The Baltic Course  


Replacement for petroleum and gas?

Michael Tuzhikov, Transport Rossii

In Recent years across Europe a constant increase in demand for coal has been observed. It is quite easily explained: petroleum prices rise, coal becomes cheaper, and the requirement for energy carriers is constantly growing. In this connection there are some questions: whether coal is high-grade enough to replace petroleum? How the reorientation of freight traffics for energy carriers will effect the Baltic region? Whether ports and carriers of Baltic are ready to process the increased volumes of bulk cargo?


Black gold

Photo: Free Port of Riga


The scientific name of carbon - carboneum - occurs from the Latin word carbo - coal. Mineral coal- is the firm combustible sedimentary breed consisting of carbon, hydrogen, oxygen, nitrogen and other minor components. Coal is deposited usually as layers among sedimentary breeds. Coal is subdivided as brown coal (the contents of carbon 63-67%, the lowest degree coal - the transitive form from peat to coal), coals (with carbon content 74-92% an average degree of coal) and anthracites (carbon content 89-98% the supreme stage of coal). 


"It's blown-up, piled-up, crushed-up black reliable gold".

/song by Vladimir Vysotsky/


It's not by accident that both coal and petroleum are named "black gold" - both these kinds of hydrocarbon fuels were born as brother and sister 350 million years back in a single cradle of the coal period. The difference is that solid gumolit (brown coal, coal and anthracite) is 25% less effective for heat combustion to its liquid organic relative called oil: 34.9 and 46.2 MDzh/kg accordingly. And if you take into account, that deposits of coal and petroleum are accompanied with natural gas methane the classical natural triumvirate of firm, liquid and gaseous substances turns out: a foundation of power - coal, petroleum and gas, just as the basis of life - earth, water and air.

Globally there are 3,600 coal basins and deposits, the 7 largest of which (on 27 500 billion tons) are in Russia and the New World: Lensky, Tungus, Taimirsky,  Кansko-Achinsky, Kuznetsk, Appalachian and Amazonian. Russia holds 29% of the world's estimated brown coal reserves.

Today coal mining is conducted in 60 countries of the world, however 85% of world extraction falls to 8 countries: China (1.35 billion tons per year), USA (964 million t.), Russia (269 million t.), Australia (250 million t.), India (108 million t.), with Poland, Germany, the UK and the republic of South Africa (up to 100 million t. together). Annually 5 to 7 billion tons of coal is extracted across the world.

According to the experts, the reconnoitered world reserves of natural energy carriers are made up of:

  • coal - 1 075 billion tons, (geological - 14 trillion 800 billion tons, of this 23 % in Russia);
  • petroleum - more than 100 billion tons (13% in Russia);
  • gas - 22 000 billion cubic meters (45% in Russia).

Coal stocks make up 87.5% of the forecast resources of mineral fuel on Earth. However, in the world's fuel-power balance mineral coals make up only 30-35% as thermal power and also electric power industries are focused on mineral oil and gas. Owing to an impetuous expenditure of the latter, their stocks have been sharply reduced, and according to Russian economist Andrey Parshev, for Russia today the secured reconnoitered stocks of minerals is limited to only several tens of years.

On other sources, stocks of coal in Russia will suffice for 500 years (globally for 225 years), but in essence existing technologies are focused on a greater degree towards the oil and gas industry, and not on coal. Nowadays coal is used basically for producing energy and refinery of coke, to a lesser degree - for refinery of gas and liquid fuel. In the near future experts predict growth of coal consumption, connected with an increased demand for:

  • power coal for producing electric power;
  • coke coal for development of ferrous metallurgy;
  • coal for power systems in case of an inevitable transition from liquid and gass to solid fuels;
  • coal as a source for refining various elements and substances;
  • coal for refining liquid and gaseous fuels.


Coke - the solid residue (carbon content over 96%), used for heating in coke coal furnaces without access of air building up temperatures of 950-1050�С. It is used as the main fuel in metallurgy.


