90th Meeting of the World Organizing Committee of the World Mining Congress
On May 14, 2009 St. Petersburg State Mining Institute (technical university) hosted the 90th Meeting of the International Organizing Committee of the World Mining Congress (WMC) that was conducted with support from the Russian Organizing Committee. Over 60 people from 14 countries, took part in the 90th Meeting, including permanent members of the International and Russian National Organizing Committee of the WMC, and also representatives of the world and domestic mining industry and science. V.V. Putin, Prime Minister of the Russian Federation, congratulated the participants of the 90th Meeting and wished them success in their work.
The official part of the 90th Meeting of the WMC International Organizing Committee included presentations on the mineral resources base condition and development perspectives in Russia up to the year 2030 and on the role of coal for the Russian economy in the post-crisis period. The reports were presented by Professor V.S. Litvinenko (Rector of St. Petersburg State Mining Institute (technical university)) and Professor G.L. Krasniansky (Head of the Russian National Organizing Committee of the WMC). The report «On the condition of the world mining industry&кaquo; was presented by Mr. Weber, a representative from Austria.
The business part of the 90th Meeting included presentations prepared by J. Dubinsky, the WMC President on the activities of the World Mining Congress in the future, and also report on preparation to the 22nd World Mining Congress in Ankara presented by the Turkish National Committee.
During the meeting the participants discussed and approved the minutes of the 89th International Organizing Committee held in Krakow, and the results of the 21st World Mining Congress. The venue and time of the 91st International Organizing Committee were discussed; Ha Long Bay (Vietnam) and Teheran (Iran) were considered as the possible locations.
Mass Media Digest on the Meeting
«The Organizing Committee of the World Mining Congress held a meeting in St. Petersburg on May 14. This news was shared to StP-TASS in the oldest technical institution of higher education of Russia – in the Mining Institute. Leading representatives of the international mining industry and science took part in this forum that gathered together mining elite and outstanding politicians.
Modern mining industry faces a number of global engineering, economic, environmental and social problems. In the current situation of the world financial instability it requires mutual co-operation, engineering knowledge and professional experience sharing. These issues were in the agenda of the International Organizing Committee of the World Mining Congress in the northern capital».
St. Petersburg TASS Branch
«Unfortunately, crisis phenomena in the world financial and credit sphere interrupted the tendency of Russian coal recovery growth. Because of low demand for coal products, starting from the second half of 2008 we witnessed decrease in the volume of production at coal enterprises, and the rate of reduction in the coal industry is higher than in other industries. At the meeting the following key tendencies of activities in the post-crisis period were discussed: improvement of the financial conditions of mining companies primarily due to the increase in the coal supply volume to the domestic market for electrical energy industry needs; ensuring industry development perspectives primarily due to intensification of coal production in basic coal fields; improvement of coal products quality based on coal processing (including coal beneficiation); development of an export-oriented transport infrastructure with an adequate growth in export supplies volume with a positive dynamics of the international market environment; stabilization of coal companies consolidation processes and separate outsourcing units development».
Berg Privileges Magazine
«Russian mining industry will have to go through reformations comparable to restructuring of the 1990s. At least this condition is required for enhancement of competitive domestic coal abilities at the domestic market and also for release of additional natural gas volume to be exported. This is the opinion of G.L. Krasniansky, Chairman of the Russian Organizing Committee of the World Mining Congress and his colleagues who gathered in May in St. Petersburg in order to discuss tasks of the International Coal Forum planned for 2012, and Russian mining industry perspectives»
Power Engineering and Industry Newspaper, No. 10(126), May 2009
Article «Russian coal: problems and solutions»
«The motto of the WMC was “New perspectives and concepts of the mining sector”. Modern mining industry faces a number of global engineering, economic, environmental and social problems. In the current situation of the world financial instability it requires mutual co-operation, engineering knowledge and professional experience sharing, and also assistance to those in need. These issues were in the agenda of the 90th International Organizing Committee of the World Mining Congress».
Information Agency «Baltic Business News»
Mining statistics
The report was prepared by Professor Leopold Weber,
Doctor,
a member of the Austrian National Committee,
the federal Ministry of Industry,
Family Affairs and Youth.
