Coal Market

7/24/2019 Coal Market

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WORLD AND INDONESIAN COALWORLD AND INDONESIAN COAL

EkawanRudianto

EMP


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ContentsContents

1.1. Coal as an energyCoal as an energy

2.2. Reserves, Production, Consumption &Reserves, Production, Consumption &

tradetrade

3. Coal and environment

4. The future of coal

5. Coal in Indonesia


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Coal as an energy

Energy consumption growth willtrack economic growth

It will grow 2%/a to 2030 Fossil fuels contribute to 87% (86%

in 2030) of energy

Oil : 39% (33%) (-)

Gas : 24% (26%) (++)

Coal : 24% (27%) (+)

Nuclear : 6% (6%)

Growth :OECD vs Non-OECD

Asia (++)

1 BTU = 1.55 KJ = 0.252 kcal ; Quadrillion = 10^15


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Coal is used for electricity generation

World electricity :

14,780 (2003) to 30,116 bil. KWh (2030)

Growth : 2.7%/a (3.9% vs 1.5%) Mainly for industrial (vis a vis Residential or

transport)

Fossil fuels contribute to 77% (80% in 2030) ofelectricity demand

Oil : 10% (7%) (-)

Gas : 27% (33%) (++)

Coal : 40% (40%) (=) Nuclear : 6% (6%)

Coal-fired from 1119 (2003) to 1997 GW (2030)or 0.3%/a

Coal as an energy


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Coal as a primary energy

share

Important energy inRevolution Industry

Until 1960s coal wasthe most importantsource

Late 1960sovertaken by oil

Forecasted, coalcould become majorenergy sources


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COAL :

Reserves, Production and

Consumption and Market


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Coal deposits

Resources and Reserve (1)


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Reserves (Gt)

Resources abundance (6,000 Gt),100 countries

70% North-equator (US, CIS,China)

Reserves 984 Gt in 2003

Antracite & bituminous: 52%

Sub-bituminous : 28%

Lignite : 20%

190 years accessible reserves incurrent production level

+ Exploration

+ Technologies

+ Economic

- Transport

- Qualities

- Deep minesSources : WCI,2001; BP-statistic,2003



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Reserves and mining

levels not always match

Case CIS

- distance

- ample oil and gas

Case PR China

- high domestic demand

- slow development oil(1.3%; 12 yr) and gas(1.3%; 47 yr)

Case Indonesia (1%;3%)

- high export demand

- need fresh money


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Exploitation life (R/P)



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Resources and

Reserve of Oil


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Resources and Reserveof Gas


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Coal Fact (1)

Source : WCI,2006


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Increase steadly 1.5%/p.a

Growth : steam > coking

Increase : China, Australia,Indonesia, Colombia

Decline :

Western Europe

Poland

Coal Production (1)


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First players :

1. Oil company

(Exxon & Shell)

TOTAL

2. State owned

CdF, NCB

PT BA Present : MNC (BHP, Anglo, Rio

Tinto, Glencore/Xstrata)

Consolidation process:

BHP-Billion (2001)

Bumi resources (2004)

Glencore/Xstrata (2003)

400 export mines,120 producers

10 biggest companies share 21%production & 32% of world trade

Coal Production (2)


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Grew from 2780 Mt (1980) to4600 Mt (2004)

Steam 2235 to 4100 Mt

Coking 545 to 550 Mt

Most is used in the proximity(83.5%)

Shift from Europe to Asia(Chinas factor 626 to 1 700 Mt)

Shift from heat market to powerplants

Most steam coal goes to powerplants

Many countries depend on coal topower their energy (& as baseload)

Coal Consumption (1)


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Coal Consumption (2)


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Internationaltrade (Mt)

Started in the middle 19th ;expand 1979/80 (steamincrease ; coking stable)

Growth :

demand energy & raw mat

cover uneconomic mined

775 Mt coal trade in 2005

cross-border 70 Mt ; maritime: 685 Mt

16.5 % production

steam 505 Mt ; coking 180 MtAustralia, 1er exporter:

231 Mt in 2005

Japan, 1er importer:

178 Mt in 2005

Sources : WCI,2001;BP-statistic,2002


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International trade (Mt)

Pacific Market (397 Mt)

Steam : 274 Mt

Coking : 123 Mt

Atlantic Market (277 Mt)

