Friday, May 16, 2008

Coal from Australia to New Thermal Power Plants in Zonguldak Region



Dear Energy Professional, Dear Colleagues,

In this article, your writer tried to evaluate the new hard coal (and/or imported coal) firing thermal power plants in our Zonguldak region, and hence in his humble capacity, explained the operational problems, advised the new coal firing technologies for their best use and efficient application in the new thermal power plant investments.

The Turkish Hard Coal Institute operates five underground mines in Turkey, and is the only hard coal production entity in the country. The two most important lignite fields in Turkey -- the Afsin-Elbistan and Sivas-Kangal coal fields -- are owned by EÜAŞ and operated by private companies under contract. Even though there is significant production of lignite and some production of hard coal in Turkey, not enough coal is mined to meet demand.

As a result, Turkey imports more than 16 million tons of hard coal each year, mostly from Australia, the United States, Columbia, South Africa, and Russia. Coal is used mainly for electric power steelmaking, and cement production. About 75% of the Turkey's lignite is used as a fuel source for electric power production.

In early 2008, high level public administrators of Zonguldak province paid an important to the new power plant construction site in Catalagzi, and received information on the latest status and the milestones in project execution from management of the investor group.

They expressed their pleasure in the project and advised the press that this new investment would be in the biggest and the latest of first five private energy projects in the local market.

Furthermore local public administrators advised that they tried to assist the investment group to allocate necessary land, support their mission in legal/ administrational procedures, and expressed their pleasure for creation of almost 4-5 thousand jobs for the local people. They further noted that;

“We have extraordinary new developments in our region. The major issue in this new investment is that the local indigenous hard coal will be fired in the new power plant.

In early next year (2009), the first unit with 165 MWe electricity generation capacity will be completed under the leadership of a former East European construction company. The other two units each with 600 MWe will be completed by CMEC of China within next 3 years.”

Investor speakers informed that the power plant will be completed by the year 2011 for a lump sum figure of 2.4 billion US Dollars inclusive with the seaport to receive imported coal.

They added that the seaport will be equivalent of local Samsun or Karadeniz Eregli seaports since they will be importing three times of the local hard coal production of the region reaching and maybe even exceeding 3 million 500 thousand tons per year.

They will be utilizing both the local available hard coal, as well as importing the available coal from the global markets. Overall project financing will be covered by the local private banks/ financial institutions, as well as their own resources.

At this time, there are 740 employees working at the site, including local people which would cover 40% of total.

Investors advised that they have allocated 1 billion 200 million US Dollar for the new energy investment, where they received finance from two leading local private banks covering 850 million US Dollars credit, and the remaining 350 million US Dollars from their own sources.

They noted that such an enormous investment without any electricity sales agreement with any party, would be the first of its kind in the local market, and a very positive indication of trust observed for their investment financing by the local private banks.

They added that although foreign banks are speaking of confidence to local investment projects, only local banks are supporting the projects by securing necessary finance packages.

The ongoing investment would be the greatest coal-firing thermal power plant investment in the local market, and they are expecting the highest plant efficiency at about 45% or more.

Investors advised that the available local coal production will not be sufficient for the 1200 MWe electricity generating power plant’s coal demand, therefore they will be importing majority of the incoming coal requirement from foreign resources.

When asked why they initiated such an enormous investment, they replied that they are an investment group with conservative financing procedures, and by putting confidence on sources of local private banks, they trust the local energy markets and as well as themselves.

They disclosed that they are expecting to generate overall 9.5 billion kw-hour electricity per year whereas the first unit will be in operation at the beginning of year 2009, and the remaining two units with one year intervals.

During the construction of the new thermal power plant investment in Zonguldak, it is foreseen that there will be 1500 foreign and 1500 local workers will be employed in the next 3 year project execution/ construction period.

Local engineering societies are carefully watching the subject investment. There are some questions and missing points in details of the transparency in Environmental Impact Report (EIR) and in the licensing by the local Regulatory Board.

Although it is disclosed by the authorities that the EIR and the licensing are fulfilled but not yet shared by the general public. It is very hard to say that the records in their respective web sites are all clear and updated.

In the latest Jan-2008, project status web site, it is stated that the first unit (1x165 MWe) is complete at 41.4 %, whereas there is no mention of the other two units (2x 600 MWe).

It is hard for your humble writer to understand why they have “imported-coal firing” thermal power plant investment in the “hard coal” region of the country but not elsewhere with better seaport access, importing the coal from international markets, and not utilizing the local coal.



It is also too hard for your humble writer to understand how these large body imported coal ships will be passing through Bosporus and Dardanelles regularly, without creating further traffic in the already congested sea channels.

On the other hand, the existing 154 kV high voltage transmission lines cannot carry the new load although they have a protocol to do so, the new and higher voltage level transmission lines are to be installed in near future to sell the generated electricity to the national grid or make the necessary wheeling to third party purchasers.

There are many applications to the local regulatory board for licensing and then constructing imported coal firing thermal power plants in the region.

We sincerely hope that they have made their investment calculations correctly, and further hope that they have secured the finances, created experiences competent technical staff, experienced project execution and will finalize the project construction on time, generate electricity and receive income to payback their project depts.

Since the number in licensing applications for construction of imported coal firing thermal power plants at our seashores are getting higher, it is noteworthy to recall that the low imported coal prices are the happy tales of the near past.

