TANMAY OBSERVES!

Coal - Black Diamond!

India is 3rd largest producer of Coal in the world but we are way behind first two, China produced 2466MT of coal in 2007, USA did 981MT while India produced 454MT. Among the non-OECD countries, China accounts for over 47% of world hard coal production and nearly 64% of non-OECD production. China’s production has more than doubled since 2000, which allows the country to meet fast growing demand for coal to generate electricity and steel making. India is the second largest non-OECD hard coal producer and third in the world.

If we see our energy mix -  India is well endowed with coal. However, it is poorly endowed with oil assets and has to depend on crude imports to meet a major share of its needs. Coal is the key contributor, with 51% of the country’s total commercial energy needs met by coal electricity generation, 36% by Oil and 9% by Gas (2006 figures). So Coal will continue to occupy a central place in India’s energy supply. 

Coal prices:-

Rising coal prices could hit the coffers of import-based domestic power generators soon. Spot prices for the fuel at Australia’s Newcastle port, a benchmark for Asia, have appreciated almost 10 per cent in November and rates at China’s Qinhuangdao port, a standard for the world’s largest coal consumer, have also seen a steady increase over the last two months.

Need to shift to other sources of Power:-

India produces just 9% of its electricity needs from Gas and now India having large gas reserves in KG basin, we need to make more gas available for power plants. Reliance Industries has become the largest natural gas producer in the country with its over 50 million standard cubic metres per day (mscmd) output surpassing that of state-run Oil and Natural Gas Corp’s (ONGC). When available, coal outcompetes natural gas in the power sector and industrial use. The experience in India suggests that coal use could be constrained because of lack of investment in new production capacity or the resolution of transportation bottlenecks. Such constraints on coal could lead to a much larger role for natural gas. But we don't possess right infrastructure for gas transportation. Pakistan is nearly six times ahead of India in terms of gas pipeline network as its pipeline network stands around 56,400 KM as against 10,500 KM  that of India with its current pipeline density measuring at 1044 KM/MMSCMD per day compared to 116 KM/MMSCMD (million metric standard cubic meter per day) of India, according to The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

Stocks that will be beneficial:-

GUJ NRE COKE :- Coke is a derivative of coking coal. It plays a very significant role in the metallurgical process. Coke is the main source of heat and is also the reducing agent required to facilitate the conversion of metallurgical ores into metal during the smelting process. Gujarat NRE Coke is the largest independent producer of Met Coke in India and is the only Indian company with coking coal mines in Australia having more than 500 million tons of Metallurgical Coal with excellent coking properties. The company is set to emerge as one of the largest coking coal producers in Australia over the next few years. The coal mines are owned through its subsidiaries – Gujarat NRE Minerals Limited. Besides ownership of these coal mines, the company has done cornerstone investments in resource prospecting companies that are scouting for coal, gold, iron-ore and various other base metals. The company has 87.5 MW wind power energy and has also set up mini steel mill in Gujarat to recycle steel scraps using green wind energy to manufacture TMT Bars.

NEYVELI LIGNITE:- The company plans to venture into power generation and mining industry business. NLC plans to participate in development of coal blocks allotted to state governments or coal-based power generation under public private partnership with state government undertakings, a release said. The company has also proposed to participate in competitive bidding of power for taking up ultra mega power projects (UMPPs) floated by the Power Ministry, it said.

GSPL:-GSPL, a GSPC subsidiary, has taken a lead in developing energy transportation Infrastructure in Gujarat and connecting major natural gas supply sources and demand markets. Gujarat State Petronet Limited is first company in India to transport natural gas on open access basis and is a Pure Natural Gas Transmission Company. The transmission network of the company envisages development of systematic and seamless pipeline network across Gujarat connecting various suppliers and users. The suppliers of natural gas include traders, producers and LNG terminals. The users comprise industries such as power, fertilizer, steel, chemical plants and local distribution companies. 

GAIL:- Centre is planning to build a national gas highway network criss crossing the country to transport the environment friendly fuel to regions untouched till now. GAIL having vast experience in building gas pipelines would be a large beneficiary of the project.

Myanmar-India gas pipeline on card http://indiatoday.intoday.in/site/Story/74900/India/Myanmar-India+gas+pipeline+on+card.html

India 6 Times Behind Pak In Gas Pipeline Network: ASSOCHAM  http://www.assocham.org/prels/shownews.php?id=1233

‘Indian Imports Could Swing Global Coal Prices’ http://www.businessworld.in/index.php/Interviews/Coal.html