Energy News Monitor | Volume XIII; Issue 25
Coal News Commentary: October – November 2016
India
The government’s effort to curb coal imports were reported to be continuing. The latest in a series of steps that the government has been taking is the effort to boost sale of low-quality domestic coal by with lower freight tariff. Apparently off-take of domestic coal was weak last month as higher quality imported coal was available at competitive prices. Higher international price for coal and the increase in domestic coal output are expected to cut India’s imports by around 20 MT in FY17 from the 181 MT in FY16. The strategy of countering quality with cost may bring short term benefits but it will also bring longer term problems. There is a lesson from history. In 1954 higher grades of coal particularly coking coal, the reserves of which were depleting fast, was being burnt in power plants. The government introduced the concept of useful heat value to encourage and popularize the use of poor grades of non-coking coal by the power utilities. This entrenched the use of poor coal grades for power generation which reduced overall efficiency of power generation and contributed to environmental pollution. These inefficient power plants are now at a disadvantage compared to newer efficient plants. Likewise, lower rail tariff for coal transport may make domestic coal competitive compared to imported coal for distant coastal power plants in the short term. However this may encourage the transport of coal which is not necessarily a good thing in the long term from a macro-economic efficiency and environmental perspectives. The ideal from both economic and environmental perspective would be to have pit head plants that generate power and transmit electricity across the nation.
According to a new research report, India will be a global star in coal production increasing global market share of output from 10.1 percent in 2016 to 13.1 percent by 2020. India is expected to surpass the USA to become the second largest coal producing country in the world, second only to China.
Rest of the World
Indonesia is reported to be expecting thermal coal production to be flat at 400 MT after 2019 but as domestic consumption is expected to increase, exports are expected to fall. Indonesian coal exports are expected to drop to 160 MT 2019, which is just over half the forecasted quantity of 308 MT. This must be music to the ears of CIL as its thermal coal grades have been facing stiff competition from Indonesian coal. Indonesia is the World’s top thermal coal exporter. Demand for coal at Indonesia’s power plants is expected to climb to 119 MT in 2019 up from the 86 MT in 2016.
China was reported to have adopted new rules to stimulate coal production to counter surging prices and to balance demand for heating over winter with efforts to tackle pollution. China’s NDRC ruled that all coal mines that abide by production safety rules can operate 330 days a year rather than 276 days previously. Domestic coal production is yet to pick up and China’s thermal coal imports continue to increase to make up for the shortfall.
The Finnish government was reported to be considering banning all coal-fired power stations by 2030 to help meet emission reduction goals. Coal-fired power generation accounted for 7 percent of all electricity production in 2015 with 45 percent coming from renewable sources and 34 percent from nuclear. The ban, if implemented would be part Finland’s new energy strategy. The Finnish government has previously said that it wants Finland to source more than half of its energy needs from renewables, and to halve the use of imported oil for domestic needs during the 2020s. Last year Britain announced plans to phase out all its coal-fired power plants by 2025, other than any fitted with CCS systems. Denmark is aiming to become fossil fuel-free by 2050, but it has no binding targets or bans for coal use. There was also news of the EU paying countries such as Poland to stop using coal. It appears that the EU has taken a leaf off its immigration policy (paying Turkey to keep immigrants out) to fashion its policy against coal.
NATIONAL: OIL
Sale of local cooking gas only to PSUs
November 29, 2016. The government has ordered liquefied petroleum gas (LPG) producers such as Reliance Industries to supply all its cooking gas to state-owned oil companies only, while private retailers have been asked to source their requirements through imports. The oil ministry, in an order issued this month, stated that the “sale of indigenously produced LPG is not permitted to the entities other than government oil companies”. All locally produced LPG should be sold to PSUs for subsidised sale to consumers. India has surplus refining capacity but does not produce enough LPG to meet all of its demand. It imported 8.7 million tonnes of LPG in 2015-16 and 4.66 million tonnes in the first half of this fiscal. LPG is produced by both public sector firms such as Indian Oil and private companies such as Reliance Industries. The ministry said it had been noticed that all locally produced LPG were not being sold to oil marketing companies – IOC, BPCL and HPCL. The ministry held that the sale of LPG by domestic producers to anyone other than state-owned oil marketing companies was not permissible under the LPG control order. Non-state LPG sellers, called parallel marketeers, cannot source the fuel from domestic refiners. They have to import LPG if they want to sell it in the domestic market.
Source: The Telegraph
RIL seeks access to India’s longest LPG pipeline by IOC
November 27, 2016. Reliance Industries Ltd (RIL) has sought access to the India’s longest liquefied petroleum gas (LPG) pipeline that Indian Oil Corp (IOC) is laying from Gujarat to Gorakhpur in eastern Uttar Pradesh to cater to the growing demand for cooking gas in the country. IOC plans to import LPG at Kandla in Gujarat and move it through the 1,987 kilometer pipeline to Gorakhpur via Ahmedabad (in Gujarat), Ujjain, Bhopal (in Madhya Pradesh), Kanpur, Allahabad, Varanasi and Lucknow (in Uttar Pradesh). RIL said it wants to put in its own LPG, possibly produced at its Jamangar refineries in Gujarat, in the pipeline for transportation to hinterland. The pipeline will carry 3.75 million tons per annum of LPG, IOC said in an application to the sector regulator PNGRB seeking approval for laying the pipeline. Of this, 25 percent will be common carrier capacity that can be provided to third parties. Besides getting right to move its own LPG through the pipeline, RIL also wanted third party access to storages IOC will build along the pipeline route for stocking the gas before sent to bottling plants for filling in cylinders for sale to consumers. RIL said assistance at the allied storages proposed en route is vital for it to compete and rural penetration. IOC plans to feed LPG into the pipeline at Kandla port as well as its Koyali refinery in Gujarat. It will connect eight of IOC’s LPG bottling plants in Central and Northern India. This will be the biggest LPG pipeline in the country. GAIL currently operates a 1,415 km line from Jamnagar in Gujarat to Loni. The line carries 2.5 million tons of LPG annually.
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