OUTLOOK OF COAL DEMAND/SUPPLY AND POLICY IN INDIA 2009 APEC CLEAN FOSSIL ENERGY TECHNICAL AND POLICY SEMINAR

12TH - 14TH OCTOBER 2009 INCHEON, KOREA

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Presentation Sturcture
n Coal Sector Overview n Demand profile n Production Profile n Strategic Initiatives n Policy Challenges

Coal Sector Overview

Coal: Worlds Fastest Growing Fuel

n Coal has been the worlds fastest growing fuel and coal use is expected to grow faster than any other fuel far into the future n Steep demand growth in China and India
7 Year Change in Global Energy Consumption
CAGR

Coal

41%

5.0%

Natural Gas 2 0 - 2 0 Ca g 0 1 08 hne

23%

3.0%

Hydro

22%

2.9%

Oil

10%

1.4%

Nuclear

3%

0.4%

0%

10%

20%

30%

40%

50%

Source: International Energy Outlook 2009, BP World Energy Report 2009

Asias Most Important Fuel

n Coal remains a key source of energy in the world Provides ~29% of global primary energy needs Generates ~41% of worlds electricity n Primarily used for power generation and metallurgy n Cheapest source of energy on a heat adjusted basis n Long term secular factors to drive global growth in coal demand Growth driven by China and India ~50% of global demand Global demand driven by steel and power industries and higher cost of competing fuels Asian growth driven primarily by power generation needs n Infrastructure and regulatory constraints, access to low-cost reserves and higher cost structures impacting supply
Source: BP World Energy Report 2009 1 Mtoe= Million tonnes of oil equivalent= 1.5 metric tonnes of hard coal

Energy Consumption1 (2008)

Hydro electric 6.4% Natural Gas 24.1% Nuclear Energy 5.5%

Oil 34.8%

Coal 29.2%

World 11,295 Mtoe

Hydro electric 5.3% Natural Gas 11.0% Oil 29.7%

Nuclear Energy 3.0%

Coal 51.0%

Asia 3,982 Mtoe

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Coal Industry in India

n Total resources ~267bn tonnes: 106bn proved, 124bn indicated and 37bn inferred n 81% of production from opencast mines; 19% from underground mines n Coal present in 14 out of 28 states n [Indian coal is generally high ash, ~4500 GCV, low Sulfur] Coal Reserves in India
China Pakistan Nepal India Myanmar Bhutan

Coalfields
Sri Lanka

Types of Coal Produced in India

Tertiary Coking 0.4% Coking 12.6%

Coal Production and Imports

600.0 500.0 400.0 300.0 200.0 411.6 29.0 59.1 445.6 38.6 63.6 473.9 43.1 69.9 506.9 49.8 77.6 552.0 59.0 89.3

Non Coking 87.1%

323.5

343.4

360.9

379.5

403.7

100.0 0.0 2004-05 2005-06 Coal 2006-07 2007-08 Others Imports 2008-09

Source: Ministry of Coal, India; Coal India Management

Unparalleled Strategic Relevance

n The Indian economy expected to grow at 7.5% p.a. over the next 5 years Access to electricity a core element to achieving this growth n Energy demand growing at 7% per year Additional generation capacity of 79 GW1 by 2011-12 of which 72% coal-fired Over 50% of Indians currently do not have access to electricity n Coal contributes ~54% of commercial energy in India
Coal Consumption as % of Energy Consumption in India2
Hydro Electric 6%

Growth in GW in India
Installed Capacity (GW) 250 200 150 100 50 0 1992 1997 2002 2007 2012E 69 85
: 6% CAGR

211 132

Natural Gas 9% Oil 31%

Nuclear Energy 1%

105

Coal 53%

Total = 433.3 Mtoe

Source: External Research, Ministry of Coal, Planning Commission of India 1 Excludes Wind and Renewable Energy 2 Mtoe= Million tonnes of oil equivalent= 1.5 metric tonnes of hard coal

Indian Coal Industry in Context

Per Capita Electricity Consumption Growth in India (units per capita)
2012 2006 2004 2001 1990 1980 1970 1960 1950 35 18 84 131 238 408 58% Growth in XIth Plan 582 631
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Global Coal Production by Country