«In the beginning of May 2009 the 24th volume of the World Mining Statistics was published in both hard copy and in CD format. As opposed to the previous volumes, this one will be distributed only among the members of the WMC International Organizing Committee that provided the Austrian National Committee with mineral resources production data.
The publication contains information on mining production in more than 60 countries and on over 70 mineral resources. The data is presented with breakdomn by continent depending on various groups and regions; countries are grouped in economic blocks, in terms of global regions, according to YaSA, and depending on the per capita income data and political situation provided by the World Bank. Moreover, information on production of each article is given; each country is classified in terms of production and processing level.
When publishing the 21st volume, the Austrian National Committee faced some problems as only some of the national committees had provided the requested information. We deem such a situation as a lack of interest by the majority of national committee and the secretary in this work, and that is why we would like to discuss the issue of our further cooperation.
Please note that the Federal Ministry of Economics of Austria finances publication of reports in mining statistics for the amount of 100,000 euro annually. That is why the future of reporting in world mining statistics as a publication of the International Organizing Committee of the World Mining Congress will depend on the desire to cooperate actively during their preparation on the part of national committees and the secretary».
The National Organizing Committee of the World Mining Congress members’ speeches
Prof. Sinasi Eskikaya,
a member of the Turkish Organizing Committee
«Turkey deserves the right to host the congress. The twenty-second congress will provide a rare and good opportunity to get acquainted with Turkey and to have a good time. The congress will be held in Istanbul Exhibition and Events Centre where 65 exhibitions and trades are conducted annually.
The congress will start on September 11, 2012 with a greeting.
- September 12. Official opening of the congress and exhibition. Cultural events.
- September 13. Scientific meetings and reports.
- September 14. Continuation of the congress. Scientific programs. Official dinner.
- September 15. Closing ceremony. Istanbul declaration.
Theme of the congress: mining industry innovations and problems.
Program: advanced ecologically friendly recovery processes. Advanced ground monitoring techniques. Geo information systems application. Waste management and natural environment rehabilitation. Mining processes mechanization. Deep seabed mineral resources mining. Waste conversion. Advances in research methods. In-situ coal gasification and convection. Bioengineering in mineral resources processing. Geomechanics. Blasting operations. Jointing. Health and safety. Human resources issues. Legal issues of closure of pits. Impact of the mining industry on the environment. Mine planning. Mine assessment. Financing. Transportation of mineral resources by sea. Use of fuel elements. Boron, gold, recovery and production. Mining machinery.
Alternate theme suggestions are welcomed. Also we offer a broad range of programs for connection with and exposure to cultural heritage. Trips. Entertainment».
Prof. Shayam Kishor Choudkhari
a member of the Indian Organizing Committee
«In order to implement our aims, more extensive membership and attraction of large Asian states to our works is needed. Such countries should be involved in work and discussion on a wide range of issues that they may help resolve. We should have regional units, and we might solve issues both in industry sectors, in separate industries, and in regions.
One of the most important issues is the publication of information in each state of our strategic reports. We should carry out outreach activities and publish books, as it will promote and attract of attention to our work. The Congress should publish small booklets on relevant topics, for instance on climatic changes. We may publish our own recommendations. We may carry out publishing activities».
Prof. Joseph Dubinsky
Chairman of the WMC International Organizing Committee
«The aim consists in maintaining and promoting scientific and technical co-operation in solid minerals mining and surveying, and also of natural mineral resources recovery.
We think that the key target of such congresses is conduction of large international meetings every 2–3 years under the auspices of the WMC for those who want to exchange information. Herewith we should provide high quality reports and corresponding efforts for such congresses to shape further development trends. Moreover, publication of various statistical data may also be useful, where such data are viewed as results of our activities».
Prof. Ivo Cotman
a member of the Croatian Organizing Committee
«I would like to propose some topics that we may discuss. First, let us consider the WOC membership structure. Members should represent producing companies, the scientific community and politics. In a number of countries the corresponding organizations are governmental ones, in some countries they are non-commercial ones and organize their own activities. Thus, we have a need for representation in such sectors. And second. As our congress grows, we have to form new directions. But at the same time it is necessary that all countries (both close and remote ones) are represented in one congress, under auspices of one organizing committee, so our activities are not divided into separate regions».
