Global coal market attracts entrepreneurs

The international coal market is in a boom at present, and there are more requests for coal exports than coal producers can allocate to export. The main South African exporting companies seem to be satisfied with this situation. With globalisation, which began some years ago, South African companies invested in coal-mining operations abroad. It is a move that makes sense, practically and economically.

These companies are no longer solely dependent on their South African production. "Now they can, for marketing reasons, choose from coal produced in three or four continents to give their customers a better service and to optimise their profits," states Department of Minerals and Energy chief mineral economist for coal and hydrocarbons Xavier Prevost.

As big coal companies become global, the only victim is South Africa's economy and the optimisation of the remaining reserves. A new group of coal-mine entrepreneurs, however, namely the economic empowerment (EE) companies, is entering the South African scene.

With the advent of the new Minerals Development Bill, which will be enacted soon, there will be a dramatic change in the country's mineral law, maintains Prevost. Present legislation states that mineral rights are in the hands of surface rights owners. However, the new law states that, as in other countries of the world, the State will have the custodianship of all minerals. With the exception of existing mines, all coal reserves not attached to an active mine or to be used for mining, will revert to the State. This will release smaller coal blocks previously owned by the large coal companies but never exploited, mainly due to their size and the heavy overheads the exploitation of these blocks create for large companies. "It is now the duty of government to oversee the activities of the new coal entrepreneurs and ensure that they will use the remaining reserves to benefit the local, and if possible, coal markets abroad," explains Prevost. However, there is a perception among some that opening a coal-mine, of any size or quality, is an easy process, which invariably makes the owner a rich person overnight. This is a flawed perception, says Prevost. Differences between coal types, ranks and qualities, the importance of markets, cost of transportation and the many other variables that make coal-mining such a complex but exciting exercise, are still not seen as important to some, he reports. That is why the presence of coal experts is needed more than ever.

Many of them, providing a range of services, are available locally.

Prevost states that the next 20 years will be critical for the South African coal industry. If South African coal reserves' potential is not fully used, the country is bound to steadily decrease its production and lose international markets to other, better prepared producers during this period, he says. The future of coal in South Africa cannot be seen in isolation any more. Coal, as a global commodity, will have an impact on coal in the local market. The new oil crisis will have an influence on coal prices. Prevost adds that the spectrum of the Kyoto Protocol and its potential threat to coal use is slowly disappearing as more countries join the ranks of those believing in clean coal, rather than gas or nuclear power as a source of energy. The perception of the European Community, a place where a few years ago the emphasis was on carbon taxes and the replacement of steam-coal by natural gas, is changing. Millions are being spent on research and development in clean-coal technologies (CCT). The International Energy Agency (IEA) Agreement on Clean Coal Science (CCS) is channelling the resources of many countries into this area of research.

In South Africa, most of the coal research is, directly or indirectly involved in CCT. With the signature of South Africa as a member of the IEA CCS agreement, the country will have access to all the agreement resources and project knowledge.

"Our scientists doing research in this area will co-operate with their colleagues abroad to benefit South Africa; the industry and the inhabitants," says Prevost.

Coal no longer needs to be a threat to the environment and, given the right technology, it will survive as the main energy source.

"South Africa's problem, however, is not finding ways to make coal usage environment-friendly, but to find enough coal resources to last beyond the year 2020," concludes Prevost.