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SA considers regulation of coal exports

Eskom power “’
may be protected
by future regulation
of coal exports
Johannesburg, South Africa — ESI-AFRICA.COM — 18 November 2010 – The South African government is giving serious consideration to the future regulation of coal exports, in order to protect power utility Eskom from local producers who get higher prices for their coal in India and China.

Mineral resources deputy minister Godfrey Oliphant said here at a conference on clean coal resources that Eskom was suffering because low-grade coal was being sold to India and China. It was proving more profitable for the producers to export the coal than to sell it to Eskom, so the producers then sold a very poor quality product to Eskom.

In reporting this development, Fin24 pointed out that South Africa had very little high-grade coal and Eskom’s power stations had been designed for a low-grade product, but the quality of the coal it currently received was too poor.

Oliphant said that in the coming months government would look at amendments to the Mineral and Petroleum Resources Act. He was not sure whether it would be in the country’s interest to declare coal a strategic resource.

Oliphant’s remarks were clearly in response to complaints from top Eskom spokespeople in recent weeks that the utility was struggling to meet the country’s electricity requirements because of inferior quality coal being delivered to its power stations. Eskom had put the blame on the fact that exports were receiving preference.

Eskom CEO Brian Dames said recently that Eskom was losing between 500 and 1 000MW a day of generation capacity because of the exceptionally poor quality of the coal.

Oliphant said that Eskom’s building programme meant the electricity giant would require 160Mt of coal a year by 2020, compared with the current demand for 122Mt. “Would we have enough coal to meet this demand,” Oliphant wanted to know?

Export prices are many times higher than the price that Eskom pays for coal in terms of its long-term contracts. The long-term contract price currently stands at about R150/t, while export prices through the Richards Bay Coal Terminal are US$102/t (about R840 at yesterday’s rand/dollar exchange rate).