fausimm cp mmica - engineers australia

THE FUTURE OF COAL

Pat HannaFAusIMM CP MMICA

Engineers Australia

Southern Highlands

27th May 2010

Main Points• The Ideals: After some 50 years and billions of dollars of research,

alternate forms of energy generation have yet to provide a solution that can compare to the low cost of millions of tonnes of readily accessible coal. More recent developments in Coal Seam Gas (CSG) and Underground Coal Gasification (UCG) are in early stages of commercialism but are yet to prove to meet the scale of current coal-fired power generation.

• The Facts: Recent discoveries of large coal deposits in Mongolia, Indonesia and Mozambique have been met with enthusiasm by the coal industry which continues to grow at a significant rate to meet the world’s ever increasing appetite for energy and steel. These large scale deposits will ensure that coal will remain the cheapest form of energy for a long time to come.

• The Challenge: The increasing effort to reduce pollution caused by coal-fired power stations is being seriously challenged by the need to provide electricity to 3.6 billion people and this number is expected to grow to 5 billion by 2030.

The World of Coal

The World of Coal

3 CountriesMissing

Indonesia

Mongolia

Mozambique

New Major Coal

Developments in the World

Indonesia• Reported to have 15Bt of thermal coal resources

• Increased annual production from 3Mt to 200Mt in the last 15 years

• Kutai Barat District – East Kalimantan (>30Bt)

• KPC (beyond 200m) – East Kalimantan (>5Bt)

• Musi Rawas District – South Sumatra (>20Bt)

• Coking Coal- Marawai, Central Kalimantan (>2Bt)

New Major Coal


Indonesia

New Major Coal


Mongolia

• Over 300 Coal Deposits

• Resources >150Bt

• Coking and Thermal Coal

New Major Coal


Mongolia

New Major Coal


Mozambique

• Resources >100Bt

• Coking and Thermal Coal

• Greenfield (Currently producing 20Ktpa)

New Major Coal

Developments in the WorldM

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New Major Coal


Galilee Basin (Australia)

• Resources >20Bt

• Cheap high ash thermal coal

• Current Production = Zero (0)

Issues to Consider

• Large Scale Production:

– Starting at 20 - 50Mtpa

• Price of Oil:

– US$70+/Barrel

– Heading North over the next 20 years

Challenges for

New Large Projects

• Transportation

• Energy Requirements for Mining

• Utilisation of New Technology

Transportation

Mongolia – none exists

Transportation

Indonesia

• Currently 150Mtpa via Barging

• Limited Capacity

• No rail

Transportation

Mozambique

• Currently Upgrading 500Km Rail


• No Port Facilities

• Barging down the Zambezi River

Transportation

Galilee Basin

• No Rail or Port Capacity Available


• No Port Facilities

Infrastructure Solutions

• Mine-mouth Power Station

• (using reject coal)

• Electrified Railways

• Slurry Pipelines

• Tram/Conveyor systems

New Mining Technologies

• Mine-mouth Power Station

(using reject coal eg Redbank PowerStation)

• Electrified Mining Equipment

– Shovels, Crushers, Conveyors

New Mining Technologies

• Upgrade Coal Quality (UBC)

– From >40% Moisture / <3500 Kcal/kg (US$20)

– To 1% Moisture / +6300 Kcal/kg (US$55)

– UBC Cost US$12 / tonne

– Low mining cost <US$20 FOB

The China Syndrome

At a recent Coaltrans Conference, Peabody Energy’s Chairman, Gregory Boyce spoke on the “three Es” – nations securing their energy supplies, strengthening economies and advancing their environmental goals – through greater “green coal” use.

"Every day, we must use more coal ... more cleanly ... to benefit the world's people and economies," he said.

The moves are all that more important given the growing global population, which is expected to swell 25% by 2030 to more than 8 billion. Worldwide energy needs will also go up 40% during that time, and Boyce pointed out that the growth would come at a time when more than half the globe did not have adequate electricity access.

"So we have the dual challenge of providing electricity to the 3.6 billion people who aren't properly connected and expanding infrastructure to another 2 billion people who will be added to the grid," he said.

China’s Urban Population Growth

Questions and Answers

• 1. Power generation from coal currently emits on average 1.0 tonne of CO2 per MWh of generated energy. With coal seam gas (VERY big in Qland now) or Underground Coal Gasification driving combined cycle gas /steam generating plant what is the overall improvement in CO2 emissions per MWh?