Dr Tomas Drnek
a member of the Austrian Organizing Committee
«We need changes. Small changes will not be sufficient. We need a revolution. We have to change; otherwise it will be the end of the International Committee».
Prof. G.L. Krasniansky
Doctor of Economics,
Chairman of the WMC Russian Organizing Committee
«All spokespersons emphasize the non-commercial character of the World Mining Congress and its national committees. It is a more than a fifty-year long tradition.
At the same time, practically all national committees and the WMC in general lack funds even for minimal organization and information activities. We are poor and have to rely on sponsor contributions. My business experience shows that we are able and should find a way out from this negative financial situation. With this end, national committees have to organize their own non-commercial units for independent mining machinery examination and economic-and-financial reliability of mining companies’ shares. Distribution of their products — results of the examination under the auspices of the WMC — may ensure financial basis for the activities of national committees and the WMC. Vendors of mining machinery and mining companies’ shares will gladly use the reliable WMC examination brand. It will ensure a wide circulation and a large volume of information publications, we may gather together for discussion of acute mining problems at least once a year or even more often if needed.
The results of such examinations will provide for extensive statistical material on the practical side of new machinery and techniques distribution, economics, finances, production organization and management in mining companies. And this is an additional source of analytic surveys, scientific research, consolidation and recommendations within the framework of the World Mining Congress».
Dr Man Dac Pjun
a member of the Vietnamese Organizing Committee
«Last year the Vietnamese Mining Association became an active member of the International Organizing Committee of the World Mining Congress; it takes active participation in the events.
As you know, Vietnam is one of the rapidly developing countries that achieved significant economic, social and political progress during the previous 20 years.
Despite the world economic crisis, growth of our economy is at the rate of 5–6%. At the same time the mining industry plays a very important role. We recover and process oil, coal, bauxites, titanium, apatite and other mineral resources. Such operations affect the environment and nature leading to a number of engineering, technological and biomechanical problems that may not be solved without scientific research, use of results of such research and engineering advancements in the world mining industry. Extensive works are carried out for new pit and mine construction feasibility assessment, solution of rational coal pit use issues, complex drifting and treatment operations mechanization, coal pits in severe mining conditions, and development of a new coal field under the Red River bottom. I may enumerate many problems that, when unsolved, would hinder normal development of the Vietnamese mining industry. In order to attract attention of the scientific community to solution of the above mentioned problems, in 2010 we plan to hold an International Conference in under the common topic “Modern progress in mining” Vietnam. We also hope to attract a lot of foreign and Vietnamese specialists.
The Conference will be held under the initiative of Vietnamese Mining Association, Vietnamese National Coal and Mineral Industry Group, State Oil Group with the assistance of the Ministry of Industry and Trade of Vietnam and the Ministry of Education and Technologies.
We plan to hold the Conference in Ha Long Bay. Within the framework of the conference there will be various technical and cultural events. We would like to propose to the WMC Organizing Committee to take a resolution on holding the 91st Meeting of the Organizing Committee in Vietnam and invite all its members to take part in the Conference that will be organized during this Meeting on September 23, 2010».
Dr Jamshid Ephtekharnejad
a member of the Iranian Organizing Committee
«We plan to organize a regional meeting of extracting countries in October 2010, and it would be quite logical to hold the 91st Meeting of the Organizing Committee in Teheran at the same time».
Press conference related to the Meting of the WMC Organizing Committee
Prof. Vladimir Stephanovich Litvinenko
Rector of St.
Petersburg State Mining Institute,
Doctor of Science in Engineering
«The current economic crisis is based on the lack of state (or social) control over financial, purely speculative issues. To put it simpler, in terms of the mining industry, businessmen made money primarily on the account of increase in prices, and not due to increase in resources recovery and processing. Nowadays, when «financial bubbles» blow out, mining companies have no guarantees of profit making. We once again witness a grievous regularity: countries recovering mineral resourcing are poorer than states that buy and process such resources. Profit from mineral resources processing is much higher than from recovery».
