COAL

Untapped potential By SHABBIR H. KAZMI July 09 - 15, 2001 Pakistan spends billions of dollars annually to meet its primary energy requirements. Oil and POL import bill is expected to further increase due to inadequate gas supply and price of crude oil remaining high. The fact that higher crude oil price is rendering local industries uncompetitive needs no analytical elucidation. While the GoP is making efforts to make it obligatory, for the industries, to switchover from oil and gas to coal, the objective cannot be achieved without announcing a comprehensive Coal Policy and investing heavily in infrastructure development. Historically, coal has been used as a major source of energy for hundred of years. The industrial revolution and enhanced use of electricity was also due to coal. Until sixties, coal was the single largest source of primary energy. Large discoveries of oil and gas resulted in massive switchover from coal to furnace oil and gas. However, once again there is a shift back to use of coal as a major source of energy. Many developed and developing countries have already reverted back to coal. The transition is being facilitated by Clean Coal Technologies and availability of coal at competitive price. While efforts are being made to shift back to coal for power generation and cement manufacturing, use of coal in other processing industries is also on a constant increase. It is estimated that the share of coal in global electricity generation now exceeds 37 per cent. Therefore, Pakistan, having some of the largest and superior quality coal reserves of the world, must also initiate the transition. Cement industry, being energy intensive, can be the largest beneficiary of this transition. Similarly, power generation sector can also become a major user of coal and optimize cost per kwh. Theoretically, while the switchover offers many advantages, the transition should not be difficult. However, the real issue is availability of coal in large quantities at point of consumption. Production of coal has remained stagnant in Pakistan mainly due to its low demand/consumption. At present, coal is mainly consumed by the brick-kiln sector. Out of around 3 million tonnes of coal produced annually, nearly 80 per cent is consumed by kilns. Other than this, only Lakhra power plant of WAPDA is based on indigenous coal. According to sector experts production of coal can be increased to 8 million tonnes per annum with the existing resources and infrastructure. Indigenous coal The discovery of coal in Balochistan during the late 18th century led to its commercial utilization mainly by North-Western Railways during the colonial regime. During fifties coal constituted 50 per cent of total energy consumption. Up to mid sixties the major consumers of coal were railways, cement, fertilizer and power plants. The availability of furnace oil and discovery of Sui gas field became instrumental in switching over to these fuels. It is unfortunate that instead of capitalizing on usage of coal and constant improvement in coal technology, policy makers chose to encourage use of imported furnace oil. Therefore, production of coal has remained stagnant mainly due to poor demand for the commodity. At present total coal reserves of Pakistan are estimated around 185 billion tonnes. These include lately discovered huge deposits of low sulphur coal at Thar. The indigenous coal reserves vary in moisture, carbon, sulphur and ash contents. The local coal fall in the lignite and sub-bituminous categories. Coal from Lakhra and Sonda fields of Sindh has relatively higher moisture, sulphur and ash contents. As oppose to this, Thar coal having an estimated reserves of 184.6 billion tonnes is much superior in quality due to low sulphur content and higher heating value.

Coal mining Coal mining is one of the oldest industries of Pakistan. It assumed new heights in fifties when cement, fertilizer and other process industries became major users of coal. This led to an increase in production from 0.7 million tonnes/annum in 1959 to 1.4 million tonnes/annum in 1968. Until discovery of natural gas, coal was meeting 50 per cent of country's total energy requirement. The boom in construction activities in eighties provided new impetus and coal production touched 3.14 million tonnes in 1989-90. Since then annual coal production has remained stagnant between 3.2 to 3.5 million tonnes per annum. COAL PRODUCTION (000 tonnes) . Balochistan Punjab Sindh NWFP Total 1994- 1995- 1996- 1997- 1998- 199995 96 97 98 99 00 1,565 1,798 1,828 1,574 1,671 1,681 413 42 515 47 425 62 366 54 479 61 454 46 1,023 1,278 1,238 1,165 1,250 985 3,043 3,638 3,553 3,159 3,461 3,166

