A MAJOR development on the Thar coal front this month has been the approval of an enhanced allocation of Rs900 million to Dr Samar Mubarakmand’s gasification project by the ministry of finance to enable it generate 100 MW of electricity in its first phase in Block-5. This removes a big hurdle and should speed up the work on a project in limbo since 1992.
Even Sindh government, which itself has been contributing to such delays by its lethargy and internal politics, has shown restiveness in recent days over lack of progress in gasification work which is a federal government project. Chief Minister Qaim Ali Shah said last week that he would take up the matter with the federal government because Dr Samar Mubarakmand has “exceeded his timeline” of starting the generation of electricity. The initial 50 MW gasifier was to be completed in 18 months but has been delayed, he said. Next day, the nuclear scientist said, it has been completed.
The new allocation is a huge increase over of the earlier paltry sum of five million rupees given under PSDP. It was provided against a demand of Rs5,703 million. The project is to cost Rs8,898.7 million, with a foreign exchange component of Rs5,847.3 million. It was approved by the Executive Committee of National Economic Council on December 9 last year.
In April 2009, the Central Development Working Party had approved Dr Mubarakmand’s two projects: ‘Creation of new processing facilities (for production of coal gas by underground coal gasification)’ and ‘Creation of new processing facilities (for handling and purification of the gas)’ at a cost of Rs494.45 million and Rs490.48 million, respectively. The first phase of the project, which will be launched in September, would require $105 million for opening a letter of credit for the import of machinery and equipment.
Dr Mubarakmand says the success of his project would encourage investment by leading foreign companies dealing with development of underground coal. According to him, several companies had shown interest in the project. But so far in Thar one sees only consultants, with little interest in investment with the exception of Engro which has obtained a block. There are two British consultants, Oracle Coalfields (which is preparing a feasibility report) and Cougar Energy. Another foreign company will determine the price of the coal. A Canadian company, SNC Lavelin, is to estimate the costs of the required transmission lines.
Keeping in view the extensive expenditures in the initial phase, what is still unknown and has yet to be ascertained is how far the conversion of coal to gas and then to electricity will be cheaper than other methods and even economically viable. And how we are going to raise money? Not many countries have taken this route because it takes time and substantial investment before it is commercialised on a larger scale. Many countries still opt for coal-fired plants for electricity despite opposition from environmentalists.
A new report on Southeast Asia’s future energy sources says that coal will be its choice up to 2020 or even beyond, contrary to popular opinion that natural gas will be the region’s top fuel.
A shift to coal, says Wood Mackenzie’s report, in the region’s fuel mix has already started with 35 GW of coal-fired plants being developed in Indonesia, Malaysia, Thailand, Vietnam and even on a smaller scale in Singapore. These countries are unwilling to sacrifice the development of their economies for the sake of carbon reduction. Even with added cost of improvements in ‘clean coal’ technologies, coal-fired plants remain more economical than LNG.
Another agitating question is the exact estimation of coal reserves in countries and the world. This question has been raised by a number of recent studies which suggest that available coal may be less abundant than has been assumed and that the peak of world coal production may be only years away. One study published in 2010 concluded that global energy derived from coal could peak as early as 2011.
There have been many claims about the coal reserves in Thar region, ranging from 175 billion tons to 185 billion tons and lasting for 500 years. Dr A.Q. Khan, in one of his recent articles (quoting Farrukh Saleem, a columnist and a researcher), says the actual presence of coal in Thar region is only three billion tons, and this includes low-grade lignite. Lignite is a middle state between wood and coal. Its usual content is 30 per cent coal and 15 to 20 per cent ash, and the rest is moisture. “Our history shows that we are very good at making tall, unsubstantiated claims,” he observes.
According to Richard Heinberg and David Fridley, two leading American energy experts, the overwhelming global trend, as revealed by national coal surveys over the past few decades, is for the size of countries’ estimated reserves to shrink. For example, both German and South African reserves have fallen by more than one-third between 2003 and 2008. The first British coal survey, in the 19th century, suggested that the nation had enough coal to last 900 years. The current reserves’ lifetime is only 12 years, and the British coal industry is a tiny fraction of its former size.
Writing in Countercurrents, the two experts said that the first official US coal survey, in the early 20th century, suggested that the country had enough coal for 5,000 years. That estimate shrank to about 400 years in 1974 and stands at 240 years today.
There are exceptions to this trend: estimates of reserves in Indonesia and India have grown. One way to estimate future production is to look at past production trends. This method was pioneered by geophysicist King Hubbert, who used 1950s data from the US oil industry to predict that US oil production would peak in the early 1970s. It did.
Applying Hubbert analysis to coal, Chinese academics Tao and Li forecast in 2007 that China’s production will peak and begin to decline as early as 2025. During and after the period when production peaks, resource quality will dwindle and mining costs will rise, pushing up coal prices, as is already beginning to happen with Asia-Pacific coal.
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