Increase in Demand forIncrease in Demand for Thermal Coal in Asia and Attempts to Expand Rights
September 4, 2012p ,Hiroyuki Kato
Executive Managing Officer and COO of Energy BU IExecutive Managing Officer and COO of Energy BU IMitsui & Co., Ltd.
Copyright © Mitsui & Co., Ltd. All Rights Reserved.
Contents
1. Introduction of Mitsui & Co., Ltd.
2. Thermal Coal Demand in a Growing Asia1) Prospects for Global Primary Energy Demand
2) Advantages of Coal – Comparison with other Fossil Fuels
3) Asia’s Position in the Thermal Coal Market
4) C l D d T d i Chi d I di4) Coal Demand Trends in China and India
3. Initiatives Aimed at Achieving Steady Supplies 3. a ves ed a c ev g S eady Supp es1) Initiatives by Japanese Companies in Achieving Steady Procurement of Thermal Coal
2) Expansion in Upstream Rights Investments by Japanese, Chinese and Indian Companies
3) North and South America – Potential to Export Thermal Coal to Asia
4) Japan-Australia Oxyfuel CCS Verification Project
1Copyright © Mitsui & Co., Ltd. All Rights Reserved.
Contents1. Introduction of Mitsui & Co., Ltd.
2. Thermal Coal Demand in a Growing Asia
1) Prospects for Global Primary Energy Demand
2) Ad t f C l C i ith th F il F l2) Advantages of Coal – Comparison with other Fossil Fuels
3) Asia’s Position in the Thermal Coal Market
4) Coal Demand Trends in China and India)
3. Initiatives Aimed at Achieving Steady Supplies
1) Initiatives by Japanese Companies in Achieving Steady Procurement of Thermal Coal
2) Expansion in Upstream Rights Investments by Japanese, Chinese and Indian Companies
3) N th d S th A i P t ti l t E t Th l C l t A i3) North and South America – Potential to Export Thermal Coal to Asia
4) Japan-Australia Oxyfuel CCS Verification Project
2Copyright © Mitsui & Co., Ltd. All Rights Reserved.
Energy Segment Business Fields<Business Content>
Coal Development, production imports and trilateral trading in coal
<Business Field>
Nuclear fuel Development of uranium mines; nuclear fuel cycle
Oil and natural gas development Exploration, development and production of oil and natural gas
Oil logisticsImports, exports and trilateral trading in crude oil and petrochemical products; Japanese oil refining and Oil/LPG sales
M i d i f i i LNG b i d l fLNG
Maintenance and expansion of existing LNG business; development of new gas business
Environment and new energy
Biomass energy, emissions rights, hydrogen, CNG, NGH, etc.
3Copyright © Mitsui & Co., Ltd. All Rights Reserved.
Major Upstream Energy Rights
As of March 31, 2012
Thai/L10/43、L11/43
Poland Shale
Marcellus ShaleLibya Block113 201
Meleiha/Meleiha Deep/West Razzak
Qatar LNG
Sakhalin-ⅡEagle Ford Shale
Abu Dhabi LNG
Keta
Tangguh LNG
Gulf of Thailand
Thai/Block 10, 11, 12, 13, 10A, 11A, G4/48
113, 201
Tuna
Merangin 1
Oman Block3, 4, 9, 27/NOGJV
South Walker Creek/Poitrel
Kestrel
Moranbah North
Equatorial Guinea LNG
Oman LNG
Kupe▲ Coal
Dawson/Surat BasinMeridian CBM
TuiVietnam/Block B
, , , , , ,
Mozambique Area1 Enfield/Vincent/Laverda
German Creek/Lake Lindsay
Thai/Block G4/43Thai/Block 8/32&9A
Cambodia Block A
NWS LNG
Wanaea/Cossack
■ Natural gas/ LNG◆ Crude oil
Yemen Block 7West Papuwa 1&3
Casino/Henry/Netherby
Drayton
Bengalla
TuiVietnam/Block52/97
Thai/Block 14A, 15A, 16A
Thai/Block B12/27
4Copyright © Mitsui & Co., Ltd. All Rights Reserved.