Prof. Georgy Leopnidovich Krasniansky
Chairman of the WMC Russian Organizing Committee,
Doctor of Economics
«In the future coal will be the «engine» of our economy. Under conditions when Russia is positioned at the international market as the world’s leader in gas energy resources supplier, we have to limit dynamic growth of internal gas consumption and to increase the volume of use of coal at domestic power plants, as the majority of countries do. On the one hand, it will ensure significant decades long currency earnings from gas export, and, on the other hand, will provide for overcoming of technological weakness of the Russian miners and power engineers in high quality coal fuel production and consumption. According to our estimates, by the year 2020 consumption of Russian coal at domestic power plants may be increased from the current 108 mln. to 160–170 mln. tons transiting to new modern, ecologically friendly coal technologies. But it will require transition to new, efficient coal burning techniques and consequently development of the power engineering industry; world wide increase in coal processing capacity and transition to coal products release with a high added value will be needed. And finally, state economic control measures will be required so that all the procedure is commercially attractive for Russian coal processors and power producers».
Prof. Joseph Dubinsky
Chairman of the WMC
«Modern mining industry faces a number of global engineering, economic, environmental and social problems. Solution of such problems during current financial instability requires mutual co-operation, engineering knowledge and professional experience sharing, and assistance to those in need.
Prof. Alexander Borisovich Kovalchuk
Director General of Institute for Coal Market Conditions,
Doctor of Science in Engineering
«Due to the crisis, control over expenditures has intensified. Company heads have to define the areas for significant decrease of expenses harmlessly for the follow-up rehabilitation. Control over expenditures is the key to success in the future».
Anatoly Ivanovich Skryl
Director General of Rosinformugol CJSC
«During the first 4 months of 2009 coal mining has decreased by 17% as compared to previous periods, and amounted to 92.3 mln. tons.».
Russian Mineral Resources Characteristics
Prepared by Professor V.S. Litvinenko
Rector of St. Petersburg Mining Institute (technical university)
Fig.1. Role of oil operators (global financial investors) in the formation of a «price bubble» at the international oil market in 2007–2008.
Taking the opportunity provided to me by the International Organizing Committee of the World Mining Congress, I would like to share my opinion as regards the processes taking place in the mining industry and its perspectives for the future. It is important to define the role of social institutions influencing economic processes, including WMC ROC. Being an expert of the European Union in power energy, I have a clear idea of the processes and projects being currently implemented. In the short-term perspective the mining industry will change due to changes in perception of the mining industry. Let me give you an easy to understand example. We all want to live in better conditions. And from year to year will consume and use more energy resources ensuring a comfortable atmosphere for ourselves. It is stable energy- and water saving and all those services that are generated from primary resources. At the same time the approach of the community to resources is ambiguous. On the one hand, we need resources, and, on the other hand, we see real objections on the part of the community to those negative impacts that the mining industry has on the technogenic and living space of the whole world. According to fundamental research, using just petrol and other types of fuel in terms of transport, in Russia we burn approximately 110–120 mln. tons of fuel and at least 12–15 mln. tons of lubricants. Nearly 30 mln. tons of harmful substances is released into the atmosphere. These are combustion and processing products including 15 mln. tons of carbon monoxide, 12 mln. tons of nitrogen oxides, and approx. 1 mln. ton of sooth, these are negative consequences. On the one hand, resources give us a better life, but, on the other hand, they have a harmful impact on the human health.
Fig.2. Incremental costs of production of liquid hydrocarbons from traditional and alternative sources
What will we face in the near future? We understand that nowadays the process of raw material market globalization has completed. Such markets are controlled by this or that vertically integrated company. Redrawing of such influence may be accompanied by military conflicts that we have already witnessed several times. At the same time, we should realize that today the energy sector has turned into a global system that allows using private experience and separate possibilities for establishment of new steady integrated companies, i.e. there is a competition not of companies, not of money, but of strategies. And the winner will be the company the strategy of which takes all crises and risks into consideration as much as possible. Companies involved in the energy sector of the future have already realized that the world does not purely consume oil, gas and coal, mineral resources in their primary state, but also needs corresponding services generated in various industries as regards all fuels. The growing role of this tendency enhances the boom in general and first of all in consumption sector. Unavailability of a community controller coordinating raw materials market activities and development has created the environment for the current crisis. The world crisis was actually generated by large speculation deals not in mining, but of financial influence tools. Consumption has grown sharply, and mining enterprises invested practically no money in additional capacities required by the market. In this context it is obvious that the tendency towards global energy sector establishment means that raw materials possession does not guarantee stable income. During crisis we made sure that extracting companies have no idea who is the end user of their products.
