Coal to keep burning on strong Asian demand

Sunday, Nov13,2011 Sourced AFP

LONDON — Coal is set to remain a major energy source alongside oil over the next 25 years on strong Asian demand, an uncertain outlook for nuclear power and despite the popularity of natural gas.

"Coal will be very competitive for a long time," Richard Jones, deputy executive director of the International Energy Agency told AFP in an interview.

"Coal will remain the main energy in many countries, principally China and India," Jones said last week as the IEA published its 25-year outlook.

"By 2020, when it comes to coal imports, India will be a new China as the largest importer of coal in the world." China is currently also the world's biggest consumer of the fossil fuel.

Companies in China and India are snapping up the world's coal assets to generate power, in particular electricity, that can fuel the countries' fast-growing economies.

Meanwhile new technologies helping to make coal a cleaner form of energy, and an expected decline in the use of nuclear power across developed nations after Japan's recent disaster, is set to boost demand for the mined fuel.

Germany recently announced that it plans to phase out nuclear energy by 2022 in the wake of the disaster at Japan's Fukushima plant in March.

"The immediate impact of the decision in Germany is to import more electricity from their neighbours, and a lot of this imported electricity is coal-fired," Jones said.

World coal production stood at 4.928 billion tonnes in 2009, providing around a quarter of the globe's total energy output, according to the IEA.

"The world ... coal market is perceived as structurally tight by many," Societe Generale analyst Emmanuel Fages said in a recent research note.

He added that that coal-hungry nations would continue to depend on the United States -- the world's second biggest producer of coal after China -- to boost supplies.

"The US have been a large coal exporter in the past. Recently they proved able to balance the market by increasing their export volumes ... The US export capacity evolution is thus important to the future global supply-demand equilibrium," Fages said.

The United States is increasingly looking to natural gas to meet its own huge energy needs, enabling it to help feed Asia's thirst for coal.

The US has become a global leader in the production of natural gas extracted from underground shale rock, helping to drive down the commodity's price on markets. Coal prices have meanwhile risen.

"Coal prices have benefited greatly in recent years because of this strong demand from China, and I don't see that changing," said Jones.

"We are looking at a modest increase (in prices) over the next 25 years, and at the same time, production cost will be stable."

China is also seeking to tap its vast shale gas reserves to reduce its reliance on coal. The world's biggest emitter of greenhouse gases relies on coal for nearly 70 percent of its energy needs.

Over the past eight years China has on average built one coal-fired power station a week -- and this after it used to be a major exporter of the natural resource.

The cost of securing coal from within China can be fatal however. Last week, at least 20 workers were killed and another 23 trapped underground after a blast at one of the country's mines.

Coal mine accidents are common in China, where work safety is often neglected by bosses seeking a quick profit.