Contents1. Introduction of Mitsui & Co., Ltd.
2. Thermal Coal Demand in a Growing Asia
1) Prospects for Global Primary Energy Demand
2) Ad t f C l C i ith th F il F l2) Advantages of Coal – Comparison with other Fossil Fuels
3) Asia’s Position in the Thermal Coal Market
4) Coal Demand Trends in China and India)
3. Initiatives Aimed at Achieving Steady Supplies
1) Initiatives by Japanese Companies in Achieving Steady Procurement of Thermal Coal
2) Expansion in Upstream Rights Investments by Japanese, Chinese and Indian Companies
3) N th d S th A i P t ti l t E t Th l C l t A i3) North and South America – Potential to Export Thermal Coal to Asia
4) Japan-Australia Oxyfuel CCS Verification Project
5Copyright © Mitsui & Co., Ltd. All Rights Reserved.
Prospects for Global Primary Energy DemandProspects for Global Primary Energy
Demand (by energy source)(Mtce)(Mtoe)
Prospects for Coal Demand by Country or Region
Coal
Oil
OECD
Gas Other
Russia
Europe
Other sustainable
Nuclear
BiomassOther Asia
India
Hydro-powerChina
Primary energy demand, including that for a coal, is expected to continue increasing up to and beyond 2035.
Th i d b i l l l i i d d f Chi d I di d l ill i b j f il f l
Source: IEA World Energy Outlook2011
6Copyright © Mitsui & Co., Ltd. All Rights Reserved.
There is expected to be a particularly large increase in demand from China and India, and coal will continue to be a major fossil fuel.
Advantages of Coal
Confirmed Recoverable Global Reserves (2008) 860.938 Billion MT
Europe147 0 billion
United States
237.73 billion MT
(27.6%)Russia157.0 billion MT(18.2%)Coal
(Unit: USD/ coal ton)
Cost Comparison by Fossil Fuel Type(converted into coal calories)
Recoverable Reserves by Coal Region and Fossil Fuels Reserve Life
Other North
6.6 billion MT (0.8%)
147.0 billion MT
(17.1%)
Canada
India60.6 billion
MT(7.0%)
( )
China114.5 billion MT(13.3%)
Japan0.35 billion MT
Oil
LNG
Crude oil
LNG
8.8 billion MT (1.0%)
Other North and South Americas
(0.8%)
Other Africa
1.5 billion MT
(0.2%)
(7.0%)Middle East
1.2 billion MT(0.1%)
13.9 billion MT (1.6%)
South Africa30 2 billi MT
Australia76.4 billion MT (8.9%)
MT(0.04%)
Other Asia/ Oceania
Indonesia5.5 billion MT
(0.6%)
LNG
4 times Fossil Fuel Reserve LifeCoal Oil Natural Gas*
112 yrs 54 yrs 63 yrs
* Europe include former Soviet Union countries excluding Russia
30.2 billion MT(3.5%)
Source: World Energy Council (WEC 2010): Figures as of end 2008
Coal 100 Coal 100Coal 100
Environmental Impact by Fossil FuelsCoalSource: World Energy Council 2010, BP Statistics 2012
3 times112 yrs 54 yrs 63 yrs
(*) More than 160 yrs including unconventional gas
Oil 80
Oil 70 Oil 70
Natural Gas 60 Natural Gas
40Natural Gas
0Source: BP Energy Outlook2030, JOGMEC
Carbon dioxide (CO2) Sulfur oxide (SOx)Nitrogen oxide (NOx) Coal is cheaper than other fossil fuels.
Coal has a longer reserve life than other sources and is more evenly distributed across different regions than oil
and gas.
Source: IEA Natural Gas Prospects to 2010 (1986)
7Copyright © Mitsui & Co., Ltd. All Rights Reserved.
However, coal has a greater environment impact in areas such as CO2 emissions.
