India's Coal Needs Fuel Overseas Push

Sunday, 31 May 2009 Faced with shortages of domestically produced coal, Indian coal producers are looking to buy stakes in overseas miners. India’s state-owned and private coal miners are looking at operations in the US, Canada, Russia, Australia, Indonesia, Kazakhstan and Mozambique. India’s electric power sector is the main consumer of coal – nearly 70 percent of the country’s electricity is generated from over 80 coal-fired thermal plants. And with the Indian government’s plans to provide electricity to all of its residents by 2012, the country will need an additional 68.5 gigawatts of baseload power generation capacity, and nearly all of that will be met with coal.  India’s demand for coal is expected to nearly double over the next two decades, rising from 390 million tons in 2002 to some 760 Mt by 2030. By that date, only China's demand for coal is expected to exceed that of India's. India’s domestic coal production has increased from nearly 300 Mt in 1997 to nearly 400 Mt in 2005. At the same time, consumption has risen from over 300 Mt in 1997 to over 430 Mt in 2005. The soaring demand has led India to import coal from abroad. From January to March, India imported some 3.7 Mt of South Africa's 15 Mt of thermal coal exports. State-run trading firm Minerals and Metals Trading Corp will import 12.5 Mt of coal this fiscal year for the country’s largest power producer, National Thermal Power Corp (NTPC). NTPC recently set up a subsidiary similar to ONGC Videsh Ltd, the overseas unit of explorer Oil and Natural Gas Corp. Ltd, to look for opportunities, primarily coal prospects, abroad. The company has announced the formation of International Coal Ventures Pvt. Ltd (ICVL) for the purpose in association with Steel Authority of India (SAIL), Coal India Ltd. (CIL), Rashtriya Ispat Nigam Ltd. and National Mineral Development Corporation (NMDC). NTPC has been looking for sometime to set up a structured approach to its overseas efforts. It is estimated that ICVL will negotiate investments to the tune of $2 billion. Coal is the prime resource that ICVL will target. NTPC has plans to augment its power generation by an additional 22 GW and achieve the target of 50 GW by 2012. NTPC’s projects include 15 GW of coal-fired generation and over 4.5 GW of natural-gas fired power. NTPC is the second state-owned firm in the power sector, after Power Grid Corp. of India Ltd to look at the option of an overseas subsidiary. The company has tried to source natural gas from Nigeria; it has been interested in power projects in Kazakhstan, as well as in America, Europe, Bangladesh Mozambique and Indonesia. Meanwhile, government-owned CIL has garnered two exploratory coal mining blocks (A1 and A2) in Mozambique. The A1 may hold 1 billion ton of coal reserves. The prospects of investment are $150-200 million and production will yield assets for 5 years. New Delhi is also negotiating deals along with NMDC. NMDC’s chairman and managing director, Rana Som, said the company received offers from coal mines in South Africa and Siera Leone. Meanwhile, Indian manufacturer JSW Steel Ltd is hoping to buy coking coal assets in Australia. The company’s vice-chairman and managing director, Sajjan Jindal, recently said that “prices of coking coal assets have come down significantly and this is the right time to expand.” JSW is also in the end stages of acquisition of a sub-Saharan African thermal coal mine, which has an estimated 200 Mt of reserves and will require up to $100 million of investment. Furthermore, JSW has obtained a mining stake in Chile to exploit magnetite iron ore deposits.  Another Indian firm, Oswal Chemicals and Fertilizers, has initiated talks with three separate Indonesian coal firms to acquire thermal coal reserves for captive and commercial use. The company has already been offered six thermal coal mines in Indonesia with reserves ranging from 25-260 Mt. The intent is to own three mines with reserves of over 100 Mt.

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