According to the World Coal Institute, the conducting position of oil-and-gas energy carriers will be kept for the period up to 2010 - 2015 then coal will again become the basic spring of energy as it will be needed for processing around 90% of the world's minerals. Now coal provides for almost half of produced electrical and thermal energy in the USA, Denmark and China.

As for statistics, in Russia the level of extraction of gas remained stable till 1999, and then volumes of its extraction began to reduce approximately by 1.5% a year. Therefore, in connection with the predicted rise in prices of gas sales at its growing deficiency the real precondition for revising the role and place of coal in maintaining power security for the country was created. Since the Eighties Western and Russian power sectors have undertaken practical steps in the issue of redirecting the production of thermal and electric energy on derivatives of coal fuel. Model vortical coal furnace models have been developed (called combusters in the USA) where dust-coal fuel is burnt in vortical frontfurnaces. The technology of burning natural fuel (coal, peat) in a stationary and boiling layer has been developed. Research on burning and gasification of coal in a circulating boiling layer under pressure for creating steam-gas installations on coal fuel is being conducted. By the way, even on the eve of the World War II the Germans learned to make synthetic petroleum from coal, having produced up to 0.7 million tons a year (similar technology was possessed by no other country in the world).


Russian coal

In total production of fuel and energy, the share of coal (thermal power stations) in Russia is 3.6% and in the total amount of industrial output for the Russian Federation, the coal sector is needed by only 1%. Thus with coal exports Russia takes eighth place in the world.

Annual coal mining in Russia during the long recession from 1988 to 1998 decreased by 425 million to 232 million tons. Since 1999 a gradual growth of coal production began, with around 280 million tons now produced. The sector employs 328,000 people. The share of coal mining by private companies in 2001 stood at 72% by 2003 the process of privatization of joint-stock companies in the coal sector will be completely over, and privately owned coal mining companies will make up 95%. As a result, transformations are possible: growth of coal output within the last three years has been at 16% (about 232.2 million tons in 1998 to 269.3 million tons in 2001) and the state should, apparently, support this positive tendency in every possible way. However annual investments from the federal budget have decreased for this time by more than in 400 times - truly "trust Russia to not understand".

Coal is consumed in all territories of Russia - in 89 regions, and extracted only in 27 of them. This causes mass transportation of coal, basically from East and Western Siberia which send off 30% and 20% percent respectively to other regions. It is necessary to note, that the undercharge of gas on the domestic market (in comparison with the external market) has created an artificial inefficiency of coal use as the energy carrier for electric and thermal power stations. The lack of demand for coal on the domestic power market, because of the Russian economy's focus on using natural gas, has resulted in destabilization of the coal production market. Since the fourth quarter of 2001 there was a sharp decline in purchases of Russian coal by power stations, and a reduction of demand continues building up even today. In the first half of 2002, delivery of coal to power stations made up only 70% of the previous year's level. Thus, since 1998 consumption of gas by power stations is steadily growing, that has already brought Gazprom losses (from forced cheaper deliveries of gas on the domestic market) of around 1 billion US dollars. The principal cause of falling coal supplies for power stations became an aspiration of Russia's united energy systems RAO UES to use cheaper fuel. All this, under forecasts of experts, can result in a reduction of volumes for coal mining in 2002 to 20 million tons.

In 2001 Russia exported about 42 million tons of coal and at the same time imported around 28.6 million tons. For what reason? Russia's RAO UES here again has taken the upper hand - the basic volumes of import coal are delivered from Kazakhstan for power stations of the Ural, Omsk and Tula regions.