Though coal mining is undertaken at all the four provinces, Pakistan has not been able to exploit the real benefit of huge reserves of the commodity. One of the reasons for this is poor demand for coal. The mining sector in each province is faced with peculiar set of issues ranging from higher cost of production to lack of infrastructure. The cost of mining per tonne not only varies from province to province but also varies within each province. Main reasons being different mining methods, level of application of technology and variations in working depths of mines. Despite the fact that coal found in Balochistan is superior in quality, it is expensive due to mines being deeper and steeper. The overall mining cost can be reduced by upgrading the present technology used in coal mining. This requires heavy capital investment. The payback of this investment can be reduced by achieving higher production. Demand for coal can be increased by making its use obligatory for various industries. Another important area which needs massive investment is the infrastructure for coal transportation. At present, coal from mines is transported mostly by road. While railway lines passes through or near the coal fields, slow and outdated system coupled with limited availability of railway wagons are the key issues faced by the miners and the ultimate coal using industries. Therefore, transportation infrastructure requires urgent development to facilitate the coal mining industry to cope with increased demand for coal in future. Shift back to coal As stated earlier importance of shift back to coal needs no elucidation. The question is how quickly and efficiently coal can be utilized by the process industries. The switchover, to coal, is largely dependent on uninterrupted supply of processed quality coal. However, the situation is, 'chicken or egg first'. Miners are not willing to increase coal production unless there is a demand and processors are not willing to undertake switchover unless there is adequate supply of coal. According to sector experts, demand for coal can be increased by making its use obligatory for cement manufacturing and power generation. This has to be done according to a programme whereby cement plants are given three years and power plants are given five years to make the complete transition. This also requires incentives for the mining sector to ensure higher coal production. Both, the coal miners and the coal users, should be allowed duty free import of requisite plant and machinery to avoid front loading of the projects.

According to a report prepared by Experts Advisory Cell of Ministry of Industries and Production cement industry could be the first and the largest beneficiary of this transition. In the past, Wah, Rohri, Dandot and Daud Khel cement plants were using coal. Therefore, these units have past experience of using coal and switch back does not pose too problems. One of cement plants in Sindh, Dadabhoy Cement, is in the process of transition and experience has been satisfactory to a large extent. The utilization of indigenous coal by cement industry seems attractive simply on the basis of cost per tonne of clinker produced. To produce one tonne of clinker a cement plant uses 850,000 kcal, using any type of fuel. Since the heating value of furnace oil is almost double than that of local coal a cement plant uses 88 kgs of furnace oil whereas it will use 170 kgs of coal. According to the Report, use of coal will translate to a net saving of Rs 491 and Rs 415 per tonne of clinker for the cement plants located in the North and South respectively. At present, there are 23 cement plants with an installed capacity of 16.5 million tonnes per annum operating in the country. However, capacity utilization is around 63 per cent due to a number of factors higher cost and low offtake being the two main reasons. Cement industry is highly energy intensive and fuel cost constitute about 30 per cent of the total cost of cement manufacturing. Based on the total installed capacity, furnace oil requirement comes to 1.5 million tonnes per annum. However, based on the actual capacity utilization, furnace oil requirement is estimated at slightly less than one million tonnes per annum. If all the cement plants switcheover to coal and capacity utilization remains the same, the industry will be able to save over Rs 5 billion annually. Not only this there will be huge saving of foreign exchange currently being spent on import of furnace oil. Saying this much, it is also important to take into account two factors: 1) investment required to by the cement industry to switchover from furnace oil to coal and 2) uninterrupted supply of quality coal at cement plants. According to the Report this investment has 12 to 18 months payback period and should be a valid reason to undertake the switchover. However, the second factor is very crucial. Not only that coal production is low, the existing infrastructure is highly inadequate to ensure uninterrupted supply of processed coal to ultimate users. Cement plants can either buy coal in raw form and then process it to suit their demand or buy processed coal from a coal processing and distribution company (on the pattern of existing gas transmission and distribution companies). The first option is not economically viable. Therefore, establishment of coal processing and distribution companies seems to be a better option also offering economy of scale and cost optimization. Sindh coal The province of Sindh posses around 99 per cent of the total coal reserves of Pakistan. These are located at Lakhra, Sonda, Badin, Metting and Thar. The Lakhra field in District Dadu, covers an area of over 1,309 sq. kms. However, exploration activities are confined to an area around 500 sq. kms. The coal seams have been developed at the depth of 50 to 150 meters. Annual production from this field is estimated at about 2 million tonnes per annum. The Sonda field covers 1,822 sq. kms. and coal seams are at a depth of 16 to 240 meters. The field comprises of four blocks: 1) Sonda-Thatta Block, 2) Jherruck Block, 3) Ongar Block and 4) Indus East Block. Badin field has been discovered recently. Geological features indicate that Badin coal field may extend towards Indus East block of Sonda field. Metting is the smallest field covering only 90 sq. kms. in District Thatta.

