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Thermal Coal Prices Are Soaring

With tight supply in key…

John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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Putin Set to Revive Russia’s Coal Industry

In a holiday somewhat overlooked in the West, on 25 August, Miners' Day, Russian Prime Minister Vladimir Putin sent to the Russian Federation’s coal industry workers and veterans a congratulatory telegram, telling them, "You belong to a particular brotherhood of people who know and value hard work, responsibility, dependability, and willingness to lend each other a helping hand. Miners have handed down these lofty moral principles and strong professional traditions from one generation to the next, earning society's genuine respect. It is not by chance that this professional holiday is celebrated not only in the coal producing regions but throughout the whole of Russia. Today, we can be confident in saying that Russia's coal sector is growing, covers our domestic needs and is building up its presence in new international markets.

Well he might - coal in the Russian Federation is one of the country’s largest sources of energy, accounting for 14.4 percent of the nation's energy consumption. Russia is one of the top producers and consumers of electric power in the world, with more than 220 million kilowatts of installed generation capacity.

And Putin has big plans for the Russian Federation’s coal industry, even though the prominence of coal power in Russia has been declining since 1990, the year before the Soviet Union imploded.

Following the collapse of the USSR Russian coal production declined precipitously, shrinking from 425 million tons in 1988 to 232 million tons in 1998. Five years later production had begun to recover and in 2003 it reached 329 million tons, although production has declined again in the past decade.

Related article: The Hidden Opportunity in Asian Coal

Despite its sizable reserves, production of coal in Russia is relatively low.

With 173 billion tons, Russia holds the world's second largest recoverable coal reserves, exceeded only by the United States, which holds roughly 263 billion tons. In 2011 Russia produced 372 million tons, less than a third of U.S. coal production and consumed roughly 262 million tons, making it the sixth-largest producer and consumer of coal in the world.

Most of the Russian Federation's coal is produced using the opencast mining method and 76 percent of the coal produced is hard coal. According to the U.S. government’s Energy Information Agency, Russia's power sector includes over 440 thermal power plants, of which roughly 77 are coal-fired, which, along with hydropower and 32 nuclear reactors in 10 nuclear power plants generate more than 800 billion kilowatt hours annually.

Since Putin came to power in 1999 the Russian Federation’s coal sector has undergone significant restructuring and now more than 80 percent of Russian domestic coal production comes from independent producers. Two years ago Russian coal production increased substantially, reaching its highest post-Soviet production level.

Why the sudden interest in the dirty fossil fuel responsible for the Industrial Revolution?

Simple – Putin’s government intends to increase coal production and build more coal-fired thermal plants to reduce domestic demand for natural gas, allowing for more natural gas exports.

Putin told journalists that despite the country’s coal production rising 17 percent in 2012, “the internal market, with its huge potential is still not developed," adding that in 2011 "we have taken the decision to stimulate domestic consumption.” In this Putin was thinking of Russia’s Far East, where he stated that coal is the most effective form of local fuel, commenting, "We need to accelerate the construction of coal-fired power generating facilities in the Far East. Transport is an integral part of Putin’s vision, who noted that coal producers needed more flexible tariffs for the transportation of their products, emphasizing, "I stress that we have to support the coal companies that invest heavily in the development of rail and port infrastructure."

Related article: Turkey’s Declining Coal Industry

Which railways?

"We have mapped out plans to increase the capacity of Trans-Siberian and the Baikal-Amur railways.”

 Both of which have spur lines that connect to China, where in 2009 coal still supplied the 70 percent of China's total energy consumption of 90 quadrillion British thermal units (Btu). While China’s reserves are the world’s third largest, China became a net coal importer in 2009 for the first time in over two decades.

No guesses for where some of that Russian coal is going to end up.

By. John C.K. Daly of Oilprice.com




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