Steam : 210 Mt

Coking : 67 Mt

Demand

277 Mt

Western Europe

Eastern Europe

Mediterranean

North,Central &

South America

Supply

245 Mt

Colombia

South Africa

Rusia

Poland

Venezuela

US etc

Demand

397 Mt

Japan

South Korea

Taiwan

India

China

etc

Supply

429 Mt

Australia

Indonesia

China

Rusia

Vietnam

222 Mt 374 Mt

55 Mt23 Mt

Price Formation

Market Leader

South Africa

Colombia

Russia

Marginal Supplie

Poland

US

Australia

Indonesia

Market Leader

Australia

Indonesia

Marginal Supplie

South Africa

Russia

China

US

FOB Prices

Frei ht Rates

Buyers market

Sellers market

World Seaborne Coal Market (674 Mt)

Steam : 484 Mt

Coking : 190 Mt

Currency relations

Diff. Coal market (for steam)due to freight cost (distance)

Pacific (59% ; +)

Atlantic (41% ; -)Diff. Consumers

Diff. SupplierDiff. market mechanicsm


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Coal Market


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transport maritime cost

Factors :

Distances

Fleets availability

Other raw material(iron ore, grains,etc)

(position of fleet)


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Coal MarketInternational trade

Players :

- dealers (active in early 80s ; no more)- producers vs consumers (Glencore, Anglo, BHP..)- champion (case : Sogo Shosho)- trading house as agent for producers (active 00s ; RAG, RWE, EDF..)

Contract nature

-long-term(T : < 10 yr ; Q : fixed ; P : yearly based on reference price; long-term relationship;big supplier; JSM or Utilities base load or near-mine power plant)

-spot contract

(T & Q : ~ ; P : spot/Indexes ; liberalization electricity, excess supply & devlp. coalchain; no permanent relationships & less security of supply; smaller supplier;KEPCO, Taipower ; different reason between Atlantic (70%) & Pacific (30%+))

- tender(bidding process ; deal through trader ; larger volume than spot ; multiple cargo forseveral quarter ; big buyer/state owned ; high transaction cost ; no permanent

relationships ; Shenhua for KEPCO)


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Coal Market

International trade

Price setting

-contract priceRelate to long-term transaction (tonnage; quality ; exchange rate ..) ; fixed price

for each current year ; settled directly buyer & seller

- spot pricePrice (& Q) depends market situation ; reference : indexesglobalCoal ; BJI ;MCIS

- benchmark-price (only in Pacific)

Price settlement JSM vs Australias sellers as a basis for others electric utilities

-Future price- offered by commodity markets for spot quantity; price agree in advance ; usesindex (that specify provenance, quality, place of delivery etc) PRB 8000, NYMEXCoal Index ; Physical trade vs Coal derivatives (swaps, future, option)


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Coal Price Indexes

25

30

35

40

45

50

55

60

1Q1992 1Q1993 1Q1994 1Q1995 1Q1996 1Q1997 1Q1998 1Q1999 1Q2000 1Q2001 1Q2002

$/tce

CWI SACR MCIS EU-index


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Indonesian Coal Index To determine Indonesias coal export pricereference is by using the price index of amongothers Australian (Barlow Jonker), Global, Platt,

Argus, McCloskeys, and Japanese Benchmarking

ICI-1

ICI-2

ICI-3

ICI Specification ICI-1 ICI-2 ICI-3

Caloric value (kcal/kg) 6500 5800 5000

Sulfur content Up to 1% Up to 0,8% Up to 0,6%

Ash Up to 2% Up to 10% Up to 8%

Total moisture Up to 12% Up to 18% Up to 30%

Basis GAR GAR GAR

Size Panamax Panamax Panamax

Timing in 90 days in 90 days in 90 days


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Methodology ICI (1)

Membership in the Coalindo ICI Panelist : 23 members; 9

personnel from coal Producers, 9 personnel from coalconsumers and 5 from supporting members.

Coal Price is Weekly. The Coalindo ICI Panelist

members have to fulfill the Form and furnish.

The price of evaluated coal is every Friday at 17:00Jakarta Time at the latest.

The end product is the price "reference" of Indonesia'scoal in markets at home as well as abroad with the brand"Argus/Coalindo ICI.