1,000
3,000 2,500 Million Tonnes 2,000 1,500 993 1,000 500 0 2002 USA Russia China India 2008 Australia 256 358 342 327 512 402 1,455 1,063 2,782

Electricity Consumption per Capita

US Australia France China Brazil India Indonesia 2,444 (2007) 2,024 (2007) 631 (2006) 504 (2007) 7,493 (2007) 10,347 (2007) 13,515 (2007) 300 250 Billion Tonnes1 200 150 100 50 0

Global Coal Reserves by Country

238

157 115 106 76 34 31 30 4 Russia China India USA Australia Ukraine Kazakhstan South Africa South Africa

Source: International Energy Outlook

Coal Reserves (as on 01.04.2009)

Estimated Coal Resources - 267.2 Bt Coking - 33.4 Bt; Non-coking - 233.8 Bt Proved Reserves 105.8 Bt or 39.6% Coking - 17.5 Bt; Non-coking coal- 88.3 Bt Remaining 161.4 Bt or 60.4% of resources to be brought in to proved category Extractable reserves of about 55 Bt may last for 50 years with projected level of production. Estimated Lignite resources - 38.93 Bt Proved Reserves - 4.82 Bt (12%)

IMPORTANCE OF COAL RESOURCES IN INDIA

In power generation coal contributes 75%. Power sector consumes 78% of total countrys coal production. Industries such as steel, cement, fertilizer, chemical, paper and a host of other industries also dependent on coal.
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Actual and Projected Coal Demand during XI Plan

Sectors

01-02 06-07 07-08 (IX Plan) (X Plan) (Actual) 250.38 29.42 17.37 15.25 4.40 37.76 351.49 309.38 47.66 17.30 19.74 17.47 55.52 463.87 333.44 33.13 40.01 19.32 20.92 60.293 467.38

08-09 (RE)

11-12 09-10 (BE) (XI Plan) 483.00 57.06 68.50 31.91 28.96 61.58 731.00

Power (Utility) Power (Captive) Steel Oven Cement Sponge Iron BRK & Others Total & Coke

378.00 397.54 38.00 44.00 25.00 18.00 52.00 57.66 20.29 25.69 44.33 58.93

555.00 604.44

Actual & Projected Coal production targets for XI Plan

Company 01-02 (IX Plan ) 28.55 25.25 33.81 42.46 37.01 64.12 47.81 0.64 279.65 30.81 327.65 327.65 06-07 (X Plan ) 30.47 24.21 41.32 52.16 43.21 88.50 80.00 01.05 360.92 37.71 430.84 430.84 07-08 Actual 24.06 25.22 44.15 59.62 43.51 93.79 88.01 1.10 379.46 40.60 36.94 457.00 08-09 Actual 28.14 25.51 43.24 63.65 44.70 101.15 96.34 1.01 403.74 44.54 44.67 492.95 09-10 (BE) 31.00 28.00 48.00 66.50 45.00 106.00 109.30 1.20 435.00 44.50 52.83 532.33 11-12 (XI Plan) 46.00 30.00 78.00 70.00 45.00 111.00 137.00 3.50 520.50 40.80 118.70 680.00 12

ECL BCCL CCL NCL WCL SECL MCL NEC CIL-Total SCCL Others Total

Emerging Demand Supply Gap in XI Plan n Actual production from domestic sources - not likely to reach the envisaged level by the terminal year of XI Plan. n Estimated demand based on existing linkages/ FSAs and LOAs - outstrips estimated supply projections. n Ggap likely to be wider than the gap projected by Working Group.

