China and India’s role in international coal trade is far reaching, with increasing demand for imported coal (both thermal and metallurgical) to supplement domestic production. Increasingly, these countries are looking to the seaborne market for coal. Consequently, they are making large overseas investments in mining interests to secure long-term supplies of fuel from countries, such as Mozambique. This report examines the use and production prospects for coal in Mozambique, Botswana, Zambia, Zimbabwe and Namibia.
These countries’ economies are small with a high dependence on agriculture and mining commodities for income. Two of the five countries have large coal reserves with potential for export. Botswana has reserves of 40 billion t and Mozambique has 16 – 22 billion t. There is uncertainty about the reserves in Zimbabwe, which are in the range 2 – 26 billion t. Namibia has little proven reserves and Zambia some 0.1 billion t. The actual coal production of all five countries is less than 4 million tpa, yet the potential is considerable. In the five countries, only two operate coal-fired power plants of significant size, amounting to a modest 1.2 GWe, the Morupule plant in Botswana and the Hwange in Zimbabwe. However, Zimbabwe operates several small units as standby plants. Interestingly, the preferred power option in the region is coal. A key driver in several of the countries will be a growth in coal demand from power generation. The demand is being spearheaded by mining companies that need power for their mining facilities. There are 15.7 GWe of new power plants being considered in the region, including 4.5 GWe of hydroelectric plants and 10.6 GWe of projects on the drawing board fuelled by coal. This could lead to a demand of more than 20 million t carbon equivalent/year of coal.
As well as building new coal-fired power plants, there is huge potential for developing a coal export industry. The two countries with the most potential are Mozambique and Botswana; however, they will first have to resolve several issues that are casting doubt on these aspirations. A key issue is lack of transport infrastructure, especially for Botswana, which is landlocked with access to port facilities via neighbouring Mozambique and Namibia. Mozambique has seen several successful small trial shipments of export coal by rail from its coalfields. Mozambique also offers the most direct route from the landlocked countries of Botswana, Zambia, and Zimbabwe. However, investment in the transport infrastructure to increase capacity is needed to ensure a meaningful export business. The Mozambique Government expects coal exports to exceed 56 million tpa by 2020, but currently the only railway line is limited to around 5 million tpa. South Africa and Namibia also offer potential alternatives with suitable investment in track and rolling stock.
Elsewhere, progress for the development of the coal industry is likely to be slow, especially in countries like Zimbabwe. A major obstacle to overseas investment is the 2007 Indigenisation Bill that mandates 51% indigenous ownership of businesses, such as coal mines. Zambia has little in the way of coal reserves, although the construction of a 300 MWe circulating fluidised bed combustion plant is an interesting development and is planned to be commissioned by the end of 2014. Namibia – with its small population and potential large gas resources – is likely to focus on developing its gas resources, but could offer an export terminal for the Atlantic coast, provided the Atlantic market still provides the demand.
Initial plans and developments in infrastructure, mine expansion and coal-fired power projects will need to prove successful for continuing foreign investment. Investment is being encouraged in all the countries covered with the exception of Zimbabwe. In particular, Mozambique has a favourable tax structure for foreign companies. Long-term aspirations to increase coal production and export capacity in Mozambique could lead to a 90 million tpa industry, much of which could go through its three main coal ports. The potential is attractive to foreign investors and has resulted in an economic boom for the coal mining sector. Botswana could see exports reach a similar level of investment if commitment from the government is secured. With that said, the financial write down by Rio Tinto of some of its mining assets in Mozambique highlights the high risk in developing the coal sector in this region.
All five countries suffer from electricity shortages and rely on power imports from neighbouring countries. The South African Power Pool (SAPP) is a regional body that was formed in 1995 through a SADC (South African development community) treaty to optimise the use of available energy resources in the region and support one another during emergencies. The SAPP pool enables power surpluses to flow into other grids when necessary. In response to power shortages, all of the countries in this report are examining options to build coal-fired power plants. If investor uncertainty stalls coal and power projects, the region’s ability to meet electricity demand could be put in jeopardy.
Investing in countries in Southern Africa carries some risks, particularly legal and regulatory. Pricing and market interventions, through capped tariffs, encourage subsidies and result in a high cost for electricity. Raising funds for expansion, maintenance and improvements of the existing system could be challenging. Social tensions have risen in some of the countries covered in this report – particularly in Zambia, where there has been conflict between overseas mining firms and local workers. South Africa has a population equivalent to the combined population of the five countries in this report.
The average per capita electricity consumption of the countries covered in this report is 1031 kWh/cap, significantly more than Mozambique, which has the lowest consumption at 444 kWh/person and a population of around 23 million. Power demand from the residential sector will be better served through the process of electrification of more communities. Development agencies will continue to propose an increased use of renewable energy rather than fossil fuels. However, evidence indicates that coal-fired power is perceived as more cost effective and reliable, which are two criteria important to the fledgling economies in Southern Africa. Coal investment prospects are therefore essential for the population. To achieve better environmental performance from coal-fired power, several countries are investigating the use of novel coal technologies that offer low cost emission reduction and better utilisation of low grade coals, by-products from coal preparation plants. Botswana, Zambia, and Namibia are turning to fluidised bed technology, along with air-cooled condensers to cope with water shortages. There is also some preliminary exploration for coalbed methane and underground coal gasification.
Carbon capture and storage is not high on the energy agenda in any of the countries examined. Given the goals of ensuring energy for all and reducing poverty it is unlikely that CCS will be developed in the foreseeable future.
The key drivers for coal production in this region are the continuing demand for coal in the Asia-Pacific region and from the populations of each country. Development of an efficient transport infrastructure for coal will determine the future for coal in all the countries. The building of reliable coal power technologies will massively reduce the current risk of blackouts in much of the region, as well as prove economically beneficial.
The full report ‘Coal prospects in Botswana, Mozambique, Zambia, Zimbabwe and Namibia’ by Paul Baruya and John Kessels, is available from the IEA CCC website.
Adapted to World Coal house style by Sam Dodson
Read the article online at: https://www.worldcoal.com/cbm/07012014/coal_prospects_in_southern_africa_383/