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Methodology ICI (2)


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Coal as a primary energy share


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Prices Prices of energy

product

Transport cost

Excess capacity

Others (congestionetc)


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Coal utilisations (1)

Electricity, Metallurgy,

Cement, heating,

23.5 % of primary energy in2000

62% : electricity

16% : steel industry

Some countries aredependent on coal for theirelectricity :

Poland(96%), SouthAfrica (90%), China (81%),India (75%), , USA(56%)

Some countries aredependent on coal for theirdomestic consumption :China, USA

Monde: Energie primaire par source (Mtoe)

Source : WCI,2001;EIA,2001

Utilisations des charbons en 1998

C l ili i (2)


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Coal utilisations(2)

electricity generation

0 10 20 30 40 50 60 70 80 90 100

Bulgaria

Rumania

Hungary

Czech Republic

Poland

Spain

Greece

UK

Italy

Belgium

France

Germany

EU 15

Coal Oil Gas Nuclear Other (hydro)

Coal utilisation

Electricity : 73%

Steel : 12%

Cement et heating : 15%

Structure of electricity

production in Europe :

Nuclear : 35%

Coal : 30%

Natural gas : 13%

Oil : 7 %

others : 15 %

Several countries are heavilydependent on coal for theirelectricity generation :

Germany (50%), Greece(70%), Poland (90%), Czech(75%)


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Electricity generation from coal

Pulverized coal is blown into the combustion chamber of boiler;

The hot gases (1400) convert water into high pressure steam;

The steam rotate the turbine shaft at high speed, and is condensed andreturned to boiler

Thermal efficiency?

Electricity is generated when turbine shafts rotated in a magnetic field


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Coke and steel

10% of coal use for steelindustry

Coke+limestone+iron ore

are fed to blast furnace

Hot air blast ( pulverisedcoal or gas or fuel) areinjected into the base offurnace

630 kg of coal pertonne ofsteel

500 kg of coking coal

130 kg of steaming coal

Source:WCI,2001


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Coke

Coking coal

Certain physical properties

low sulphur

low phosphorous

Cokefaction in coke oven Size 3 mm

1200C

20 h

Volatile contents are driven

off as gas Red-hot product is cooled

and screen (>30 mm) ascoke

Coke+limestone+iron ore are fedto blast furnace to produce steel


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Coal advantages

Within 20 years, coal priceswere slightly decline

technology

economic of scale

freight

Low cost energy sources Coal: 2 $/GJ

Oil : 4 $/GJ

Security of supply

No production

concentration

Safe to be transported

Spot oil proces (US Dollars/barrel)

Steam coal prices (CIF, US Dollars/tonne)

Source : WCI,2001;EIA,2002


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Coal

&Environment


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Coal and environment (1)Stage Main Impacts

Mining

- Und ergroun d Subsidence

Gener ation of gases (mainly CH4)

Liquid effluent/Acid Mine Dr ainage

Hydrologic impact

H ealth effect of m iner: r espiratory d iseases (e.q.

pneu moconiosis o r silicosis) caused by d ust

- Surface Surface disturban ce (e.q. changed of natu ral land surface)

Liquid effluent/Acid Mine Dr ainage

Hydrologic impact

Solid waste

Beneficiation Water contamination from pr epar ation plants

Air contamination from preparation plants

Refuse contamination from preparation plants

Tran sportation Depend on types of transport, mainly air pollution (dust), and

surface distur bance

Combustion

- By pr odu ct Fossil fuel combustion waste :

fly ash, bottom ash, boiler slag, Flue Gas Desulphurationmaterial

- Emission Sulfur Oxides

Nitr ogen Oxid es

Particulate matter

Carbon monoxide

Tr ace elements (potentially toxic):

chrom ium, arsenic, lead, cadm ium etc

Green hou se Gases: i.e Carbon Dioxide


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Coal and environment (2)Core

Element

Environmental

Challenges

Technology Response Status

Particulate

emissions

- Activated carbon Injection ; Electrostatic Precipitators; Fabric Filters

- Techn ologies have rem oval efficiencies of over 99%.

Technologies developed, commercialized and widely applied

both in d eveloped and developing coun tr ies.

NOx emission - Flue Gas Desulphurisation ; Integrated Gasification Combined Cycle ;

Selective Catalytic Reduction

- Over 90% of NOx emissions can be removed by treating the NOx in

the flue gas.


in d eveloped countries.

