Coal investment crucial starting block for South Africa’s energy progress

8th July 2013 By: Martin Creamer - Creamer Media Editor

Coal investment crucial starting block for South Africa’s energy progress

South African Coal Roadmap chair Ian Hall
Photo by: Duane Daws

JOHANNESBURG (miningweekly.com) – The need to create an environment conducive to coal-mining investment is the crucial starting block of the South African Coal Roadmap, which is due for official release by the end of this month.

“That’s the number-one priority right now. We need coal mines to come on stream quickly,” says South African Coal Roadmap chairperson Ian Hall, who addressed the Geological Society of South Africa’s GeoForum 2013.

For this to happen, South Africa needs to align environmental, water and minerals legislation.

“That’s a really big problem right now. There are no mandatory response times to get water-use licences. There’s a lot of uncertainty as to what’s allowed and what’s not allowed,” says Hall.

Commercial agreements need to be reached on the continued supply of coal to South Africa’s State-owned power utility Eskom; much more light also needs to be shed on coal’s potential future status as a strategic resource; and planning needs to begin now on the next baseload power station after Medupi and Kusile.

With a significant volume of South Africa’s coal resources in the Waterberg, coal delivery from the Waterberg region needs to be facilitated.

In 2011, South Africa’s saleable coal production was 253-million tons from a sector that employs 78 580 people and pays R16.1-billion a year in wages.

The soon-to-be-released Coal Resources and Reserves Study of South Africa suggests that South Africa still has plenty of coal – more than 60-billion tons of recoverable coal reserves.

However, the problem the country faces is that, as the world’s twenty-fourth-largest economy, it is the twelfth-largest producer of greenhouse gases.

“That’s a key conundrum. We can’t keep on growing coal without minding the emissions impact that it has,” he cautions.

The Southern African region will remain an important source of seaborne supply to both the Pacific and Atlantic markets and Eskom’s current coal requirements of 120-million tons a year are likely to rise to 160-million tons a year, as demand from the under-construction Medupi and Kusile power stations clicks in.

Old mines are nearing the end of their supply to Eskom’s existing fleet of power stations and, thus, new mines need to be built.

Between now and 2020, Eskom will need at least 60-million a year of new coal-mining capacity to come on stream, just to supply Eskom, and some commentators in Eskom have said that considerably more than 60-million a year of new production will be needed.

“And that’s a big challenge,” Hall comments, adding that Eskom is concerned about the impact that the export of low-quality coal out of the Central basin will have on domestic supply.

India is poised to become the largest net importer of thermal coal and South Africa’s biggest export market.

South Africa has the world’s most advanced coal beneficiation programme, with 75% of production used domestically and exports comprising 27.2% of production contributing 57.5% of the value in foreign revenue.

Regardless of how the future evolves, Hall says that many common actions are required in South Africa, the first of these being the creation of an environment conducive to mining investment.

Seventeen government, quasi-government and private-sector organisations support the South African Coal Roadmap process, including the Department of Energy, Department of Mineral Resources, Council for Geosciences, the Fossil Fuel Foundation and The Green House.

From a global perspective, coal continues to be extremely dominant, with the International Energy Agency calculating that coal will retain its first place as a primary energy source for electricity generation for another 30 years.

Coal, which contributes more than natural gas and renewable energy put together, is continuing to meet half of the planet’s energy demand.

Despite all the pressures on it, it also continues to make an above-average contribution to economic growth, BP statistics show.

In the last 13 years, China has increased coal production by more than 2.5 times, lifting 1.38-billion tons production in 2000 to 3.65-billion tons last year.

Rising living standards in emerging economies are expected to increase energy demand by one-third in the next 30 years.