“Imported Coal” is Oxymoron

Dear Energy Professional, Dear Colleagues,

In May 2007, we had an important conference on “Natural Gas” in Ankara Sheraton Conference Center. Your writer was one of the speakers on 4th May afternoon trying to explain the professional market responses of the Chamber of Mechanical engineers, to evaluate the ongoing activities in the gas market, as well as to advise the new opportunities, different fuel option, more of local resources in future within his own professional capacity.

Since its cheaper cost in comparison to many alternative fuels, convenience for use, and absence of problems related with storage, the demand for natural gas, which entered the Turkish energy sector from late 1980s onwards, has increased its use up dramatically.

Despite high amounts of natural gas consumption, there is no active gas storage facility in our country at this time. The biggest factor in the increase in natural gas consumption is that the generation of electrical energy is mostly dependent upon imported natural gas.

Initially natural gas was very cheap. Combined cycle power plants firing natural gas were also cheap in unit installed capacity and their construction period were quite fast compared to other power plant constructions.

Now natural gas is NOT so cheap. Our Northern neighbor increased its unit price tremendously. Price is unbearable now. It is a real threat against our national security.

Our eastern neighbor cuts the natural gas flow each New Year putting the force majeure clause as “Act of God”, although it’s their own decision in order to put more pressure on our local government in international politics.

In Turkey, nearly 65% of the imported natural gas is used for generating electricity, and hence 45% of generated electricity is based on natural gas. Chamber of Mechanical Engineers, therefore, organized the International Natural Gas Congress in Ankara in order to provide a serious platform for sharing available latest market information, clarifying the prevailing market problems, and for discussing possible solutions to those problems.

We have an enormous energy supply risk on our energy business. That is not because of natural gas but also huge amount of imported coal for our thermal power plants.

“Clean Coal” expression may not be oxymoron anymore, thanks to new modern technologies.

However “Imported Coal” is an oxymoron expression. Coal should not be imported.

Coal Exporting Countries would certainly be delighted to find countries to export their coal.

Countries should be cleaver not to import the coal. Desperate countries with limited local fuel resources are to be cleaver not to import that dirt whatever the desperation is. Coal is not a fossil fuel only; it comes with its ash, unburnable materials, plus radioactive elements with huge health hazards. That is also import of CO2 emissions which will make you under burden against Kyoto Protocol.

The WWF report, which lists the power plants according to their energy efficiency, is based on the 2006 data used for emissions trading. The two worst offenders are in Greece, with Agios Dimitrios named the dirtiest European power plant: it produces around 1.35 kilograms of CO2 per hour of kilowatt power. Britain shares the dubious honor with Germany of having 10 plants in the top 30, Poland has four, and Spain, Portugal, Italy and the Czech Republic have one each

There was a time when European and U.S. coal producers worried that imported coal might threaten their domestic industry. Several large U.S. companies today own shares in foreign coal mines and sell imported coal in the United States and other countries. From the customer’s point of view, imported coal has been an option for power plants or industries situated well for delivery-- usually at attractive prices—but some have been reluctant, or found infrastructure lacking in the tidewater.

The timing of domestic customers, for the near term at least, was not good. Prices for international coals for the European market rose steadily last past summer, followed by rising shipping rates, as the long, hot summer in Europe spurred coal demand. First South African coal sold out for the year; now it appears South American coal is no longer available. Initially, consumers gave Colombian, Venezuelan, and Indonesian coals a second look because of good prices, because they offer low- and very low-sulfur products, and because they offer some supply diversity. Prices are up and currently more volatile in international coal markets, but the low-sulfur coals from South America and Indonesia can in the longer term help keep some domestic mines producing. The two coal types can be blended to “manufacture” blends that meet the emission limit of 1.2 pounds of sulfur dioxide per million Btu, or just to keep it within ranges covered by emission allowances. Because of their Btu levels, some imported coals also react well in reducing nitrous oxide emissions.

In year 2006 price ranges were between 50-60 USD per metric ton for imported coal in European markets based for feasibility calculations.

Local private companies may be too eager to make partnership with foreign companies to construct new thermal power plants on our beautiful sea shores since imported coal is cheap at first. But who would guarantee the cheap coal prices forever. It was the same case in Natural gas. Initially we were all expecting cheap natural gas prices for the long term in our feasibility studies. Natural gas is not cheap anymore. Moreover Natural gas has huge energy supply risk.

Imported Coal also has the same energy supply risk as well as environmental hazards. Although our Energy Markets Regulatory Board and the Ministry both keep low profile in licensing the imported coal applications in the local market, we visualize that our local public authorities as well as our local NGOs put high profile reaction to avoid in Imported Coal firing new thermal power plants.

The first thermal power plant firing Columbian imported coal is built in Sugozu seashores of the Mediterranean coast despite of resistance from engineering and other civil organizations.

It is our pleasure to visualize that the local public reacted to new thermal power plants in FOCA, Yalova, on the Aegean and Mediterranean coasts. We expect to have similar reactions in similar non-responsive initiatives.

One new important developments is that the Privatization Administration Board prepared tenders for the privatization of the KusAdasi, Antalya, Trabzon and Mersin Seaports belonging to the Turkish Maritime Enterprises Inc. The private companies who will win the tender will have a 30-year operation right on the harbours. These sea ports will be ideal locations for imported coal firing thermal power plants in near future. Therefore all parties should be very careful in releasing Environmental Impact Reports, and licensing the new plants in those locations. Applications are to be carefully reviewed and any irresponsive initiatives are to be avoided upfront.

European Union advised their members to utilize their local indigenous lignite to the fullest maximum extent whatever would be the cost. EU furthermore advises its own members to make more investments on renewable energy resources.

The other hand, imported coal is not cheap any more.

Its market price was merely 50-60 USDollars per ton in year 2006.

Now in Richards Bay South Africa FOB price is more than 100+ USD per ton

and in Rotterdam ARA coal market for 6000+ kcal/kg LHV, it is now more than 140+ US Dollars per ton.

Compared to local mine-mouth prices of less than 8 US Dollars per ton for 1150kcal/kg LHV Afsin Elbistan lignite, there is no reasoning for imported coal fired thermal power plants in near future.

It is our sincere feeling that those investors who dare to invest in “imported coal firing thermal power plants” would have difficulties, and should consider high calculated risks, and high unforeseen cost/ risks in their technology selection, project finance and overall project execution.

Therefore,

We have to reduce dependence on imported fuel/energy that also includes imported coal
We have to reduce energy consumption by improved energy efficiency
We have to produce more energy from our own local energy resources, wind/ hydro/ local lignite,
We have to develop most efficient processes and use the best technologies within our own engineering capacity,
We have to control our CO2 emissions to reduce climate change and health effects
We must allocate more funds for MSc and PhD works as well as post graduate studies on best utilization of our lignites,
We have to open new Research Centers in our poor quality lignite fields to make academic research for best use of our local lignite.
Though it is late, but as saying goes "It is never too late to mend".

Your comments are always welcome


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