Asia’s Position in the Thermal Coal Market
(Unit: million MT))Thermal Coal Import Volume Trends (results and forecast)
905 920859
905
750
596
43068%
50%
(Source: AME strategic market study, 2011 Q4)
There is expected to be a steady increase in the global volume of Thermal Coal imports (marine trade volume) to 2025.
The main cause of the increase will be an increase in demand from the Asia region, particularly China and India.
India in particular has the potential to become the world’s largest Thermal Coal importer by 2025.
There is the possibility of Japanese companies encountering difficulties in securing import volumes as a result of demands by new customers emerging in the growing Asian market
8Copyright © Mitsui & Co., Ltd. All Rights Reserved.
by new customers emerging in the growing Asian market.
Thermal Coal Demand Trends in China
Demand for power generation fuel (“coal conversion” million MT)
Coal import volume(million MT)
Demand for power generation fuel by power source and coal import volume trend
Power generation capacity (GW)
Power generation capacity by power source - forecast
(“coal conversion” million MT) (million MT)Power generation capacity (GW)
Along with an increase in coal-fired thermal power generation, by 2025 the consumption of coal is set to increase by 600 million MTagainst 2009 demands.
(Source: IEA World Energy Outlook2011) (Source: IEA World Energy Outlook2011, AME strategic market study, 2011 Q4)
against 2009 demands.
The Chinese government plans to gradually increase production from 350 million MT through efficiency measures, such as mergers between small-scale coal mines.
If domestic prices overtake international prices this will encourage a trend towards increased imports in the coastal regions.
9Copyright © Mitsui & Co., Ltd. All Rights Reserved.
If domestic prices overtake international prices this will encourage a trend towards increased imports in the coastal regions.
However, there is a possibility that growth in import volumes will be restricted by improvements in the domestic rail network.
Thermal Coal Demand Trends in India
Demand for power generation fuel (“coal conversion” million MT)
Coal import volume(million MT)
Demand for power generation fuel by power source and coal import volume trend
Power generation capacity (GW)
Power generation capacity by power source -forecast
Along with an increase in coal fired thermal power generation by 2025 the consumption of coal is set to increase by 200 million MT
(Source: IEA World Energy Outlook2011, AME strategic market study, 2011 Q4)(Source: IEA World Energy Outlook2011)
Along with an increase in coal-fired thermal power generation, by 2025 the consumption of coal is set to increase by 200 million MT against 2009 demands.
The Indian government is promoting plans to build large-scale coal-fired thermal power plants (Ultra Mega Power Project).
There is expected to be an increase in production of domestic coal in response to the increased demand, but difficulties in covering th ti i i d d t d i th d l i l d i iti d i i t l th i ti d th
10Copyright © Mitsui & Co., Ltd. All Rights Reserved.
the entire increase in demand are expected given the delay in land acquisitions and in environmental authorizations, and the insufficient logistic capacity in India.
Contents1. Introduction of Mitsui & Co., Ltd.
2. Thermal Coal Demand in a Growing Asia
1) Prospects for Global Primary Energy Demand
2) Ad t f C l C i ith th F il F l2) Advantages of Coal – Comparison with other Fossil Fuels
3) Asia’s Position in the Thermal Coal Market
4) Coal Demand Trends in China and India)
3. Initiatives Aimed at Achieving Steady Supplies
1) Initiatives by Japanese Companies in Achieving Steady Procurement of Thermal Coal
2) Expansion in Upstream Rights Investments by Japanese, Chinese and Indian Companies
3) N th d S th A i P t ti l t E t Th l C l t A i3) North and South America – Potential to Export Thermal Coal to Asia
4) Japan-Australia Oxyfuel CCS Verification Project
11Copyright © Mitsui & Co., Ltd. All Rights Reserved.
