Are we heading for Peak Coal?

Peak oil, yes; but ‘peak coal’? India’s Tata Power recently acquired 30% stakes in Indonesia’s two largest coal mines, securing 20 million tons of coal to fuel its 750 kilowatt project on India’s west coast. This is a shrewd and opportune move.

There’s a sustained and tightening squeeze on global supplies of the ‘thermal’ coal needed to power the world’s coal-fired power stations, just as Asia (except Japan ) embarks on a massive expansion of planned generating capacity based on coal, despite rising concerns about carbon pollution. The technology that needs to be deployed to separate and store the pollutants from coal burning is still at least five years away.
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So there’s no short-term fix to Asia’s coal problem, and in the longer-term, the situation could be nearer to the ‘peak’ oil scene than is generally understood. Careful and detailed independent research by two highly regarded bodies, the Energy Watch Group (EWG) and the Institute for Energy (IFE), suggest that the price and cost of high energy coal is going to catch up with the prices of oil and gas over the next 10-20 years.

Both concluded that global coal reserves are at least 60% lower than suggested 20-25 years ago. They say that the older predictions were made on the ‘basis of inadequate data’; and since then a lot of coal has been mined. China, in particular, hasn’t updated its reserve estimate for 15 years. It could be within anything of 5-15 years of ‘peak’ production, according to the EWG, putting a spanner in the country’s coal-fired economic growth. And the IFE points out countries like Poland, Germany and the UK have reduced recently their ‘estimates’ by 50%-90%.

The US is often cited as the ‘Saudi Arabia’ of coal. But it passed ‘peak’ production in 1990 and the remainder of its vast reserves are mainly in lower-quality bituminous and very low quality sub-bituminous coal and lignite. Little more than half the world’s dwindling reserves are of the best quality coal, anthracite.

At the same time, about 90% of the world’s remaining coal is in just six countries (China, USA, Australia, India, South Africa and Russia), which scarcely bodes well for a high security of supply and market ‘perfection.’

Given the geological difficulties in developing new fields and the additional infrastructure costs entailed, the world’s supply of high grade coal available at anything like today’s operating costs is extremely limited.

MoneyWeek