Thus the thermal power stations of Russia, appeared in unequal conditions. On the one hand are natural monopolies: Gazprom, RAO UES and the large, vertically integrated petroleum corporations, on the other hand - the coal enterprises competing amongst themselves, and with the monopolies. The position of the coal companies is aggravated even more through relations with another monopolist - Russia's Ministry of Railways, considerably influencing the final price of coal by the time it gets to the consumers. The tariff established for transportation of coal, is 1.2-1.3 times more expensive than for liquid fuel. All this has resulted in an infringement of equal rights principles on the services market for the fuel and energy sector. Moreover, calculations by experts show that for Russia the optimum parity is: 30% gas, 22% petroleum, 34% coal, 14% other energy sources, while in practice the coal balance in the structure of power occupies only 12%. The absence of state regulations for market relations in the thermal power plant sector at some point spilled into a crisis of overproduction in coal power - solvent demands for coal appeared much less then there was coal on offer.

There the paradox: coal company warehouses are full of coal, but Russia seemingly has need for it. Europeans have to their fortune reacted very swiftly by stopping mining of their own stocks and buying up Russian coal big time.


Russia's Minister of Energy Igor Yusufov, said in May 2002 at a meeting of G8 energy ministers in Detroit: "the Strategic task of the fuel and energy complex in Russia is escalating for coal mining, as it is planned to increase its consumption due to a change of balance in gas and coal. The basic market for the Russian power resources remains Europe, and Russian deliveries can be considered as a factor of steady development for Europe. Growth of power resource deliveries from Russia will demand the European Union to maintain an adequate inflow of investments, technologies and administrative experience to Russia, and also unobstructed transit of power resources through the territory of Europe. Recognizing the principle of a multi-modal approach for transportation routes of power resources meeting criteria of reliability, legal definitions, economic feasibility and ecological safety, we insist that it is necessary to avoid excessive politicization ".



To Europe through the Baltic

Russia's coal-mining enterprises are terribly interested in boosting exports and have a level of payment for export coal at a rate of 83-88% in hard currency. Taking into account this fact, and also overproduction in the sector, Russian miners have brought to the attention of the Russian government certain issues, like:

  1. Stimulating growth of coal exports through the introduction of discounts for coal shipments sent abroad.
  2. Canceling VAT taxes for coal, or at least lower the tax rate to 10% for the CIS and Baltics.
  3. Giving all companies equal conditions for rail transportation of coal.

The countries of the European Union have been expedient to provide a consumer demand for Russian coal, mining volumes of which in this case may increase by 2020 by more than double. The Europeans have decided to preserve their stocks of the "black gold" for a rainy day. So also have the Americans with their petroleum, however.

A change of situation in the Russian coal sector has been at once felt in the Baltics. Recent years in Latvian ports have seen a constant increase of coal handling volumes. In the last 3 years coal was transported via the Latvian railways to an amount of 3.728 million tons, making up 3.5% of all transported cargo.

With European supply contracts, Russia continues to increase export coal through the Baltic region: in the first half of 2002 19.6 million tons of coal exports were sent, up 3.2 percent year-on-year. This circumstance and the fall in other kinds of cargoes at Baltic ports has forced the Balts to begin designing and constructing new coal terminals.

Ventspils plans to handle 2 million tons of coal this year, therefore the Ventspils Trade Port is going to construct a new coal terminal at quay № 26, capable at handling initially 3.5 million tons of coal per year. In the long-term it is planned to stay at a five-million ton margin.

Estonians too are holding hand on pulse and, to keep abreast from their neighbors, are building in port Muuga by Tallinn a coal terminal capable of 5 million tons a year. Moreover, for guaranteed congestion Estonian stevedores there are partners of the one of the largest Russian coal companies Kuzbassrazrezugol, which mined over 36 million tons last year.

Lithuania has refused a competitive struggle for coal, having in 1993 redirected the Klaipeda port for processing mainly metals.

The first place in loading coal on the Baltic Sea is confidently shared by Russian ports, while the struggle for "black gold" proceeds includes also serious players from the Baltic states. In any case, one can be sure that no one will be left without coal.