Thursday, October 15, 2015

Wait, What? "Australia's coal exports set to rise as south-east Asia demand surges"

But, wait, the U.S. had a deal with China.
From the Australian Financial Review, Oct. 13:

Australia could regain its crown as the world's largest thermal coal exporter by 2020.
South-east Asian coal demand is set to triple in the next 25 years, bucking a global trend and giving Australia's coal exporters a sorely needed boost, a new International Energy Agency report predicts.  
The forecast surge in demand for energy coal – also known as thermal coal and Australia's third-biggest export – in south-east Asia comes as China's demand is thought by some analysts to have peaked and India focuses on renewables and domestic coal production.  
The report is a rare piece of good news for Australia's struggling coal producers because the growth in domestic energy demand in south-east Asia will exceed the capacity of domestic suppliers, especially Indonesia, to expand to meet it.
As a result, the International Energy Agency predicts that Australia will surpass Indonesia as the world's largest thermal coal exporter again by 2020, regaining a position it gave up in 2006.  
The growth of coal power generation in south-east Asia comes as Australian financial institutions face global pressure to walk away from coal. Many expect a United Nations climate conference in December to bring a global agreement to reduce planet-warming carbon dioxide emissions – of which coal is the biggest source.  
Chinese group Shenhua's Watermark coal mine in north-western NSW and Indian group Adani's Carmichael mine in Queensland are awaiting federal government approval, in the face of persistent protests by farmers and green groups.  
South-east Asia's embrace of coal comes with a geopolitical twist.
As Western financial institutions such as the World Bank and European and American development banks walk away from funding coal, the IEA predicts that Chinese-led institutions such as the recently formed Asian Infrastructure Investment Bank will step into the breach to help south-east Asia meet the higher cost of low-emission coal technology. 
Paul Flynn, chief executive of Whitehaven Coal, operator of the Maules Creek mine in north-western NSW, said the IEA projections were consistent with the demand the company was seeing from countries such as Vietnam, Malaysia and the Philippines. 
Mr Flynn said analysts predicting the decline of Australian coal exports ignored the higher energy content of Australian coal, which made it more suitable for new high-efficiency coal plants, which emit up to a third less carbon dioxide than conventional power plants.  
He said 70 gigawatts of new coal-fired power stations would be opened across Asia in the next five years, requiring another 150 million to 180 million tonnes of coal a year. Even if only half of that came from Australia, it didn't have the capacity. 
"That does see the supply-demand dynamic tightening," Mr Flynn said. "You cannot deny the build-out of power stations in those countries. That is happening and they don't have the coal to service it."  
Anti-coal activists and "peak coal" advocates dismissed the IEA report, South-east Asia Energy Outlook 2015, which contradicts the economic case for divesting from coal companies on the grounds that their future demand will collapse.  
Tim Buckley, former Citigroup analyst and now director of Australasian energy finance at the Institute for Energy Economics and Financial Analysis, said the report focused on the only growing coal market and south-east Asia's demand growth couldn't offset future declines in the much larger markets of China, Japan and India. 
"I can see a scenario where w south-east Asian demand grows and I can see a scenario where Australia gains market share because we keep building new capacity," Mr Buckley said.
But he said with coal prices at decade-lows, most Australian coal miners would have "profitless prosperity and the coal price will keep falling".  
The IEA predicts energy demand in south-east Asia will jump by 80 per cent as governments seek to extend electricity to 120 million people who don't have it and cleaner cooking and heating fuels to 276 million people who rely on polluting solid fuels such as wood or dung. 
Because the region's oil production is shrinking and natural gas production is growing more slowly, the majority of the increase in demand will have to be met from the region's coal production and imports.  
The IEA forecasts that south-east Asian thermal coal production will increase from its current level by about 230 million tonnes a year, while demand will increase by about 300 million tonnes.

The IEA says the surge in coal use is "underpinned by economic factors, abundant supplies and the need for rapid electrification" to meet the demands of a rapidly growing middle class.  
It also highlights the need to accelerate the deployment of more efficient coal plant technologies to address the rise in local pollution and carbon dioxide emissions, with less-efficient, conventional plant still forecast to account for half of coal-fired capacity even as average efficiency increases by five percentage points. 
Energy from renewables – hydro, wind and solar energy – will treble, while oil and gas will lose share. 
New Resources Minister Josh Frydenberg, speaking from the Asia-Pacific Economic Co-operation energy ministers meeting in Cebu, said coal importance had been reinforced at the meeting. 
"There is a unanimous call for more investment in renewables but at the same time everyone understands the key role that fossil fuels are playing. 
"Nobody is under any illusions at these international meetings that coal is going away."