R/€ = 15.11
R/$ = 13.34
Au 1152.52 $/oz
Pt 975.00 $/oz
May 20, 2008
Eskom says coal exports threaten security of supplyBack
© Reuse this While soaring coal prices were a key driver behind Eskom’s latest and much-debated application to the energy regulator for significant electricity price increases, CE Jacob Maroga said on Tuesday that it “won’t be useful to force” issues on the coal industry.
However, he conceded that having to compete with the export market for South African coal was a threat to Eskom’s security of supply for coal, which it uses to produce over 90% of its power.
Its biggest supplier of the fuel, Exxaro Resources, which said in January that it might start exporting lower-grade coal to India by the end of the year, had not yet started this, spokesperson Trevor Arran said.
In a media briefing at the State-owned entity’s Johannesburg offices, Maroga said that: “Eskom quality coal was coming under pressure as something that is attractive to overseas consumers”.
He acknowledged that there was a debate between industry and government around availability, security of supply, and the price of coal.
“There is a view that, given coal is a strategic resource for energy, we have to do things that maintain the security of supply,” stated Maroga. “It may be a combination of taking resources, pricing mechanisms, but how that will unfold is still in the early stages.”
Government had also said on Tuesday that it was interrogating issues around coal in South Africa.
Department of Minerals and Energy spokesperson Bheki Khumalo said that the Minister had commissioned a study to draft a "coal master plan", which would interrogate the "best way of preserving our national coal resources".
He was quoted in other publications as having said that an option was to limit the export of coal, but denied having said this when Mining Weekly Online approached him for comment. "You can't put the cart before the horse," he said.
Arran also said that government could not simply “close off the export taps”, as miners had contractual obligations to fulfil, including with rail operators, port operators, and with overseas customers.
Maroga hinted towards a more amicable approach.
“I also think that, within the mining industry there is a recognition that they have to do things that are responsible, and not to threaten security of supply,” he said.
“And I’m confident that discussions that benefit everybody will emerge. I don’t think that it will be useful for things to be forced on parties.”
Arran said that Exxaro was playing its part.
“We are not irresponsible in all of this,” he said in a telephone interview.
He pointed out that the JSE-listed miner had agreed to supply Eskom with 13,5-million tons out of the additional 30-million the parastatal had contracted thus far in its bid to secure an extra 45-million tons of the fuel.
Meanwhile, Maroga noted that Eskom had not cut its spending on coal to protect its profits last year, as the National Energy Regulator of South Africa argued in its report released on Monday.
In fact, he said that the power utility had “consistently spent above its budgeted amounts” in the 2006/7 and 2007/8 financial years, and was on track to spend a total of nearly R13-billion above its budget on procuring coal by the end of the current financial year.
One of the contributing factors to Eskom’s ballooning spend on coal was the fact that it had to increasingly look to the spot markets for supply, as it ran its stations harder.
Maroga said that it currently sourced about one-quarter of the fuel on short-term contracts, which led to significantly higher prices.
Arran said that about one-half of the coal that Exxaro sold to Eskom was based on cost-plus contracts.
Ruling African National Congress secretary general Gwede Mantashe on Friday said that more of Eskom’s coal should come from such contracts.
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
Creamer Media Senior Researcher and Deputy Editor Online
Other Electricity News
Updated 2 hours 43 minutes ago Eskom on Friday warned that the risk of load shedding was high from as early as 06:00 until 22:00 after some of its units tripped on Thursday evening and on Friday morning. The power utility said this caused a shortage of generation capacity, increasing the risk of...
Updated 30 minutes ago Universal Coal’s independent directors have again called on shareholders not to accept fellow South Africa-focused IchorCoal’s A$0.16 a share cash takeover offer. Ichor, which already held a 29.99% stake in Universal, on October 1, officially launched its takeover bid.
Updated 2 hours 24 minutes ago President Jacob Zuma on Thursday said the National General Council took place amid a tumultuous economic climate, however, South Africans have something to smile about. Addressing guests on the eve of the NGC at the Gallagher Convention Centre on Thursday, Zuma...
Updated 2 hours 31 minutes ago Ethiopian Airlines told Boeing Co that the shutdown of the US Export-Import Bank has triggered concerns about the airline's ability to take delivery of Boeing jets already ordered, and would force it to reevaluate future orders. Boeing released a letter from Tewolde...
Recent Research Reports
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
Road and Rail 2015: A review of South Africa's road and rail sectors (PDF Report)
Creamer Media’s Road and Rail 2015 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail infrastructure and network, the funding and maintenance of these respective networks, and...
Defence 2015: A review of South Africa's defence sector (PDF Report)
Creamer Media’s Coal 2015 report examines South Africa’s coal industry with regards to the business environment, the key participants in the sector, local demand, export sales and coal logistics, projects being undertaken by the large and smaller participants in the...
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
Real Economy Insight: Automotive 2015 (PDF Report)
Creamer Media’s Real Economy Year Book comprises separate reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, gold, iron-ore and platinum sectors.
Real Economy Insight: Water 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
This Week's Magazine
At the sixth IQ Business conference held in Sandton last month, a panel of business leaders and academics advocated that business reclaims the initiative to spur growth in South Africa amid fragmented and haphazard political direction. Management consulting firm IQ...
The building industry is an essential component of the South African economy as it contributes about 15% to the gross fixed investment that drives the economy. However, with the country’s economy going through a tough time currently, this, in turn, reflects on the...
The recipients of the 2015 South African National Energy Association (Sanea)/South African National Energy Development Institute Energy (Sanedi) Awards were announced at a ceremony and banquet in Sandton last month. Sanea chairperson Brian Statham named Exxaro CEO...
As South African information technology (IT) firm EOH posted another full year of strong growth, CEO Asher Bohbot, known for his frank words, people-centric management style and stoic humanism, attributed the company’s continued South African and African growth to...
International heavy-equipment engine manufacturer Cummins’ regional distribution centre (RDC) in Woodmead, Gauteng, has halved the average logistics distribution time for clients in Southern Africa and allowed for critical or long-lead stock to be kept closer to...