• Emissions of CO2 from natural gas are about half those of coal*. I would imagine that CO2 emissions from gas produced via CSG and UCG would be of a similar level.

• * ESAA data on CO2 emissions from electricity generation for 2007-08 shows coal at about 0.9 tonnes per MWh sent out. This is the figure for NSW where coal contributed to more than 95% of electricity generation. In the Northern Territory, where natural gas use was over 95%, CO2 emissions were about 0.6 tonnes per MWh. (Energy Supply Association of Australia -Electricity Gas Australia 2009 publication).


• 2.What is the current contribution of coal mining

to Australian GDP.?

• Around 2% directly. But we can add to that the indirect

inputs by other industries (such as construction,

process engineering, transport, banking and finance).

Coal is a major contributor to regional areas and the

economies of NSW and Queensland. It is a major

employer and on average for every job created in

mining coal there are 3 more jobs created in the

Australian economy. In regional areas this "multiplier"

can be far higher.

COAL EXPORTS

• Australia is the largest exporter of seaborne

coal in the world

• Australia’s annual coal production (485Mt) is

7.5% of the world’s total coal production

• Australia’s coal exports total $46 Billion

• Australia’s mineral exports total $120 Billion

• Australia’s total exports fetch $225 Billion

• Therefore, coal is 38% of total Mineral exports

and 20% of Australia’s total exports.


• 3. Will emissions trading negatively impact Coal production / coal

exports?

• Yes it acts as a tax on production. No other country in the world is proposing

to place a tax on the emissions from coal mining. The US and EU both

produce more emissions from coal mining than Australia. But neither

includes these in their current or proposed emissions trading schemes.

• The Rudd government's Carbon Pollution Reduction Scheme (CPRS) will

raise the costs for Australian coal mine production here relative to our

overseas export market competitors.

• The proposed CPRS is still on the table. The Commonwealth's May 2010

Budget papers state the Government intends to "introduce the CPRS ... after

the end of the current commitment period of the Kyoto Protocol" (ie after

2012). It will thus be in addition to the proposed super profits tax, which is to

begin in the same year.


• 3. Will emissions trading negatively impact Coal production / coal exports?

• Independent modelling by ACIL Tasman of the impact of the CPRS on coal mining finds it would have a huge impact on the industry and the regions within which it operates. It is projected to lead to 16 premature mine closures and an estimated 3300 direct job losses and more than 9000 indirect in the first 10 years of the CPRS. Reduced royalties and taxes from coal would also weaken the state budgets of Queensland and New South Wales. Importantly, the tax would cause reduced investment in Australia as investors direct their capital to countries and other coal industries where they can get the best returns.

• Coal mines that provide coal to generators under very long term contracts will also be adversely affected as they will be unable to pass on the cost of the CPRS.

• There are about 10 of these mines in Australia. One coal mine has been operating for around 30 years. It currently employs 160 people. Annual pay packets inject $18 million into the local economy and 720 indirect jobs are reliant on its operation. It is a significant long-term contributor to the local community. Without transitional assistance under the CPRS this mine will be marginalised and could face closure. This closure would also be likely to impact energy security.


• 4. Assuming Australia does not embrace nuclear energy in the next ten

years but does achieve its renewable energy target of 20% by 2030 -

what impact will this have on the coal mining industry?

• The federal government’s recently released Australian Energy Resource

Assessment is a timely reminder of how important coal is, and will continue

to be, in the Australian economy.

• The report projects a substantial rise in Australian coal production and

exports as well as an important ongoing role for coal in domestic electricity

generation despite a fall in its market share.

• On the report's projections, coal-fired power will be delivering some 150

TWh of electricity in 2030 – out of an estimated 366 TWh total supply –

compared with 197 TWh at present out of 257 TWh supply.


• 5. To what extent does the lack of export infrastructure

impede coal exports?

• Don’t have any quantifiable information as to the extent, but

news reports regularly report on the number of coal ships that

are queued up at ports like Newcastle and Gladstone. By way

of example though, For the week ending 17 May, Newcastle

had 21 ship arrivals with 33 ships waiting off-shore. Average

total time at berth was 1.28 days with the forecast average

vessel queue days being 8.94 days. (Hunter Valley Coal

Report, 17 May 2010).

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