Coal

38 One of the most notable events on the supply side of oil was the shale gas revolution of America. With the development of the horizontal well technology, the USA began to produce oil from shale rock. In 2012, USA recorded the highest oil and gas production of its history. While the USA was the biggest importer of oil until the shale gas revolution, it is estimated that by the end of 2016, it will be one of the oil exporter countries in the world. This development changed rules of the oil and energy game in the world and decreased the dependency of USA to the Middle East oil reserves. It is expected that by the year 2030, rock oil-gas takes the 5^th place in the total energy supply and USA, Saudi Arabian and Russia will meet the 1/3 of the world oil supply. With the current demand and consumption level, the life of oil reserves was estimated as 53 years (WEC, 2013).

The price of oil has been fluctuating since the discovery date of it. The price of oil can be used as a weapon by the producers like being in Arab-Israel war. Economic growth, political decision of OPEC, supply demand equilibrium and instability in the supplier countries can easily jump the price of it (WEC, 2013).

39 be found nearly in 100 countries and comparing with the oil and natural gas, its distribution is relatively equal in the world countries. Therefore, to decrease the dependency to the foreign resources and to sustain security of energy supply, the countries choice coal usage especially in electricity generation.

As mentioned above, it is the most abundant energy resource among the fossil based fuels in the world. It can be found nearly in all continents, but the largest reserves are located in Asia. According to the most recent study, made by Germany's Federal Institute of Earth Sciences and Natural Resources (BGR), the total coal reserves are 1.038 billion tons in the world. While the coal reserves were 634 billion tons in 1978, it increased at about 63 % since that time and reached to 1.038 billion tons (WEC, 2013: 20). Despite the fact that the coal reserves can be found almost in 100 countries, 75 % of these reserves are located in 4 countries: USA 31%, China 25 %, India 10 % and Russia 10 % (IEA, 2012: 163).

Table 5: 2003-2013 World Coal Reserves and Production Years Proven Coal Reserves

(Billion Tons)

Production (Billion Tons)

2003 984 4.92

2004 907 5.27

2005 909 5.67

2006 990 6.01

2007 935 6.33

2008 1019 6.56

2009 990 6.74

2010 997 6.84

2011 1000 7.21

2012 1004 7.61

2013 1038 7.83

Resource: World Energy Resources, WEC 2013 and BGR 2013

China and USA are the largest producers of the world. With the 2.701 (Mtce) production level, China alone supplied the 48 % of total coal production. USA produced 711 (Mtce) coal and took second place with 13 % share in the world coal supply. India, Australia, Indonesia, Russia and South Africa followed them in the production of the coal. With the 23 (Mtce) production level Turkey produced only 0.4 % of world coal supply in 2012. According to the current production and consumption level the life of the coal reserves are estimated around the 140 years (IEA, 2012).

40 Table 6: Coal Production by Type and Scenario (Mtce)

New Policies Current Policies 450 Scenario 1990 2010 2020 2035 2020 2035 2020 2035 OECD 1.533 1.406 1.403 1.259 1.516 1.689 1.203 690

Steam Coal 986 930 962 855 1.048 1.202 804 423

Coking Coal 282 278 270 289 279 321 248 226

Lignite 265 198 171 115 188 166 151 41

Non-OECD 1.668 3.718 4.428 4.767 4.794 6.200 3.895 2.649 Steam Coal 1.250 3.101 3.762 4.128 4.114 5.493 3.273 2.129

Coking Coal 290 517 554 539 565 582 528 470

Lignite 129 100 112 100 115 125 95 51

World 3.201 5.124 5.831 6.026 6.309 7.889 5.098 3.339 Steam Coal Share 70 % 79 % 81 % 83 % 82 % 85 % 80 % 76 % Coking Coal Share 18 % 16 % 14 % 14 % 13 % 11 % 15 % 21 %

Lignite Share 12 % 6 % 5 % 4 % 5 % 4 % 5 % 3 %

Resource: World Energy Outlook, IEA, 2012

Although it is production is less than China and USA, Indonesia was the biggest exporter of coal in the world and nearly 31 % of coal export belongs to this country. Australia is the second biggest country in the export quantity with share of 24 %. While China imported only 8 % of its total consumption, it became the first importer in 2012 (IEA, 2012).

Depending on the different scenario the share of coal in the global energy market is changing between the 16 % and 30 % by the year 2035. In table 7 International Energy Agency’s forecast of coal demand by region and scenario is given.

Table 7: Coal Demand by Region and Scenario (Mtce)

New Policies Current Policies 450 Scenario

1990 2010 2020 2035 2020 2035 2020 2035

OECD 1.544 1.552 1.482 1.181 1.581 1.578 1.312 649 Non-OECD 1.644 3.411 4.349 4.845 4.728 6.311 3.787 2.690 World 3.187 4.963 5.831 6.026 6.309 7.889 5.098 3.339

Non-OECD Share

52 % 69 % 75 % 80 % 75 % 80 % 74 % 81 %

Resource: World Energy Outlook, IEA, 2012

In general, the demand for coal comes from the non-OECD and Asians’ growing countries, especially from China. Today, Asian countries consume 48 % of the total coal supply.

China has very rich coal reserves and to maintain its economic development the country

41 needs cheap, domestic and reliable energy resources. Therefore, China intensively uses the coal especially in electricity production. Apart from China, the demand of developing countries is expected to grow and the share of them will reach to 80 % by the year 2035. In contrast to Asian countries, IEA does not estimate any demand increase for OECD countries. Because of the heavy working regulations and environmental concern, OECD countries preferred the natural gas and renewable energy instead of coal (IEA, 2012).

When we look at the sectorial distribution of global demand for coal, we see that 65 % of the demand for coal comes from the electricity generation. The main demand of coal comes from the electricity sector, because today nearly 41 % of global electricity is produced from the coal. Two countries, China and USA, produce 62 % of world’s coal-based electricity generation (IEA, 2012). The coal will protect its dominant position in the electricity generation in the near future.

Because of the global warming and climate changes, today the countries have been trying to obtain clean energy from coal. In this context, in addition to construction of the high efficient and low emission coal power plants, liquid fuels from coal and gasification studies are ongoing. South Africa obtains 160.000 barrel liquid fuel from coal by using the converting coal to a liquid fuel (CTL) technology. Currently, the country meets nearly 30

% of gasoline and diesel needs from liquid fuels derived from domestic coal. Liquid fuel not only protects the country from the effects of sudden price changes of crude oil but also protects the environment because dimethyl ether (DME), liquid fuels of coal, is a non-toxic and non-carcinogenic fuel and create less carbon monoxide than LPG (WEC, 2013).

Therefore, the biggest demand grow, 8.2 % per year, is estimated in this field and if a country has appropriate domestic coal supply, IEA recommends application of CTL and underground coal gasification process to that country.