COAL SOURCES
-RESERVES
Of all the fossil fuels, coal is by far the most plentiful in the
world. It has been estimated that, as at 1996, there are around
one thousand billion (1 x 1012) tonnes of total coal reserves economically
accessible using current mining technology, approximately half of
it being hard coal. Not only are coal reserves extensive, they are
also geographically diverse, being spread over 100 countries and
all continents.
Almost 80% of world coal reserves are now concentrated in North
America, Asia Pacific and the former Soviet Union. Reserves in Europe,
based on calorific value, are estimated at 72 billion tons of coal
units (of which 70% is hard coal). Overall, coal represents 80%
of fossil fuel reserves in the EU (96% in Eastern Europe). More
limited reserves can be found in S. America and Africa. Coal reserves
are being used at a far slower rate than oil and gas, particularly
within the EU and applicant countries. Plentiful reserves mean a
long-lasting supply. At 1998 levels of production, coal reserves
are sufficient to last over 200 years,
approximately four times the reserves of oil (some 45 years) and
gas (about 65 years).
·PRODUCTION
Hard coal production across the globe has grown over the last 25
years and is likely to go on expanding because of rising demand
from developing countries. In 1999, coal production in the EU was
100 million tonnes (Mt), out of a total consumption of 247 Mt, almost
all of it dependent on subsidies. Production within Europe is falling
and is likely to continue to do so as traditionally large producers
continue to scale down production - as in the UK in the 1990s. A
similar trend is apparent in Eastern Europe where production fell
from some 178 Mt in 1990 to 135 Mt in 1998, mainly lignite in Poland,
which will soon no longer be self-sufficient in coal.
A key factor in coal production is cost. Despite its leading position
as a developer of clean coal technology, the EU is at a disadvantage
for structural and geological reasons. It has many deep mines that
are expensive to operate. Drastic cost-reduction programmes have
taken place in Germany and the UK, which have reduced their cost
and raised productivity - the UK now has the highest productivity
among EU producers, but levels of production have been slashed.
Similar developments are taking place in France and Spain.Compared
to USA, Canada, Australia and S. Africa, productivity in the EU
is relatively low. Poland's productivity is several times lower
again.
Despite the vast hard coal reserves of the EU and applicant countries,
most EU hard coal production has no future without subsidies. Belgium
has already ceased indigenous production. France plans to do so
by 2005. In the UK, the price of coal delivered to generating companies
lies above world levels. The UK coal industry is alone in the EU
in receiving no state subsidies, but the number of operating mines
and employment in the coal industry are a fraction of what they
were 10 years ago.
·DEMAND
EU coal demand is following a determined downward trend, due to
the wide-scale removal of coal from domestic households, the substitution
of coal fired generation of electricity by gas and the restructuring
of the steel industry. Coal has in the past been associated with
pollution, and is still a large emitter of CO2. Technological advances
(e.g. clean coal programmes) could renew interest in coal, make
it more attractive and benefit supply security. Economically, coal
offers the advantage over oil and gas of relatively stable prices,
partly due to an excess of supply over demand. Over the last 15
years, average coal import prices have fluctuated by no more than
20 $/tce, compared to over 120 $/tce for crude oil. Enlargement
could benefit the EU's coal balance if Eastern European coal satisfied
some of the demand in the existing EU.
However, a more likely scenario is that restructuring in accession
states leads to new falls in production without corresponding falls
in demand. The net result is likely to be increased dependence on
coal imports. The medium term projection is that demand for coal
would increase after 2010, especially for power generation, due
to a projected price increase of gas and the decommissioning of
ageing nuclear power plants.
·IMPORTS
Imported coal is far cheaper than domestically produced coal. At
an average of 42 �/tce, imported coal costs a fraction of, for example,
German coal, at 143 �/tce. Coal imports come from a wide range of
countries, but mainly from Australia, Canada and USA. This factor
reduces
he risk element of dependence on imports. Providing that these reserves
are available to European markets, there are more than sufficient
alternative low-cost reserves accessible to markets in other parts
of the world.
·COAL - CONCLUSIONS
From an economic and energy supply viewpoint, coal is attractive.
There are extensive worldwide reserves, including in Europe, and
competitive, well supplied markets to keep prices low and stable.
However, coal has been phased out from homes (in earlier "clean
air" legislation) and, more recently, electricity generation,
where gas is the preferred choice. Restructuring of the steel industry
has also removed an important customer.
Source: IIASA/WEC
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