There is regularity in the world economy: as a rule, countries rich in mineral resources grow at a medium rate and very often have poorly developed economy. Such an economy has usually no perspectives. On the on hand, high demand for resources increases their value, but makes the gross domestic product and income of the budgets of primary producing countries very non-transparent. Lack of normal business conditions accompanies the major part of mineral resources extraction. In Russia we face this problem. On the other hand, growth of income in the extracting industries results in processing sector stagnation. For instance, recent years have demonstrated a drastic increase in prices for primary energy resources, raw materials, when raw material prices grew by 20-30% annually. Companies put all their efforts to recovery, none of them very seriously concern themselves with processing. Thus, nowadays money and control in the processing sector are quite different things; though earlier we thought that these are interrelated processes. It is obvious that the main problem of resource-depending countries consists in underdevelopment of state institution control mechanisms, i.e. processes that should ensure clear and distinct relation between the sate and business. These are the processes that are able of providing both the market control mechanism, and activity control mechanisms promoting advance technologies and staff preparation for a new break-through and adaption of new technologies to the current requirements. Countries exporting raw materials are characterized by a high gross domestic product rates. Today Russia extracts raw materials to over 400 bln. USD annually (according to the previous year statistics), and the share of the deep processing is unfortunately is less than 10%. 20% is the value of primary processing for further treatment of raw materials in other countries.
According to 2007 results, we see that Russia exports huge amounts of oil, coal and other raw materials. Hydrocarbons serve as a basis for the chemical complex. Russia is the key exporter. Let’s compare incomes. In 2007 USA generated 630 bln. USD in the chemical complex; China — 2 times less (270 bln. USD); Germany that extracts practically no hydrocarbons generates 200 bln. USD. annually. France, the country that extracts nothing at all receives 140 bln. USD. annually. Russia is as last as the 41st. These are the figures that should not just alert us, but to push us towards the idea that we have to change something urgently. Practically all the income of those states that extract raw materials originates from sales, and the primary additional cost and internal consumption products are generated at the market where primary consumption products are packaged and manufactured.
Fig.3. Long-term offer curve (accrued for 937 oil-and-gas provinces) for the traditional oil and alternative liquid hydrocarbons sources (heavy oil, bitumen sandstone, combustible shale)
The key problem nowadays consists in dependence of countries on raw resources. In this context those programs that are implemented in the countries with developed economy are as a rule efficient, and those that are tried to be implemented in countries with raw-material economy not only bring no positive impact, but generate the opposite reaction. Gradual fund generation stimulates complex processing industries development; countries having no raw resources use them for invention of high-technology devices, machines, equipment, as the share of intellectual labour resources in such countries grows from year to year, and the volume of raw materials consumed reduces. In fact, we have to state that raw materials market globalization envisages not only expansion of integration relation of the countries producing and consuming raw materials, but also expansion of integration of financial and investment resources and new technologies, revolutionary attitude towards raw materials. The biosphere state, social and economic living conditions and the advance of the civilization are very dependant on production development and organization level in the mineral and raw resources sector in first of all in consumption. In the environment where resource extraction rates grow drastically the international community is interested not only in competition of extracting technologies, but in stable growth of raw material volume. From year to year we have to and will increase the volume of raw materials consumed. Raw materials markets and relations concerning use of mineral and raw resources will take a leading position in the globalization system; mineral materials will be a strategic component. It will be a link to the competitive abilities of companies and countries.
Fig. 4. Share of idle wells in the performance stock, thousands of wells/%
Fig. 5. Average operating well flow rates, t/day
Efficiency of raw materials use in the complete processing chain starting from surveys to generation of products and direct-consumption services during globalization is determined primarily by the efficiency of use of accumulated intellectual and scientific-and-engineering potential of all the countries, availability of investment globalization and scientific-and-technical co-operation for all consumers. The other question is: what are the prognoses for coal?
