Coal India considers tie up with Sasol for CTL project
Coal India (CIL) is looking for newer ways to invest its surplus into technological innovations. It plans to invest Rs 10,000-12,000 crore over the next three to four years in producing hydrocarbons from coal. The state-owned firm is likely to tie up with Sasol of South Africa, a leader in coal to liquid (CTL) technology.
A senior official told Business Standard the plan is to set up new-age refineries that can realise the full value of coal. To begin with, CIL plans to use around 10 million tonne (mt) of coal to make products that can be used as substitutes for petroleum. This is not the first time CIL has looked at tying up with Sasol. Ten years back, a high-level delegation from Sasol visited India to hold discussions with CIL for a project to produce synthetic fuel from coal.
The South African firm was planning to put up plants for gas-to-liquids and CTL technology. Though that proposal did not take off, Sasol entered into a partnership with Tata group. The two floated Strategic Energy Technology Systems (SETSL), a joint venture between a consortium of Tata companies and Sasol.
In 2008, the ministry of coal invited applications for allocation of coal blocks for captive use for CTL projects. An inter-ministerial group (IMG) was constituted by the Centre to examine proposals. There were 22 applicants, including SETSPL, for the blocks.
SETSPL was allocated North of Arkhapal and Srirampur coal blocks in Talcher region of Odisha in February 2009.
However, the company got prospecting licence (PL) from the government of Odisha in March 2012. This was subsequently cancelled, sealing the fate of joint venture.
On its part, CIL had entered into a memorandum of understanding (MoU) with GAIL India, the country’s largest marketer and transporter of natural gas, for setting up of a surface coal gasification project for production of synthesis gas for fertiliser production in January 2008. As part of the MoU, GAIL and CIL were to make an investment of around Rs 2,400 crore. Subsequently, an MOU was signed with Rashtriya Chemical and Fertiliser for the use of this gas. It was estimated that the project would consume around 5,000 tonnes per day of coal to produce 7.76 million standard cubic metres per day of synthesis gas (equivalent to 3,000 tonnes per day of ammonia) for production of 3,500 tonnes per day of urea.
CIL’s current proposal is aimed at branching out into newer areas that have low carbon emissions. “For making a capital investment, we have to look at technology that is sustainable and can give an economic rate of return,” said a senior CIL executive.
Coal interests oppose technologies and rules that would prevent the waste of pollution-free power
The 16th of October marks the start of heating season in northern China. Traditionally that means firing up coal boilers and pumping excess heat from big coal-fired electric plants to residences and businesses. This year, another heat source will join the mix: wind power. District heating systems across northern China are preparing to use small injections of heat from electric boilers that will be soaking up power generated from the region’s robust overnight winter winds.
Wind-to-heat demonstration projects, including installations in Hebei, Inner Mongolia, Liaoning, and Xinjiang, will offset only a little coal. But their real raison d’être is to demonstrate a strategic sink for northern China’s massive wind farms, whose output is increasingly being crowded out of the electric power market by coal-fired turbines and has nowhere else to go.
China’s selective shutdowns of wind power hit record levels last year, and the country is likely to smash those records in 2016. Curtailment of wind farms squandered 15 percent of China’s wind energy potential in 2015, and those losses surged to 21 percent during the first half of 2016, according to China’s National Energy Administration (NEA). Solar farms also face rising curtailment; 10 percent of their output went unused last year.
Experts say wind-to-heat and other technical solutions are ready to reverse China’s curtailment trend, but Beijing and regional governments have yet to implement the policy changes required to support them—policies that would significantly hurt coal-fired generators. “Curtailment has not been solved yet,” saysRanping Song, a China energy expert with the World Resources Institute (WRI), in Washington, D.C.
Leaders in Beijing have committed to cap coal consumption and promote renewable energy as a way to clean up smog-choked cities and cut carbon emissions. They have vowed to push nonfossil sources up from today’s 12 percent share of China’s energy mix to 15 percent by 2020. Song says that in order to meet those goals, China must continue installing wind and solar power at its world-leading pace and “make sure that generation from the installed capacity gets consumed.”
But here’s the rub: Construction of coal-fired power plants continues, expanding King Coal’s capacity by 7.8 percent last year. As the growth of China’s power demand slows—edging up just 0.5 percent last year—generators must jockey for access to the power grid.
