Coal? Sold! to the Developing World

The energy source of choice in the developing world remains coal. And, as I have argued, unless the developed world undertakes energy transition now, it too will be forced back into coal as the decade progresses.  Today comes an intriguing story from Bloomberg, that the massive and iconic Richard’s Bay Coal Terminal in South Africa may have, for the first time, shipped more coal to India than Europe:

Exports to India from Richards Bay Coal Terminal in South Africa may have exceeded shipments to Europe for the first time in 2009, Raymond Chirwa, the terminal’s chief executive officer, said in an interview today. Exports to the two destinations for the first ten months of the year were similar, he said, adding that the terminal is now calculating shipments by destination for the last two months of 2009.

It’s worth taking a look at the countries that are the top consumers of coal, which I call the Coal 7: China, USA, India, Japan, Russia, South Africa, and Germany. I like to use the BP Statistical Review for global energy data which helpfully translates all units of energy measurement –in addition to barrels, tonnes, and bcf–into mtoe or million tonnes oil equivalent. This unit, mtoe, allows us to see that China, for example, is using 3.75 times as much coal energy as oil energy. (1406.3 mtoe of coal vs 375.7 mt of oil). Compare that to India, whose consumption of coal energy is only 1.58 times its use of oil energy. (213.5 mtoe of coal vs. 135 mt of oil). India has a stronger automobile and vehicle legacy than China. But, given there’s truly not enough oil in the world for either India or China to replicate North American driving habits, I would tip India to direct alot of its growth toward electrified transport instead. And that will be powered by coal.

While both India and China were steadily growing consumers of coal in 1990′s, consumption ramped pretty hard in both countries in the recent decade. Here is the latest available data for India:

China is a younger user of oil, with lots more to come. But on a proportional basis, unlike India which I see as moving much more heavily into coal in the years ahead as its oil demand growth slows, I see China maintaining a coal to oil energy relationship not very from its current 3.75 ratio.

Could India possibly be heading to a coal energy vs oil energy ratio like China’s, at 3.75? It seems quite likely. Not that the developing world needs extra help in building coal fired power generation, but the world bank is helping speed up the process. As for climate change legislation, one reality that’s shared by all leaders whether in the developing or the developed world, is that the optimal approach politically to carbon reduction is to 1) enter into weak agreements, and then 2) not adhere. That’s exactly what I expect in the next decade, as the Era of Coal 2.0 unfolds.

-Gregor

Charts: via www.gregor.us using data from BP Statistical Review.

  • chrisarkenberg

    Also: China is experiencing much more rapid GDP growth indicating that more of it's populace will be consuming more energy. To their credit, they're investing heavily in solar & wind, but also in incredibly energy-intensive resource distribution like Three Gorges & moving southern water to the north, as well as shipping coal from the strong northern reserves to the weak South. Furthermore, if per capita wealth does rise substantially, I would expect population to follow the US path and distribute away from urban areas into outlying suburbia. This will increase Chinese demand for cars.

    India will see a further population swell as Bangladesh continues to displace Eastward under pressure from melting Himalaya, flooding the lowlands even more than usual. I would expect similar heavy engineering from them to better tap into these flood waters to help mitigate their ongoing droughts. In general, water and energy are very closely bound. Most climate & environmental models suggest that water will be at a premium before too long. This will impact energy return on energy investment significantly. I would imagine that rising water & energy costs will inevitably dampen growth across both India & China in the mid to long-term.

  • Michael Anthony

    Coal is here to stay,in China,India,United States and other counties. So buy coal stocks,it is the way to invest in coal. The coal stock ,I will buy is (pcx) and I'm long to $50.00 a share,but is going much higher with a low p.e,check out the earnings. It is a spin-off from BTU and PCX has many mines than the price of the stock price. Some insiders has shares over $50.00 a share before the market crash.

  • Michael Anthony

    Coal is here to stay,in China,India,United States and other counties. So buy coal stocks,it is the way to invest in coal. The coal stock ,I will buy is (pcx) and I'm long to $50.00 a share,but is going much higher with a low p.e,check out the earnings. It is a spin-off from BTU and PCX has many mines than the price of the stock price. Some insiders has shares over $50.00 a share before the market crash.