Fig. 6. Model for formation of new knowledge in geomechanical processes of nature-and-engineering systems saving (based on geology and geophysics data)
Coal is a primary sphere of interests of the majority of WMC participants. Coal was, is and in the future will attain even greater significance. First, we have to clearly understand that there is no any serious alternative to hydrocarbons for the coming 10-20 years. Hydrocarbons in the form of gas and oil are limited. Coal is a most commonly spread resource that is why it is obvious that the place of coal in the international fuel balance will be unique. It is apparent that coal transportation is a complicated and costly; this is why probably pipe and hydro transportation will enjoy active development, where coal-water slurries or other formulations will have a singular value. Transport development will be connected with new technologies that are quite well-developed in China, Australia and other countries. These are performing, a new method for transportation to long distances where environmental impact is minimal. Another direction is power engineering. In our country coal burning efficiency is very low, and the closest perspective is new burning technologies using plasmatron ion sources. But the basis for energy production and supply is the technology using no steam generation, i.e. direct coal-water slurry burning like gas burning. There are already positive results of direct coal burning using special water-based mixes where water is delivered to the turbine bucket and due to direct exposure energy is generated ensuring an increase in the coal use efficiency at the rate of up to 80%.
When using coal as a fuel, furnaces and boilers are outdated equipment, the future belongs to coal synthesis, synthetic liquid fuels generation, gas generation and so on. Such projects are already implemented in three countries.
The method that provides for a possibility to find a serious field for coal application consists in synthetic fuels, special technologies for generation of economically feasible liquefied gas, special resins and a wide range of chemical components. Nowadays such a project requires investment of approximately 4 bln. USD for generation of components from 20 mln. tons of coal. In terms of prices it is comparable to the technology of natural gas liquefaction; nowadays such a plant costs approximately 3.5 bln. USD. Taking into consideration transportation of gas to consumers in difficult-to-approach regions the cost reaches 200 USD per 1000 m³ of liquid product. It is 30% more profitable than today but unfortunately there are still no large-scale projects. Some technologies exist, and one module already operates in Harbin.
WMC ROC is an organization that may change its attitude towards the processing taking place in the mining industry. The WMC has the right to take a unique place in the modern international relations system; it can help countries to expeditiously find coordinated solution to a wide range of issues in the mining sector without use of any efforts, without sophisticated diplomacy, on the integration level. The geopolitical pressure tool is hydrocarbons, coal, gas and other raw materials. The WMC is a body that works in a constant mode. In this context it is obvious that there should be systematic work among large mining congresses. Such work should be aimed towards integration, towards solution of problems, primarily not purely engineering, but engineering-and-organizational ones, that would allow generating staff potential, international scientific co-operation and integration tools, establishing global multiple access centres on the basis of unique apparatuses. The key aspect is to be normal, descent and pure lobbyists on all levels including such tools as impact on the UNO and European Union systems and other bodies that co-operate, unite and work for interstate co-operation.
The role of coal in the economy of Russia during the post-crisis period
Prepared by Professor G.L. Krasniansky, Doctor of Economics,
Chairman of the Russian Organizing Committee of the World Mining Congress
Fig. 1. History of fuel-and-power traditions in the economy of Russia
The world crisis persists. Demand for goods and services is falling. Violent fluctuations have destabilized international and internal markets. Strategic targets of the largest transnational corporations and even regions possessing vast mineral resources are revaluated. That is why discussion of problems and perspectives of the mining industry in the light of the crisis and disappointing world economy forecasts is currently the most acute. Recently the subject of the special focus of members of the Russian National Committee of the World Mining Congress has become issues related to the world crisis.
What are the key problems that this or that sector of the mining industry faces during an economic crisis?
What are the main risks affecting fuel-and-power markets of some countries and that of Russia? In the pre-crisis period the majority of world-known expert agencies thought that up to 2030 world’s demand for energy resources would grow steadily: demand for gas fuel would grow twofold, that for coal will grow 1.8 times, and demand for oil only 1.14 times.
