mark Price.This coal benchmark price was calculated based on calorific valueof 6,322 kcal/kg (GAR), stated to be using formula based on theDecember 2012 index average of ICI-1 (Indonesia Coal Index)25%, Platts-5900 25%, NEX (Newcastle Export Index) 25%, and GC(globalCoal Index) 25%. 3rd Asia Energy Security Summit, 56 Bangkok, 1st March 2013
  57. 57. INDONESIAN COAL INDEXAccording to the Energy & Mineral Resources department,Indonesian coal output would increase by 1.2 percent to 391million 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 $118.4 per ton throughout2011. The January 2013 Indonesia coal reference price (HBA) hasjumped by US$ 5.80 per MT or 7.09% from December 2012 priceand 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 reachgovernment prediction within end 2nd quarter 2013. 3rd Asia Energy Security Summit, 57 Bangkok, 1st March 2013
  58. 58. INDONESIAN COAL INDEXThe Indonesian Government declared reference price for eightbrands of Indonesias coal, which are most commonly traded inthe market. Those eight brands are acted as the benchmark andused to calculate other 62 coal types with a quality similar to thecoal price markers.The coal reference price, which has been established to fulfil therequirement of mining law 04/2009 and latest ministerial decree17/2010 and also aims to increase government revenue fromroyalties from coal producers. According to industry, all existingcoal supply agreements with Indonesian coal mining companieshave been revised to comply with new coal pricing regulation,which was fully implemented on 23 September 2011. 3rd Asia Energy Security Summit, 58 Bangkok, 1st March 2013
  59. 59. INDONESIAN COAL INDEXThe government has recently introduced export duty forunprocessed minerals but coal was missing in the recentregulation. According to Mining law 04/2009, the coalproducers of Indonesia were asked to add value for theirproduct such as washing, crushing, blending and upgrading tohave a higher-value product prior to eye on the export marketand avoid proposed export ban. However the industry playersare in opinion that, the government may not proceed furtherwith LOW GCV coal export ban by early next year as planned earlier. 3rd Asia Energy Security Summit, 59 Bangkok, 1st March 2013
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