The prevailing price of coal in Rotterdam ARA coal markets (http://www.globalcoal.com/) is above 219 US Dollars per ton for high quality coal with LHV (lower heating value) exceeding 6000 kcal per kg as of July 2008. At the plant delivery, the final CIF price at any Turkish seaport exceeds 290 US Dollars per ton. Without having long term coal sales/ purchase contracts, it is our humble and sincere feeling that there is neither feasibility nor any profitability in generating electricity based on imported coal.

That bulk coal will be transported from far ends of the global world, from Australia, South America, Indonesia, from Columbia, reach to Turkish shores, pass the Turkish channels, arrive to unloading seaport near the thermal power plant whereas we have lots of coal lying underneath the same land waiting to be exploited. That is not so easy to understand.

Besides the wide bodied ships with imported coal bulk can not pass the Turkish channels from Aegean to Black Sea so easily. Even if they can, they will have certain adverse effects to the current sea traffic at the Turkish Channels. We do not wish to think about it. There is at least 10 days of waiting period at this time only to pass Bosporus for such big ships. In future it will certainly be more delay due to ever increasing channel sea traffic.

In the end the imported coal firing thermal power plants at the Black Sea coast will be completely dependent on coal suppliers of the countries at the Black Sea coast, namely Russia and Ukraine. Their coal prices are relatively lower than the spot price and they have traditional tendency to increase their prices to world market levels when they face the demand as in the case of natural gas. That is a great energy supply risk. That is an obvious big risk.

Each country has to make her own long-term energy policy based on utilizing her local resources, and constructing by her local contracting/ engineering companies. This is an important task not to be left to foreign companies. Plant availability, high reliability, high performance and its easy/ fast/ cheap rehabilitation can only be secured by depending on your own companies, on your own engineering capability.

We may consider that the local low LHV lignite may not be suitable for firing in the pulverized coal firing thermal power plants. Pulverized coal firing is the technology of the past. Today we have other choices such as Circulating Fluidized Bed boilers and Integrated Gasification Combined cycle power plants utilizing low LHV quality local lignite, and hard coal remains.

At supercritical pressure/ temperature design levels, we can reach and even exceed 46% plant efficiencies. The prevailing imported coal prices at USD 8-9 per MMBtu with 46% plant efficiency can compete with the current natural gas prices at 12-13 US Dollars per MMBtu in CCPPs with 58-60% plant efficiency. However imported coal prices are indexed to current petroleum prices and they have ever increasing tendency in the global markets.

Please do note that the coal price in Afsin Elbistan lignite basin is only 2-3 USDollars per MMBtu gross. However local indigenous lignite has very different characteristics in the elementary analysis even in the same coal basin. Therefore we need to carry out selective mining procedures to receive standard coal from the coal mines.

Selective mining is an expensive mining investment. At this time we have a very few coal mining premises in the local market. We normally send all available coal to the nearby thermal power plant as received basis.

The most of the local power plant investors are not originally from the energy markets but are of leading figures of other enterprises expecting cheap and secure electricity for their plants. Most of them will be consuming almost 50-60 % of generated electricity in their own fabrication plants. The remaining portion of generated electricity will be sold to the market. That is not a big risk at this period of nationwide electricity shortage in the local market.

So they can finance their new investment projects with “Corporate Financing” procedures. Between 1993- 2005, more than 4000 MWe cogeneration plants are financed and realized in the local market by applying these procedures.

First they will secure their own energy needs, then they payback and generate more income and make further investments in the market. We need to build real “Non-recourse financing” with “Off-taker” contracts in near future, thus we need to create such investment climate to make the future investments easier.

On the other hand, we have an enormous energy supply risk on our energy business. That is not only because of imported 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 such as CFB and IGCC. However it is your writer’s sincere and humble feeling that “Imported Coal” is an obvious oxymoron expression. Coal should not be imported.

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

Countries should be clever not to import the coal. Desperate countries with limited local fuel resources are to be clever not to import whatever the desperation is.

Coal is not a fossil fuel only; it comes with its ash, with unburnable materials, plus radioactive elements with huge health hazards. That is also import of CO2 emissions which will make you under the burden of Kyoto Protocol which you have not ratified yet.

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 have seemed too cheap upfront. But who would guarantee the cheap coal prices forever.

“Imported Coal” also has the energy supply risk as well as environmental hazards. Although Energy Markets Regulatory Board and the Ministry both keep low profile in licensing the imported coal applications in the local market, one can visualize that local public authorities as well as local NGOs, Chambers of Engineering Societies put high profile reaction to avoid any new “Imported Coal firing new thermal power plants”.

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

Though it is late, but as saying goes "It is never too late to mend".

2 Comments:

Blogger Ardent said...

Your analysis of the new hard coal firing thermal power plants in our Zonguldak region is very thorough and interesting.

There are certainly a lot of issues and problems the government needs to address.

Australia is the world's biggest exporter of coal. Nearly half of our coal exports are purchased by Japan.

2:41 AM  
Blogger Tanju said...

The first phase of this project (165 MW)was supported by all parties since it was planned to run on local coal sources and develope the surrounding coal mines, accordingly help to grow the economical activities around Zonguldak region.
I think the question should be addressed to EMRA for licensing the next two phases without considering the capacity of the current coal resources and overloading of overheadlines. Also it seems that no consideration is being taken into account for Kyoto regulations.
My origin is Zonguldak and my father is a retired coal miner and for me I find it is embarassing to have a power station running on imported coal particularly in Zonguldak, which is known to be the coal center of Turkey.

Tanju Oral
Power Generation Engineer
Gas Fired Plants
PB Power
Newcastle/UK

9:58 PM  

Post a Comment

<< Home

Click to join EnergyNewsletterTurkey

Click to join EnergyNewsletterTurkey

Free Blog Counter