Global coal prices declined steadily from a high in early 1997 and began a slow recovery only in November last year.
Furthermore, new environmental legislation has affected the industry negatively, especially after the Kyoto Protocol, reports Minerals Bureau chief mineral economist: coal and hydrocarbons Xavier Prevost. South Africa’s energy economy is heavily dependent on coal, with some 145 Mt/y consumed locally, 66 Mt/y being exported, 93 Mt/y used for electricity generation, and petrochemical giant Sasol consuming 47 Mt/y.
After nuclear power, gas is reportedly one of the cleanest sources of energy.
However, notes Department of Minerals and Energy director: coal and gas Dr Tony Surridge, environmental considerations are not the main driver for the expansion of natural gas into South Africa’s energy economy.
“The major driver is development and to ensure energy security through diversity of supply,” he adds.
The discovery of large gas-fields along the west and east coasts of Southern Africa, particularly within the last ten years, could result in South Africa, along with Namibia and Mozambique, decreasing their dependence on coal and imported oil as their principal energy sources.
However, prior to the release of the Energy Policy White Paper in 1998, South Africa has never had a formal gas policy, nor downstream gas legislation. The Bill is scheduled to be tabled in Parliament before the end of the year.
Gas currently contributes about 1,2% of the primary energy supply in South Africa, but this figure is projected to increase to anything from 15% to 20% within the next 20 years, if South Africa were to experience similar developments to other parts of the world, such as Australia, indicates Southern African Development Through Electricity chief executive Tore Horvei.
According to the European Union Annual Energy Report (1999), worldwide demand for natural gas increased by about 4,5% a year on average since 1990, demonstrating continuous growth.
However, at present, South Africa’s total reliance on fossil fuels as a primary energy source reaches nearly 90%, while the rest of the world, on average, derives about 26% of its primary energy from coal, with a total reliance on fossil fuels of about 85%.
Because of its large reserves of inexpensive coal, South Africa has among the lowest costs of electricity-generation in the world, which provides a competitive advantage in global trade.
Moreover, South Africa has about 46% of the electricity-generation capacity on the continent of Africa.
Coal provides South Africa with 75% of its primary energy supply and 92% of electricity.
It is also the third-largest minerals export earner at R9,8-billion during 1999, after gold and the platinum-group metals, says Surridge.
About 58% of the coal exported goes to Europe but, from an environmental perspective, South Africa’s coal exports may be affected if Europe alters its coal-consumption patterns in order to conform to the Kyoto Protocol.
Eskom, which generates 95% of the electricity in South Africa, currently burns just over 90-million tons of coal a year.
However, South Africa’s coal reserves are somewhat limited.
The traditional coalfields in the central coal basin contain many producing mines past their prime, elaborates Prevost.
The latest reserve estimate of 1982, reviewed in 1987, gave a figure of 55,3-billion tons of recoverable coal reserves, of which 22,5-billion tons are located outside the central basin.
According to the definition used by the South African Reserve and Resource Code, coal present in the Waterberg, Springbok Flats, Limpopo, Soutpansberg and Free State coal fields cannot strictly be labelled reserves, since its extraction is not economically feasible at present. The Waterberg coalfield represents some 28%, or 15,5-billion tons, of the total reserves; however, to date, only one colliery operates on the Waterberg on the only ‘mineable’ block, consisting of 9,7-billion tons of reserves, he explains.
Strictly speaking then, South Africa’s recoverable coal reserves of anthracite and bituminous coal amounted to only 42,5-billion tons in 1982.
From 1983 to 1999, some 4,1-billion tons of coal have been extracted, leaving an on-site recoverable reserve base of about 35-billion tons, giving the South African coal deposits a maximum life of 40 to 50 years, Prevost concludes.
Until now, more than 55% of the total coal output has been produced by seven large collieries, with a yearly saleable production of more than ten-million tons.
A second group of ten medium-sized mines, with a yearly production of more than five-million tons each, pushes this production to more than 83%, with the remaining 40 collieries producing slightly less than 17% of the total South African saleable coal.
“This situation is about to change, as most of the large producers are close to the 20-year life, or beyond it,” remarks Prevost.
Local exporters have also been steadily losing ground in the European Union market to newcomers such as Colombia and Indonesia and, more recently, old producers like Poland and Russia.
This market is still important for South Africa, but there is a trend to ship more coal to the Middle and Far East (36% last year), although, at present, local producers are withholding sales to Asia to keep the average coal export spot price higher.
It is also vital to consider the technological advances made in the areas of coal-mining, beneficiation and utilisation.
In 1998, the clean gas technology (CCT) Thermie B project was initiated to introduce to South Africa methods and technology designed to remove the image that coal is a ‘dirty’ black material and the main source of environmental pollution.
CCTs are advanced technologies that enable the production, processing, conveyance and use of coal in an environmentally-compatible manner.
The introduction of new mining methods, such as those involving highwall mining, based on auger drilling, will not only improve production levels, but will also help to prevent the exposure of mining personnel to high-risk mine areas.
One company’s operations that are entirely dependent on an efficient coal-mining operation is synthetic fuel and petrochemical producer Sasol.
Its mining activities consist of six operations – the Wonderwater strip operation at Sasolburg, Free State, as well as Bosjesspruit, Brandspruit, Middelbult, Twistdraai and Syferfontein in the Secunda area, Mpumalanga. By 2004, this scenario will look slightly different.
With the underground operation of the Sigma Colliery at the Sasolburg chemical complex nearing the end of its economic life, the opportunity arose to grow the baseload required for a viable project.
By converting Sasol Chemical Industries in Sasolburg to gas, the cost of a mine will be saved and significant environmental benefits will be realised.
Gas will also be used by Sasol Synthetic Fuels, in Secunda, as a supplementary feedstock, where it will augment the growth sustained by coal.
Sasol Gas has, over 30 years, developed an extensive pipeline network throughout South Africa and has been expanding its gas sales by some 10% a year.
Covering more than 1 500 km, it delivers gas to more than 600 customers, mainly in the industrial sector, where it is used in bakeries and the manufacture of steel, ceramics, and glass, among others.
Following intense negotiations, Sasol signed three major agreements with the Mozambique government last month which, in broad terms, provide for the joint development of the Pande and Temane gasfields, and the piping of the gas to customers in Mozambique and South Africa.
Subsidiaries of Empresa Nacional de Hidrocarbonetos de Mo