India Energy needs in perspective

The second most populous country, boasting of 17.35% of the world population amounting to 1.3 Billion people, India has embarked on a program to try and canvas for coal assets outside of India in a bid to meet its short-term energy requirements. In a more coordinated assault, the State miner has renewed efforts to acquire new coal assets across the globe in anticipation to shortfall in domestic production of thermal and coking coal.

It is predicted that local production of coal will not be able to keep pace with an exponentially rising demand from operating and planned new thermal power plants. As traditional energy barriers are broken, energy requirements are on an increase and most of the exhausted fields can’t just keep pace, The Indian government is targeting 300-million tons of domestic steel making capacity by 2030 and limited Indian coking coal resources will not be enough.

Coal India Limited (CIL) is an Indian state-controlled coal mining company headquartered in Kolkata, West Bengal, India and the largest coal-producing company in the world with a market capitalization of about US$31 Billion . The company contributes to around 82% of the coal production in India. It produced 554.14 million tonnes of raw coal in 2016-17 an increase from its earlier production of 494.24 million tonnes of coal during FY2014–15 of coal annually across the 8 states in India. The Indian Ministry in charge of power has projected coal demand of domestic thermal power plants at 651-million tons during fiscal 2019/20 with CIL assuring thermal companies of supply of at least 530-million tons during the year an increase of 9% during 2018/19 to 164.21-million tons compared with the previous financial year.

However, with depletions in reserves and drop in quality, the risk of having inadequate supply is imminent especially in energy needs of the continuously growing in India population. The State miners voluminous production has excessive amounts of ash and power plant operators have to resort to importing high quality thermal coal for blending purposes. Spreading its wings in search of the black gold, the company established Coal India Africana Limitada (CIAL) to pursue coal mining opportunities in Mozambique under International Coal Venture Private Limited (ICVPL) and has had interest coal fields in South Africa and Sierra Leone. In Mozambique, ICVL owns the Benga Coal mine sitting on more than 1.9 Billion tonne of coking and thermal coal reserves, one of the largest reserves in Africa and the world and has a mandate to supply about 10% of India’s coking steel requirements for 2019-20120 financial year. CIL has identified potential coal assets in Australia for both coking and high-grade thermal coal – the type used to make electricity for investments for shipment back to India.

Apart from government owned companies, private Indian players have also capitalized on the opportunity to supply coal products to the Indian steel industry with companies such as Jindal Africa mining coal from South Africa, Mozambique ad Botswana as well as Limestone from Madagascar for the industry in India among other markets. In Australia, to aid the government’s quest a host of private companies have also embarked on an aggressive drive to invest huge sums of capital in international coal sectors. Leading the pack in Australia is Adani in its Carmichael project which once operational will produce 10 million tonnes of thermal coal per annum and is meant to be a keystone project for the Indian company’s so-called “pit-to-plug” strategy of owning coal mines to feed its power plants in India.

The development was initially intended to represent an AU$16.5 billion investment, however, after being refused financing by over 30 financial institutions worldwide, Adani announced in 2018 that the mining operation would be downsized and self-funded to AU$2bn. At its peak capacity the mine would produce 60 million tonnes of coal a year, much of it “low quality, high ash”. In court, Adani said it expects the mine to produce 2.3 billion tonnes over 60 years. It would be the largest coal mine in Australia and one of the largest in the world. The Galilee Basin coal where the project is earmarked has a relatively high ash and low energy content for Australian coal requirements but has an average of 5800 kilocalories per kilogram, better than an average Indian energy content of 4600 kcal/kg.

Endowed Australia has attracted the attention of huge Indian coal and energy investor like CIL and Adani with is vast coal asset base Queensland and New South Wales, but the companies face a steep uphill task. CIL was heavily criticized in 2011 for operating 239 mines without environmental clearances and its high fatality rates.
CIL was recently quoted saying, “A tender is being floated for engagement of merchant banker, investment banker for assisting CIL in acquiring coal assets in Australia,” the statement added.
It remains to be seen how the Australian adventure will be for the companies considering the strict environmental legislation and steep resistance that companies like Adani have been facing regarding environmental issues in establishing operating mines.

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