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IMPORT OF COAL
(Qty in million tonnes)

Year

Coking coal

Non-coking coal Total of coking and Non-coking coal 12.03 21.70 25.20 27.76 35.00 28.95 38.59 43.08 49.79 59.00

2004-05 2005-06 2006-07 2007-08 2008-09

16.92 16.89 17.88 22.03 24.00

Blocks allotted to New Players

Sector / End Use A. Public Sector Undertakings I II III Power Commercial Mining Iron and Steel Total (I + II+ III) B. Private Companies (a) Power (b) Iron and Steel (c) Small and Isolated (d) Cement (e) Ultra Mega Power Project (f) Coal-to-Liquid Project Sub-total Grant total 29 57.16 2 6.84 7 2 104 201 4925.67 7316.77 9.34 502.09 2607.24 3000.00 18361.11 45954.10 54 40 3 97 18676.11 7424.58 1492.30 27592.99 No of blocks Geological Reserves (MT)

Key Strategic Initiatives

Enhancing Availability of Resources Ensuring Accessibility of Resources Increasing Acceptability of Mining Practices Improving Profitability and Efficiency

Targeting: Sustainable Development Growth Profitability Efficiency

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Enhancing Availability of Resources

EXPLORATION n Drilling targets increased 5x Convert inferred and indicated category of reserves to proved category n Carrying out detailed drilling and projectisation of coal blocks allocated to captive block owners n Exploration being carried out in systematic manner to arrive at reliable estimate of coal reserves n Application of Information Technology to create geo database

COAL INVENTORY

PROJECTS

n New projects for ultimate capacity of ~325 Mty in public sector n New players to contribute ~450 Mty by 2016-17 n Process of acquiring coal resources abroad through equity stake in working or green field projects Acquired 2 virgin coal blocks in Mozambique n Global EoI floated for selection of strategic partners for overseas operations
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FOREIGN ACQUISITIONS

P
EXPLORATION

r
n Carried out in two stages: Regional and Detailed n In 2008-09, 0.272mn meters of drilling has been achieved

COAL MINING

n CIL owns 473 mines 279 UG 163 OC 31 Mixed n SCCL and TISCO are the other main players in coal mining n 201 blocks are allotted to public/private companies. n CIL operates 17 washeries ( 11 coking and 6 non coking) n CIL has taken a decision to supply beneficiated coal to all consumers, other than those located at pitheads n 19 new washeries are being taken up for construction under BOM with a total washing capacity of 105.6 Mty

BENEFICIATION

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Ensuring Accessibility of Resources

OPENCAST MINING n Computer-aided mine planning for deeper OC mines n Deploying high capacity equipment to achieve economies of scale n OITDS for efficient fleet management n State-of-the-Art mass production technology being used n Tapping large reserves below 300m depth n 7 UG Greenfield properties being developed n 18 abandoned mines with estimated reserves over 1600 MT identified for development n Mining of good quality thin seams n Recovery of good quality coal in OC mines beyond economic stripping ratio limit n Recovery and commercial utilization of CBM from deep seated seams n Underground coal gasification of deep seated seams

UNDERGROUND MINING

HIGHWALL MINING

CBM/UCG

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Increasing Sustainability of Mining Practices

SOCIAL n Liberalized R&R policy for the Project Affected People (PAP) n Supports 665 educational institutes in coalfield areas n Provides medical assistance through 85 fully-equipped hospitals and numerous dispensaries

ENVIRONMENTAL

n Setting up 19 washeries with a capacity of 105.6 Mty n Started satellite surveillance for land reclamation and restoration of OC mines n 29 OCPs secured ISO 14001 (Environmental Certification) n Planted ~70 million trees with survival rate of over 75%

Plantations and Greeneries over OB Dumps1

Left Picture: Plantation over OB Dump, MCL. Right Picture: Greeneries over OB Dump, Umrer, WCL Source: Coal India Management

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Policy Initiatives
n Policy framework (operational guidelines) for underground gasification notified. n Guidelines on allocation of blocks for coal liquefaction notified 2 blocks since allocated to two companies. n E-auction and forward e-auction of coal started. n Policy on mine closure published thrust on restoration of land and funding for the purpose. n Exploration outsourced to new/ private players. n Committee constituted to plan infrastructural support to coal mining.

Policy Challenges
n Opening up of sector removal of entry barriers : Group of Ministers constituted. n Independent Regulator draft Bill (legislation) circulated for inter-Ministerial consultation. n Competitive bidding for grant of concessions a Bill (legislation) introduced in the Parliament. n Listing of coal PSEs/ SOEs for better corporate governance and market discipline. n Land use regulation entire coal bearing area to be mapped, regulation of use for other purposes. n New statute on land acquisition, resettlement & rehab.

Thank You!
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