Russia is well known as an energy powerhouse. But it is its oil and gas industry that has more often made the headlines. There are signs, however, that Russia has woken up to the opportunities presented by the rapid growth in demand for coal in Asia. After all, as Russell Banham, Deloitte CIS Energy & Resources, points out in this month’s regional report (pp. 9 – 28), the country is sitting on top of some of the largest proven reserves of coal in the world: 157 billion t, or 19% of the world’s total. Only the US and China have more.
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More importantly, it is sitting on the doorstep of the largest coal market in the world. In a recent column, The Economist noted that: “Across Asia, from Bangladesh to the Philippines, the drive for more coal-fired power seems unstoppable. Renewable energy sources such as wind and coal generation do not offer affordable electricity on a big enough scale. Production of natural gas […] will boom but not supplant coal.”1 And this seems finally to have prompted the Russian Government to take notice.
In January, World Coal reported that Vladimir Putin, then the prime minister of Russia but who was recently re-elected as president, had announced a multi-billion dollar development programme for the industry, highlighting the need to expand exports to Asia. Banham is cautiously optimistic: “Unlike its famed historical novels, Russia’s coal industry could, against all odds, have a happy ending. The coal industry may yet emerge from the shadow of natural gas to fulfil its potential thanks to the insatiable appetite of China.”
Fine words, however, will not be enough. The Russian coal industry will need to overcome significant challenges if it is to grow as hoped – not least in terms of logistics. Domestically, coal will continue to face strong competition from low cost natural gas and this may also stunt the industry’s ability to grow, as will a growing shortage in skills – an issue affecting the mining industry globally and taken up this month by Mark Charman of Faststream Recruitment Group (pp. 58 – 61). Despite all of this, perhaps Russian coal will soon be making as much news as its brasher energy cousins.
1. “Old king coal”, The Economist (25 February – 2 March 2012), p. 58.