The tussle is especially fierce across northern China, where the nation’s biggest wind farms butt heads with combined heat-and-power (CHP) plants, which deliver roughly two-fifths of the region’s space heating. The coal-fired CHP plants must run in the winter, just when northern winds are blowing strongest. Curtailment in Inner Mongolia—China’s leading wind power region—doubled to 18 percent in 2015 and leapt to 30 percent through June 2016.
Some relief is en route from ultrahigh-voltage transmission projects that are designed to export northern power to pollution-choked eastern cities. However, it remains to be seen how quickly demand for the power delivered by the lines will materialize, especially for the wind power, which peaks at night. The Lantau Group, a Hong Kong–based consultancy tracking China’s transmission program, concluded recently that renewables curtailment “probably will get worse before getting better.”
A more certain curtailment remedy is the electric boiler, according to Ning Zhang, a power systems expert at Beijing’s Tsinghua University. In 2015, Zhang and colleagues studied Inner Mongolia’s western grid, where the territorial government anticipates a doubling of wind power capacity in the next five years. They projected that electric boilers drawing surplus wind power would be an economic slam dunk.
Zhang determined that electric boilers drawing 6.19 gigawatts could provide 30 percent of the projected 2020 heat demand; that would offset enough coal consumption to save consumers US $5.2 billion over the boilers’ operating lives. That is a large payback on the equipment’s $1.4 billion installation cost. Additional health and productivity benefits would accrue from reductions in air pollution.
But the electric boiler projects moving forward so far are modest demonstrations: megawatt-scale projects propelled by subsidies and one-off deals between heating plants and wind generators. Such is the case for a district heating expansion that recently broke ground in Hohhot, Inner Mongolia’s capital. It will ultimately use two 25-megawatt boilers running on overnight wind power to provide a fraction of its 1,422-MW heat supply.
The hang-up to gigawatt-scale implementation, says Zhang, is inflexible power pricing and cheap coal. For most wind-heavy power grids, such as those in Texas and Denmark, markets adjust prices hourly based on supply and demand, making abundant overnight wind power available at low prices. But according to Zhang, China’s heating plants must purchase overnight wind power at a fixed retail price, making the switch from coal to wind power costly.
And China’s grid controllers add other impediments to fixing curtailment, says Zhang. Grid operators set generation and transmission schedules up to one month in advance, and they program coal power plants to operate continuously for a week or longer. This limits their ability to accommodate hourly or daily fluctuations in renewable output. Flexibility is further limited by utilization quotas that guarantee coal plants a certain number of operating hours per year.
In Beijing, China’s leaders are still talking change. A year ago, President Xi Jinping promised a “green dispatch” policy that would give renewables priority grid access. China’s NEA, meanwhile, has recently drafted several power market reforms that would, for example, eliminate the utilization quotas. There is also ongoing discussion about shifting to market-based power pricing via competitive bidding.
Real change may be years in the making, however. And meanwhile, political pressure from coal interests is assured. “There’s still turbulence in China’s transition to clean energy,” says Song at WRI. “While the journey has clearly started, it is far from a done deal.”
http://spectrum.ieee.org/energy/renewables/wind-battles-coal-for-access-to-chinas-grid
Iron ore: Supply worries cause a price wobble
Iron ore prices are down by 9.8% over a month ago and are back at levels last seen in end-July. The main input used to make steel closed last week at $55.97/tonne (62% iron content grade, delivered at Qingdao port), according toBloomberg. The sustained decline has revived fears that the price could go below $50/tonne levels.
What is causing this decline? China is the main draw for seaborne iron ore trade. A 15 September Bloomberg news report, quoting analysts, attributes the decline to fears of rising supply.
Last weekend brought news that Vale SA has got approval for a rail link at its S11D iron ore project in Brazil, due to start operations in January 2017. This project will add 90 million tonnes (mt) at full capacity, although initial constraints will limit it at 75 mt for the first few years, reported Bloomberg. However, another large new project that has started up, the Roy Hill project in Australia, will reach full capacity in early 2017, earlier than planned.