The application of NOx control techniques is less prevalent in

developing countries.

SOx emission - Flue Gas Desulphurisation ; Wet Particle Scrubers ; Coal benefiation ;

Integrated Gasification Combined Cycle

- Emissions can be reduced by over 90% and in some instances by over95%.


in d eveloped countries.

The application of desulphurisation techniques is less

pr evalent in developing coun tr ies

Technology

for reducing

emissions of

pollutantsCombustion

waste

- Coal benefiation (cleaning)

- Reduces waste, SOx emissions and increases thermal efficiencies. It

can be rep rocessed into construction materials (e.g. fly ash in cemen t

making)

Technology developed, commercialized and widely applied

both in d eveloped and developing coun tr ies

Efficient

Combustion

Technologies

CO2 emission - Pulverised Coal Combustion (PF) ; Fluidised Bed Combustion (FBC);

Integrated Gasification Combined Cycle (IGCC); Pressurised Pulverised Coal

Combustion; Supercritical Pulverised Fuel (S. PF)

- In th e short to medium term, substantial redu ctions in CO2 permegawatt hour of electricity produced can be achieved by increased

combustion efficiency (megawatt hours per tonne of coal consumed).

Technologies developed, commercialized and applied in some

developed and developing countr ies.

Average th erm al efficiency in OECD is 38% and in developing

count ries is 30%. Cur ren t new technology can achieve 45% ofefficiency

Tech. PF coal : proven to be excellent; commercially

Tech . S. PF and FBC: pr oven to be good; commercially

Tech. IGCC : not yet pr oven, demon stration stage

Reduction

CO2

Emission

CO2 emission - Carbon Capture (pre-combustion; oxyfuel combustion; post-combustion

capture) ; Carbon Storage (geological reservoir, saline aquifer); liquifaction;

gasification

- Zero-emissions technologies to enab le the separation and captu re of

and its perman ent storage in the geological subsurface;

Technologies have been developed beyond the stage of

techn ical feasibility, even t hough still not yet commercialized

Researchers are p lanning to improve these compon ent

technologies and demonstrate th em in integrated

configurations. Deployment may start within a decade.


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Greenhouse effect A natural phenomenon caused

by GHG (water vapour, CO2,CH4,) absorb some solar

radiation and reflect it to earths

surface

Exploitation and combustion offossil fuels may emit GHG intothe Atmosphere and increasetheir quantity up there.

Exploitation and combustion ofcoal contribute to 37% of CO2emission

Source :WCI,2001, IEA, 2001

Coal and environment (3)


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Ton nes of carbon per million

tones of oil equ ivalent

Tonn es of carbon

per GJ

Natural gas 0.61 0.0138

Crud e oil 0.84 0.0190

Bituminou s coals 1.09 0.0245

Antr achites 1.14 0.0155

Oil Products

Gasoline 0.80 0.0180

Kerosine 0.82 0.0185

Diesel/gas oil 0.84 0.019

Fuels oils 0.88 0.10



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What is the Kyoto Protocol ?

an engagement that almost 180 countries signed in Kyoto, Japan, in 1997

38 industrial countries have to reduce their emissions of green housegases within 2008 and 2012 in the level of 5,2 % less than those in 1990

green house gases (CO2, NO2, CH4, SF6, PFCs, HFCs) are some gasesthat are emitted from the burning and utilisations of fossil fuels, like coal,oil, and natural gas

the scientists predict that the increasing quantity of GHG in theatmosphere may produce a global warming phenomena

the Kyoto Protocols mechanisms :

Emission Trading

Joint Implementation

Clean Development Mechanism


Coal and environment (5) CCT in Europe


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The Kyoto Protocol in Europe

Coal and environment (5) pStrategy I : promote the

technology for the eco-friendly

combustion for reducing emissions

of dust, NOx and CO2

Strategy II : improvement ofpower-station efficiency.

Strategy III : low-to-zero CO2

coal-fired power plant.

- develop CO2 capture and storage

tech- develop zero-CO2 power plants :

post-combustion technology with

CO2 scrubbing; IGCC technology

with integrated CO2 capture;


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Clean coal technology (1)

Clean Coal Technologies (CCT) are technologies designed to

enhance both efficiency and environmental acceptability ofcoal extraction, preparation and use.