There are fears that a sharp increase and a similar sharp fall of the world prices for oil, and then for other energy resources may drastically change the forecasts made earlier. Starting from the second half of the 1950’s, due to an objective change of power traditions, Russian coal experienced some pressure from other competitive energy resources – first oil, then gas (see fig.1).
The relative coal share in organic fuel consumption in Russia decreased from 65% in 1955 to 18% in 2008. The share of coal in fuel consumption structure of heat power plants decreased from 30.5% (2000) toо 26% (2007), and the share of gas grew from 63.6 to 72% (see fig.2).
Meanwhile, coal fuel might have had a much more important role in strategic economic potential growth. All objective preconditions existed for this. Two key stages of Russian coal industry restructuring implemented in 1994–2000 released coal companies from detrimental and non-core production creating conditions for market pricing for coal products. All private ownership advantages have been used to the full extent.
Fig.2. Fuel-and-power resources consumption structure at Russian power plants
The problem of fundamental expenditures reduction in mining was solved on the system level. It is worth mentioning that the mining industry in Russia is the only industry that went through the complicated development stage (restructuring) and emerged from it renovated, competitive, socially protected and politically stable. Coal products volumes increased incrementally; investments into mining equipment became more numerous. The advantageous gas-coal price tendency was formed; in 2005 prices for these energy resources at the internal market equalled (earlier gas was cheaper) (see fig.3).
Over the period of the previous 10 years (1999—2008) the annual coal recovery in Russia grew 1.4 times and reached 326.6 mln. tons. Fixed capital expenditures grew from 13 bln. rubles (2000) to 60 bln. rubles (2008), at the same time 74% of investments was allocated to active basic funds renovation. Labour efficiency of mining workers has been growing from 1994, and recently has increased 3.2 times. Reduction of production costs provided for restriction of growth in coal prices at the internal market. If in 2002 power-generating coal was on the average 1.2 times more expensive than gas, then in 2008 this figure changed: gas became 1.3 times more expensive than coal.
Using the advantageous international coal market conditions, Russian coal companies started a dynamic increase of coal export volumes (the volume grew to 100 mln. tons; third place after Australia and Indonesia). It provided them with a flow of currency investments for mine fund renovation and partial modernization, and also for equipping the fund with heavy-duty equipment, including machinery supplied by foreign manufacturers.
Fig.3. Dynamics of gas and coal prices and their shares
Here the fuel balance in Russia is still gas-oriented. More than a half of all demand for energy resources Russia satisfies with natural gas, and the share of gas is only 16.5%. None of the countries in the world faces such a situation (see fig.4)
Fig. 4. Structure of primary energy resources consumption in the world Source: IEA Statistics
We think that during the crisis, as paradoxical as it is, Russia obtained one more unique chance to re-orient its fuel balance towards coal. With this end Russian coal consumption at power plants should be gradually, year-to-year increased from the current 108 to 160–170 mln. tons transiting to new, modern and ecologically friendly coal technologies. It will help to release up to 40 bln. cubic meters of gas annually reducing Gazprom’s dependence on imported gas. Together with the problems in the economy of our country, crisis phenomena in the world financial-and-credit sphere interrupted a ten-year tendency of Russian coal recovery growth. Because of low demand for coal products, starting from the second half of 2008 we witnessed decrease in the volume of production at coal enterprises, and the rate of reduction in the coal industry is higher than other industries.
In the first quarter of 2009 coal production in Russian in general reduced by 19%, while oil and gas production decreased only by 1.3% and 14.7% correspondingly; energy production reduced less than by 6%.
The high inflation rate combined with the growth of bank credit rates (to 24—26%) resulted in unacceptable credit conditions and, therefore, in lack of available credit facilities even at large mining companies.
It evidences the fact that coal continues to play the role of the closing resource in the fuel balance of the country and that is why the coal industry is primarily affected by negative crisis consequences.
Indeed, the anti-recessionary measures approved at the Russian federal level will help the coal industry avoid catastrophic consequences. However, the major part will depend on the clear perception of the key problems at this or that crisis stage.