These capacity additions were known events, although the advancement of the Roy Hill ramp-up may be a surprise. Despite more supply, the uptrend in China’s steel production may explain why iron ore prices have recovered from the start of 2016, although they fell from the highs of $70/tonne. China’s steel production has remained resilient despite global calls to cut output and its own assurances to do so. In July, its output rose by 2.6% over a year ago, according to the World Steel Association, and while August data is not out, a Reuters report said it rose by 3%.
However, September also saw more pressure on China at the G-20 to participate in a global move to reduce overcapacity in steel. A recent move to ask all industrial units in Tangshan (a major steel-producing hub) to cut output has led to the expectation that China’s steel output may get hit. Similar moves have happened in the past too, with no material impact on China’s steel output.
That’s why the large miners remain confident. In a recent presentation, Vale estimates a steady increase in total iron ore availability (seaborne trade plus Chinese domestic output), from 1.61 billion tonnes in 2016 to 1.73 billion tonnes in 2018 and then tapering off to 1.74 billion tonnes in 2020. But it also expects crude steel output to increase, with China’s crude steel production improving.
Perhaps, the fall in iron ore prices is a mere blip. The new supply could also cause momentary disruptions in price trends before it stabilizes. The real fear is if China’s crude steel output sees a sustained slowdown or declines, that can hit iron ore prices hard. That may signal lower steel prices as well, as buyers will demand price cuts. Back home, that’s a situation that can harm both iron ore miners and steel producers.
Pellet makers fret over hike in Iron ore fines, falling exports
Pellet makers are grappling with hike in cost of key inputs like iron ore fines and furnace oil and falling realisations inexports to China. With most of the pellet makers operating at depleted capacities and some of them even shutting operations, the latest hike in iron ore fines in Odisha has stifled the manufacturers.
Most of the miners in Odisha have announced a price hike in the range of Rs 100-200 per tonne for high grade fines with an iron content of 62 per cent and above, and others are expected to follow suit.
The margins of pellet manufacturers are already under stress due to rise in prices of furnace oil as a fall out of hike in global crude oil prices. Falling export prices of pellets, especially the material shipped to China, have added to their woes. Increase in furnace oil prices has triggered Rs 50 per tonne hike in cost of pellet production. Price of pellets exported to China have shrunk by $6-7 a tonne.
H Shivramkrishnan, director (commercial), Essar Steel said, "There is marginal increase in prices of iron ore fines in Odisha. However, NMDC (National Mineral Development Corporation) prices continue to be higher. This increase will have impact on the cost of steel production. However, we feel the increase in prices of iron ore fines is not sustainable due to softening of iron ore prices globally."
Odisha miners have upped prices at a time when international prices have softened by 10 per cent in a month and six per cent since the beginning of September.
Essar Steel is the largest pellet producer in the country with a combined nameplate capacity of 14 million tonne per annum (mtpa).
After the revision, iron ore fines with iron ore content of 62.5 per cent are priced in the band of Rs 1100-1200 per tonne. Prices of superior grade fines with average iron content of 64 per cent, sold by NMDC, are hovering around Rs 1400 per tonne. However, benchmark prices of 62 per cent grade iron ore fines in the international market have started to plunge to the level of $55 a tonne.
"The value addition industries are already incurring heavy losses, adversely impacting the livelihood of the local people on the downstream side, and very soon the job cuts will compound the problem of gainful employment. Further, the increase in prices of raw material which has been done by merchant miners raging from Rs 100-200 per tonne will be hazardous for sponge, pellet and steel industries", said Manish Kharbanda, executive director and group head (mines & minerals) atJindal Steel & Power (JSPL).
He suggested that the Odisha government should strictly enforce an iron ore production according to the approved environment clearance limits to ensure greater supply in the market.
JSPL runs a pellet unit at Barbil (Odisha) with a rated capacity of 10 mtpa. It is one of the largest buyers of iron ore. With input costs heading north, the average cost of production of pellets would now be in the range of Rs 2900-3200 per tonne. Most of the pellet makers are in loss due to steep raw material prices. The revival in demand from China in the past two months have enabled exporters to find some ground but exports were still unprofitable especially after the recent crash in export prices.
Warm Regards
Anurag Singal
Sr. Manager-Business Development
EMIL, Aditya Birla Group
+919088026252, 033-30518415
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