CCT reduce emissions, reduce waste, and increased theamount of energy gained from each tonne of coal

Several technologies are already viable and others underdevelopment:

Flue gas desulphurisation (FGD), can remove 90-95% ofthe oxides of sulphur from flue gases

Fluidised Bed Combustion (FBC), produce less NOx andSOx

Integrated Gasification Combined Cycle (IGCC), produceless solid waste and lower emissions of Sox, NOx, andCO2. Over 99% of the sulphur present in coal can berecovered for sale as chemically pure sulphur

Cl l t h l (2)


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Exploration :

Geophysics (seismic) to reduce geological uncertainty

Exploitation :

Extraction : mechanization, recovery, security,

Back filling methods can reduce environmental problems

Improvement of security conditions and health for increasing acceptability

Capture methane for improve the exploitation and increase energy recovery

Processing :

Reduce impurities (ash, sulphur,,)

Improve the quality of mine waste water

Combustion :

Improve recovery

Sequestration and storage

Reduce waste


Source : WCI,2001



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Reduce emissions :

Electrostatic filtration removes 99%of fly ash

Flue gas desulphurisation methodsremove 90-97% of SOx

Fluidised bed combustion produceless Nox and SOx

.

LIQUIFACTION & GASIFICATION

Increase thermal efficiency USA : 35%

OECD : 38%

Chine : 28%


Source : WCI,2001



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Clean coal technology (5)Gasification and IGCC


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Clean coal technology (6) CO2 Capture (15-40 $/t):

Pre-combustion

Oxyfuel

hydrogen

Post-combustion

Rotating absorber

Membranes contactor

Storing CO2 (10$/t)

Ocean storage

geological

Enhanced oil Recovery

Enhanced Coal BedMethane

Depleted gas reservoirs

Saline aquifers

.

Activity Cost (USD/t CO2)

CO2 capture 5 to 50 (curr ent)5 to 30 (future)

CO2 transpor tation 2 to 20

CO2 injection 2 to 50

Total 40 to 100

Cl l t h l (7)


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IN

THE

LONG

TERM

.


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The Future of CoalThe Future of Coal


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Energy Consumption in Future


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Energy Consumption in Future

C


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Coal in Future


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Coal in Future

World production (demand) grows by 1.4%/an orby 2,359 mt (51%) from 2000-2030

China contributes 45%; India, Australia, US,Canada, Indonesia take the rest

The EU15 is the only region to decline

Drivers of growth :

Electricity demand (higher rate)

Iron and steel sector (slower rate)

Coal-fired additional capacity for 2001-30 is1,400 GW of the 4,700 GW total additional

capacity


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World trade grows by 1.7%/an or by 414

mt (65%) from 2000-2030

East Asia and Korea drive 60% of thetrade growth

Asian demand benefits from exporters :

Australia, Indonesia, China

Total investment takes $ 398 billion, incl.mining (88%), port, shipping

OECD ($ 132 b), China ($ 123 b)

Coal in Future


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406 Mtoe (637 Mt)

27

26

15

18

43

28

23

98

19

29

39

Coal in Future


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627 Mtoe (1,051 Mt)

15

103

12328

44

20

57

18

22

53

20

19

32

71

1726

61

Coal in Future


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COAL IN INDONESIA


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Measured Indicated Inferred Hypothetic Total

1 Java 14,65 14,65

2 Sumatra 2735,32 2755,38 20046,87 4555,13 34,34 27391,72

3 Kalimantan 4246,24 9689,84 486,69 19494,09 498,46 30169,08

4 Sulawesi 0,06 21,20 112,79 133,99

5 Papua 138,30 138,30

6981,62 57847,74

ResourcesNo Island Reserve

IndonesiaCoal Resources and Reserves

In Million tonnes


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C

O

AL

R

ES

O

U

RC

E

S


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IndonesiaCoal Production & Consumption

INDONESIA

0.00

20.00

40.00

60.00

80.00

100.00120.00

140.00

198

0

198

2

198

4

198

6

198

8

199

0

199

2

199

4

199

6

199

8

200

0

200

2

milliontonnes

Production Consumption


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India

Malaysia

Thailand

Australia

Hongkong

China

Taiwan

Philipines

KoreaJapan

kilometers0 2000

4

COAL FROM INDONESIA


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Documents

Coal Market