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U.S. Shale Means Cheap Coal for British Economy

By Daniel J. Graeber | Thu, 03 April 2014 21:34 | 0

British Prime Minister David Cameron said Thursday his government would do what it could to help the country's largest coal producer, U.K. Coal, stay afloat. It's been struggling in part because the U.S. shale boom is causing coal companies to export more to overseas markets.

Two years ago, U.K. Coal was producing more than 30 percent of the British coal supply. It started having financial problems last year and this week said it may be forced to close two of the last three deep pit mines in the country.

Cameron told the BBC "there are things we can do" to help save the struggling coal producer.

Related Article: Is the U.K. Ready for a Shale Revolution?

U.K. Coal now provides about 8 percent of all the coal consumed in the United Kingdom. It said it's been struggling to compete against cheaper imported coal and most of that was coming from the United States, where the shale natural gas boom has forced U.S. coal producers to look overseas for new energy markets.

The U.S. Energy Information Administration said total natural gas imports last year were 8 percent less than in 2012 and at their lowest level since 1995. The shale boom in the United States means more self-reliance on domestic gas and coal producers are feeling the pressure.

While coal exports to Europe as a whole declined 8.5 percent from 2012 to 2013, EIA said U.S. coal exports to the United Kingdom increased 11.8 percent. The increase comes even though total U.S. coal production during the fourth quarter declined 4.2 percent year-on-year and U.S. coal exports fell 0.7 percent from fourth quarter 2012.

Last year, British Energy and Climate Change Secretary Ed Davey said it was "completely illogical" for major economies to keep supporting their economies with coal-fired power plants.

"It undermines global efforts to prevent dangerous climate change and stores up a future financial time bomb for those countries who would have to undo their reliance on coal-fired generation in the decades ahead, as we are having to do today," he said.

Related Article: U.S. Taking on More Saudi Oil despite Shale Glut

The British Department of Energy and Climate Change said primary energy production declined 6.7 percent year-on-year because of a fall in fossil fuel extracts. Coal output for last year was down 24 percent because of mine closures. Though Davey said it was time to move away from coal, DECC said coal accounted for 40.7 percent of the electricity supplied in 2013. The contribution of coal to the British energy mix, the department said, "remains high."

The Intergovernmental Panel on Climate Change says the coal industry is the most carbon-intensive of the fossil fuels it blames on spoiling the environment. While cleaner-burning gas is abundant, the U.S. shale boom may be creating secondary problems in the global marketplace.

By Daniel J. Graeber of Oilprice.com

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