The Thar field, one of the largest coal field in the world, is spread over an area of about 10,000 sq. kms. in District Tharparkar. Thar coal Incentives According to some sector experts, to ensure greater use of coal by various industries, the GoP should follow 'carrot and stick policy'. Cost optimization is the carrot and obligatory use is the stick. In the past, cement industry had switched over from natural gas to furnace oil, only because the government refused to supply gas to cement plants. The same policy can now be followed to switchover from furnace oil to coal. However, this time the transition is difficult. Handling and using furnace oil is much convenient than coal. Since this switchover is the need of cement industry, the willingness is there but the only apprehension is uninterrupted supply of quality coal at cement plants. Since the GoP will be the largest beneficiary of this switchover, it should provide incentives to the coal miners as well as the cement industry. To avoid front-loading of the projects, the GoP should abolish import duty on coal mining and related handling (transport and storage) equipment and requisite plant and machinery to be installed at cement plants. The Sindh government should also convince the federal government to allow establishment of at least two coal-based power plants of 500MW each at/around Karachi. This is the need of the hour because KESC has a dependable capacity of 1300MW only as against a peak demand of over 2000MW. This can be done by following a bidding process based on price per kwh and by following an amended Power Policy. Environmental impact The presence of impurities and mineral matters in coal leads to the formation of various pollutants during combustion having adverse environmental impacts when emitted into the atmosphere. The major environmental aspects that are associated with use of coal are: the formation of pollutants such as fly ash, sulphur oxides, nitrogen oxides, carbon monoxide and other mineral matters. However, the Clean Coal Technologies have been designed to enhance the thermal efficiency of coal, reduce emissions and waste and make coal environmentally acceptable. Therefore, use of coal by utilizing modern technologies does not create the havoc as it used to create in the past. According to sector experts, most of the equipment required to facilitate use of coal can be manufactured locally. As far as the existing oil-fired burners are concerned, these can be modified or the new multichannel burners can be manufactured by HMC and KSEW under licence agreement with the leading manufacturers. If HMC/KSEW acquire the engineering design, they can supply the same to entire cement industry at competitive prices. Global scenario World coal consumption, despite decline in some regions, has been on a constant increase. The countries that have witnessed increase in coal consumption include the United States, Japan and many developing countries in Asia. Coal is mostly used for power generation, steel production, cement manufacturing and other process industries. However, half of global coal production is used for power generation. Conclusion

Crude oil price is expected to remain high due to the policy followed by OPEC. Since Pakistan has no other alternative except to make use of coal obligatory by process industries, the GoP must announce a comprehensive Coal Policy immediately on the basis of report prepared by the Experts Advisory Cell. The policy should address the following points: * Duty free import of required plant and machinery * Establishment of coal processing and distribution companies * Allocation of funds for upgrading infrastructure * Allocation of special funds for exploitation of Thar coal * Establishment of coal-based power generation plants WORLD COAL CONSUMPTION * World coal consumption is projected to increase to 7.6 billion tonnes in 2020 * Coal use in developing countries of Asia alone is projected to increase by 2.4 billion tonnes * China is projected to add an estimated 180 gigawatts of new coal fired power generating capacity (600 plants of 300 megawatts each) by 2020 and India approximately 50 gigawatts (167 plants of 300 megawatts each) * The coal share as a percentage of total energy consumed worldwide for electricity generation is projected to decline from 36 per cent in 1997 to 34 per cent in 2020. Source: International Energy Book 2000 COAL BENEFICATION Coal preparation, commonly known as coal benefication, is the process of cleaning, gradation and preparation of uniform coal suitable for commercial consumption. Effective preparation of coal, prior to use, improves homogeneity of coal, reduces transport cost, improves utilization efficiency, results in less ash production and more importantly reduces emission of toxic gases. There are various technologies globally used for preparation of coal. While Pulverized Fuel technology is in use in cement industry, other technologies, though having significant application in power plants and other industries are more expensive. The various technologies is used for the preparation of coal are:* Pulverized Fuel (PF) technology In this process, coal is reduced to fine powder form, stored and then transported by air to the burner as coal air mixture for combustion. * Fluidized Bed Combustion (FBC) technology In this method coal is added to the bed of heated particles and continuous mixing encourages complete combustion at a lower temperature then pulverized fuel technology. * Coal Gasification (CG) technology In this process coal is brought into contact with steam and oxygen and thermo-chemical reactions produce fuel gas. This process is mainly used in power generation and is a costlier method of fuel preparation. * Coal-Liquid-Mixtures (CLMs) technology

These include the coal-oil-mixture and coal-water-mixture. These are costly technologies. The disadvantage of coal-oil-mixture is that 60 per cent of the total energy is derived from oil. * Coal-Briquetting (CB) technology In this process coal is compacted for use, transportation or further processing. The main purpose of briquetting is to convert low grade coal into compact mass having higher calorific value. CONSUMPTION OF VARIOUS FUELS (Per tonne of clinker) Fuel Heating Value Fuel quantity 88kg 110M3 170kg Furnace oil 9,700 kcal/kg Natural gas 7,700 kcal/M3 Local coal 5,000 kcal/kg

COST PER TONNE OF CLINKER Fuel Furnace oil Natural gas Local coal (South) Local coal (North) Fuel quantity 88kg 110M3 170kg 170kg Rate Rs 11,370/tonne Rs 490/M3 Rs 3,000/tonne Rs 3,450/tonne Cost Rs 1,001 Rs 539 Rs 510 Rs 586