Pacific Rim Coal Marketing

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Linda Chase
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1 Wyoming Infrastructure Authority Spring Energy Conference June 11-12, 2015 Cheyanne Pacific Rim Coal Marketing Michael Mewing MC2 Company Pty Limited

2 Pacific Rim Coal Marketing * Asia s reliance on coal * Asia Pacific Coal Trade * Indonesian subbituminous coal export industry * PRB opportunities * Demand Pull market

3 Asia s Reliance on Coal Japan, Korea & Taiwan have no domestic energy reserves fully reliant upon imports Asia has limited access to natural gas Asian electricity grids are independent Importance of security of supply Coal and nuclear - base load for power generation Coal represents 52% of Asia s primary energy World s average 30%

4 Primary energy world consumption 2013 Million tonnes oil equivalent BP Statistical Review of World Energy 2014 BP 2014

5 Primary energy regional consumption pattern 2013 Percentage BP Statistical Review of World Energy 2014 BP 2014

6 Energy Consumption by Fuel Type 2013 (percentage) TOTAL (Mtoe) Coal (%) Oil (%) Natural Gas (%) Nuclear (%) Hydro (%) Renewable (%) North America 2, Europe & Eurasia 2, Asia Pacific 5, WORLD 12, USA 2, China 2, India Japan South Korea Taiwan Source: BP Statistical Review of World Energy 2014

7 Asia Pacific Coal Trade Asia 70% of the world s coal production & trade Newcastle bituminous coal historically design spec for Asian power stations (imported coal) Australian and Indonesian coal industries have been developed for the export market Asian thermal coal imports have 400 million tons over past 6 years (total 900Mtpa) US thermal coals hold a 1% market share in Asia Dominance of China = instability

8 Coal production/consumption by region 2013 Million tonnes oil equivalent Production by region Consumption by region BP Statistical Review of World Energy 2014 BP 2014

9 Americas, RSA & Asia Pacific Coal Production (million tonnes per annum) Source: BP Statistical Review of World Energy USA Canada Colombia RSA Australia China India Indonesia

10 Regional Coal Production (million tonnes) Region Mkt Share Var Americas 1,039 1,108 1,106 1,231 1,105 1, % (29) Europe & Euroasia 1,890 1,173 1,198 1,254 1,282 1, % 49 Asia Pacific 1,628 2,188 2,764 4,087 5,243 5, % 3,148 South Africa % 33 OECD 2,286 2,028 2,045 2,169 2,056 2, % (8) NON OECD 2,454 2,673 3,267 4,659 5,837 5, % 3,204 TOTAL WORLD 4,740 4,701 5,312 6,828 7,893 7, % 3,195 Source: BP Statistical review of World Energy

11 WORLD Top Ten Thermal Coal Producers (2013e) Top Ten Coal Producers (million metric tonnes) 5,800 Top Ten Coking Coal Producers (2013e) WORLD 1,200 PR China 3,034 USA 756 India 526 Indonesia 486 South Africa 255 Russia 201 Australia 239 Kazakhstan 103 Colombia 81 Poland 65 PR China 527 Australia 158 USA 78 Russia 73 India 42 Canada 34 Mongolia 20 Ukraine 20 Kazakhstan 12 Poland Source: World Coal Association - Coal Facts 2014 Lignite production 800 million tonnes

12 Americas, RSA & Asia Pacific Production (million tonnes) Mkt Share Var USA , % (81) Canada % 1 Colombia % 48 Americas ,108 1,106 1,231 1,105 1, % (31) South Africa % 33 Australia % 166 China 1,080 1,384 1,835 2,802 3,645 3, % 2,296 India % 270 Indonesia % 344 Total Asia Pacific 1,628 2,188 2,764 4,087 5,243 5, % 3, Source: BP Statistical Review of World Energy 2014

13 Coal Imports by Country/Region (million short tons) Country/Region Var China Japan India South Korea Taiwan Asia & Oceania TOTAL WORLD ,161 1, Source: US Energy Information Administration Agency (EIA) 13

14 Indonesian Subbituminous Coal Export Industry Indonesia s subbituminous coal exports: million tonnes million tonnes Indonesia largest thermal coal exporter - 35% of Asian market A grade subbituminous coals secured market position through quality and cost competitiveness Industry has flexibility to respond to market small equipment, flexible labor force, cost effective logistics Challenges: Quality Expiry of CCOW s Market s desire for diversity Government intervention

15 Coal Exports by Country (million short tons) Country/Region Var China (62) Australia Indonesia USA South Africa Columbia TOTAL WORLD ,212 1, Source: US Energy Information Administration Agency (EIA) 15

16 Coalfields of Indonesia June 19,

17 Export Coal Qualities Australian bituminous & Indonesian subbituminous Brand Hunter Valley Ensham Adaro Mulia Energy: - NAR kcal/kg - Btu/lb 6,080 11,350 6,005 11,250 4,740 9,000 3,950 7,560 Total Moisture % (ARB) Volatile Matter % (ADB) Ash % (ADB) Total Sulphur % (ADB) HGI Topsize (mm) IDT (degrees Celsius) 1,450 1,350 1,200 1,180 Sodium in ash % (Dry Basis)

18 PRB Coal Opportunities Market diversity FOR costs Quality: - Indonesian B grade coals - new boilers designed for subbituminous coals Logistics challenge rail & port Professionalism of US producers Ocean Freight Indonesian coal industry Australian coal industry Cost pressures Infrastructure costs

19 SAILING TIMES TO MAJOR ASIAN MARKETS US WEST COAST, INDONESIA & AUSTRALIA

20 Coalfields of Australia June 19,

21 Demand Pull Market Coal will continue to be base load in Asia limited alternatives 5 year demand growth: +700 million tonnes pa 2035 demand growth: 1 billion tonnes Growth not just in China China s dominance = instability Asian demand will be met regardless of the level of participation by US coals

22 International Energy Agency Medium Term Market Report % per annum projected growth versus 3.3% per annum in and 4.6% per annum over past 10 years 722 million tonnes per annum incremental coal demand increase by 2019 China India ASEAN OECD Asia Other Developing Asia Africa/Middle East OECD Americas +471 Mtpa +177 Mtpa + 79 Mtpa + 19 Mtpa + 21 Mtpa + 38 Mtpa - 54 Mtpa China.. will remain the elephant in the room for a while. There can also be upturn surprises: the Galilee and Surat Basins in Australia and PRB in United States have the potential to oversupply any demand if the appropriate infrastructure is in place.

23 Mt Imported Thermal Coal Demand by Basin (million tonnes) 2,500 2,000 Thermal import coal demand by basin (Mt) 1,500 1, Atlantic Pacific Source: Wood Mackenzie Coal Market Service

24 Japan & Korea 5 Year Plans - Coal Fired Power Stations JAPAN Generating Capacity (MW) Coal Demand (Mtpa) 2014 Existing capacity 35, New construction 7, Year , SOUTH KOREA 2014 Existing capacity 27, New construction 18, Year ,

25 There are 1.3 billion people in the world today who live without access to electricity. A life lived without access to modern energy is a life lived in poverty. The International Energy Agency (IEA) has predicted that more than half of the on-grid electricity needed to meet their energy for all scenario would need to come from coal World Coal Association, Divestment & future role of coal, November

The transition to sustainable energy

ATSE Symposium The transition to sustainable energy Peter Littlewood 8 Nov 2016 The changing world economy Index 180 170 160 150 140 130 120 110 100 90 Economies less energy intensive Electricity less