Initiatives by Japanese Companies in Achieving Steady Procurement of Thermal Coal
Mine Development and Investment
- Increase in investment ratios
- Build and strengthen relations with newly emerging countries and newly-emerging suppliers
- Use of coal technicians and a proactive contribution to decision-ki
E i l
makingActively secure steady supply sources
Logistics Environmental Technology
- Develop new supply sources - Reduce environmental impact by controlling CO2 emissions, etc.
- Strengthen logistics and finance functions
Develop trading company functions to answer needs
,
- Increase and diversify usable brandsDevelop a coal-use environment that meets the needs of the times
Use “three-in-one” management system initiatives to secure coal resources and achieve a steady supply
12Copyright © Mitsui & Co., Ltd. All Rights Reserved.
and achieve a steady supply
Expansion in Upstream Rights Investments by Japanese, Chinese and Indian Companies
Number of upstream investment projects in the last 10 years
Amount of upstream investment in the last 10 years
(USD 100 million)
2008 20122008 2012
Japan2003-2007
2008-2012
IndiaChinaJapan2003-2007
2008-2012
IndiaChina
Investment in resources in China and India has become increasingly active since 2008, when there was a major rise in the coal price.
The amount spent on investment by China and India over the 5-year period from 2008-2012 is approximately USD 10 billion per country.
Despite the number of investment projects undertaken by Japan (17) over the past 5 years being approximately the Chi d I di th i t t t i l h lf W th t Chi d I di h b i
13Copyright © Mitsui & Co., Ltd. All Rights Reserved.
same as China and India, the investment amount is only half. We can see that China and India have been carrying out large-scale investments.
Upstream Rights Investments by Japanese, Chinese and Indian Companies
Japan
China
India
Securing supply sources in preparation for an increase in demand from Asia Diversification of projects invested in
14Copyright © Mitsui & Co., Ltd. All Rights Reserved.
North and South America - Potential to Export Thermal Coal to Asiap
1. Development of Shale Gas in United States
There has been an increasing shift to gas as a source of power generation as a result of falling domestic gas pricesdomestic gas prices.
The closure of coal-fired thermal power stations has been promoted along with stronger domestic emission controls in CO2, mercury, etc.
At the same time, issues still need to be resolved concerning exports of United States coal to Asia.
Moreover, there have been moves towards strengthening export controls on energy resources including coal from the perspective of securing domestic energy resources and implementingincluding coal from the perspective of securing domestic energy resources and implementing stronger environmental controls.
2. Expansion in Panama Canalk #3 i d l d i j C l i l d f 2014
New Gate #3 (Pacific Ocean side) Lock #3 construction and canal deepening project. Completion planned for 2014.
Allowable ship size to expand from Panamax to Post-Panamax((>100,000 dwt)
New Gate #3
Current gates #1 & #2(above photograph)
However, after the expansion plan an increase in canal passage charges is planned, and there is a need for prices to be set at a level that makes an expansion in exports competitive.
15Copyright © Mitsui & Co., Ltd. All Rights Reserved.
New Gate #3 (under construction)
Japan-Australia Oxyfuel CCS Verification Project(Callide-A CCS)
Flagship Project* – a joint Japan-Australia project at an Australian coal-fired thermal power plant as the world’s first project to verify oxyfuel operation and the collection and underground storage of emitted CO2
(*) Participants: Mitsui & Co., Ltd., J-POWER, IHI, CS Energy, Xstrata, Sohlumberger Australian Coal Association
By introducing this technology, it will become possible to restrict atmospheric emissions of CO2 (a major problem with existing coal-fired power plants) almost to zero thereby making clean power generationproblem with existing coal fired power plants) almost to zero, thereby making clean power generation possible.
- In 2008, work was launched to replace a suspended boiler
at CS Energy’s Callide-A coal-fired power plant in Queensland
(located approximately 200km northwest of Brisbane)
with an IHI oxyfuel boiler.
- In March 2012, the world’s first oxyfuel operation was launched.
16Copyright © Mitsui & Co., Ltd. All Rights Reserved.
Thank you for your kind attention!
17Copyright © Mitsui & Co., Ltd. All Rights Reserved.