The determinative factor in the crisis overcoming period is still the factors of demand for coal products at the internal and international markets and investments allocated by coal companies for market expansion. The key coal consumption tendencies in Russia are as follows. Approximately 138 mln. tons are delivered to thermal power plants, including 30 mln. tons Ekibastuz coal supplied from Kazakhstan. Nearly 100 mln. tons of coal products are exported. Domestic metallurgical industry uses over 40 mln.tons of coal concentrate. More than 50 mln.tons of coal concentrate go in other directions including consumption by the population, agro-industrial complex and public living needs (see fig. 5).
During the crisis Russian coal companies may stabilize their financial status due to maintaining of positions attained at the international coal market. The important role will be played here by active marketing and already built capacities of export-oriented transport and port infrastructure (use of Ust-Luga port capacities and Myrmansk port expansion – to the west, completion of Vanino port construction and Vostochny port reconstruction — to the east).
As far as electrical energy industry and domestic household sector are concerned, here some reduction in coal use may take place due to decrease in use of power and thermal energy. The biggest losses are incurred by coal companies recovering coal for coking, the demand for which has reduced twofold, especially at the domestic market.
Here state control of the coal business would be appropriate, especially during a sharp fall of coal prices at the international market. The main forms of such control may be:
- provision of state guarantees for investment credits meant for replacement of fixed assets;
- withdrawal of system restrictions in coal transportation, and competitive market environment in coal transportation.
The position of coal and the coal industry in the post-crisis economy may be viewed from various points of view.
Undoubtedly, coal will maintain its position as one of the key elements of the fuel balance of the country.
The most realistic forecast as regards the short-term perspective (1–2 years) of coal would be preservation of its current share in the fuel balance with an insignificant reduction in its absolute use. During the period of 2012–2015, due to the deficit of investments for a full-scale implementation of the electrical energy industry development scheme, there will be a decrease in the coal share in the electrical energy industry and fuel balance of the country. During the period after 2015 restoration and maintenance of the coal share in the economy of the country will be possible only if competitive coal advantages as compared to natural gas are present.
The determinative factor for coal advantages in the interfuel competition with natural gas is coal products prices (see fig. 3).
According to our estimates, coal competitive abilities will provide for a coal/gas price equal to at least 1:3. In the pre-crisis period, as we had estimated, the tendency of this balance was positive. However, currently we witness higher and rather alerting rates of reduction of coal prices.
We should be clearly aware of the fact that the role of coal in the post-crisis period will significantly (or even predominantly) depend on the level of expenditures for coal production and therefore of the coal prices.
That is why the key task that the post-crisis coal industry faces today is development and implementation by coal companies of range of measures ensuring a possibility to reduce production costs. Otherwise it would be rather problematic to maintain and so much the more to increase the coal share in the economy of the country.
Thus, in our opinion, key anti-recessionary measures may be as follows:
- Continuation of the structural coal industry reorganization, but not in the form of a large-scale restructuring that was successful over the period of 1994–2000, but by means of a gradual withdrawal of outdated production capacities.
- Speeding-up of (engineering and logistics) infrastructure preparation for new coal fields development, further exploitation of which will ensure a lower coal production costs level. The question is primarily about Kuzbas (Mencherepskoye field), and Elegetskoye field in the Republic of Tuva, Elginskoye field in Yakutia, and Ural field in Khabarovsk Region.
- The post-crisis coal electrical energy industry should be characterised by an advanced development providing for a possibility of development of new, environmentally friendly coal burning technologies, a powerful impetus to power and coal engineering advance, it will free gas resources for steady and regular export supplies. It will ensure reliability of gas supply in Russia, Europe and even China (in future).
- Improvement of competitive abilities of the Russian coal industry under a cardinal rise in production and labour efficiency based on provision of coal enterprises with modern high-performance machinery and technologies complying with the international safety and environmental standards. Improvement of coal business transparency, outsourcing systems development, achievement of the maximum volume of power-generating coal beneficiation with due account to the international and internal market requirements.
- Expansion of use tendencies of coal and coal products. We have a task to involve not only the power and metallurgical potential of the mineral coal, but also its suitability for coal fuel chemistry products, carbon and composite materials manufacturing as much as possible.
- Labour safety and ecological issues should be the key components of the further sustainable development strategy.
Fig. 5. Coal consumption streams formation in Russia