New Delhi: India is burning coal in power plants at the fastest pace in 31 years.
At the same time, domestic supplies of natural gas that are the main alternative are falling at the quickest rate in Asia, data from 2012 compiled by BP Plc show. Both trends run counter to those in most major economies and give India clout over global coal prices.
India’s growing appetite for imported coal should benefit suppliers in the $69 billion global coal trade such as BHP Billiton Ltd and Indonesia’s PT Adaro Energy. India is set to eclipse China as the top importer of power station coal by 2014, as China burned the fuel in 2012 at the slowest pace since 2008, and US demand fell for a second year, according to Energy Aspects Ltd.
“India is increasingly becoming an important swing factor in the coal markets and exporters will look there for price support as Chinese imports slow,” said Michael Parker, a Hong Kong-based analyst at Sanford C. Bernstein and Co. “Chinese imports will start to fall as they use more of their own coal.”
As Asia’s second-biggest energy consumer, with an economy expanding 5% last year, India used 10.2% more coal from a year earlier. That was the sharpest rise since 1981 and reversed three years of slower gains, according to this month’s BP Statistical Review 2013.
Other large economies are increasingly using more cleaner-burning natural gas to produce electricity and reduce carbon emissions. While China remains the biggest coal user, growth in use of the fuel is slowing as the government tackles pollution that’s choking Beijing and other cities.
China will have a coal-production capacity of 4.3 billion tonnes by the end of this year, compared with estimated consumption of 4.1 billion tonnes, Bernstein said in a 30 May report. The nation bought 142 million tonnes of thermal coal from overseas in 2012, 39% higher than a year earlier, said Trevor Sikorski, an analyst at Energy Aspects in London.
India imported 20% of its coal requirements in the year ended 31 March, according to the state Planning Commission. Imports may rise to more than 23% of supply by 2017.
Adani Enterprises Ltd and the Tata Group were among buyers of 15.6 million tonnes of the fuel in April, according to Interocean Group, a New Delhi-based shipper. The purchases drove up imports by 51% from a year earlier owing to lower prices ahead of summer when demand for electricity increases.
Gas output at India’s fields has dropped every month since November 2010, according to oil ministry data. Billionaire Mukesh Ambani-controlled Reliance Industries Ltd has been attempting to reverse an almost three-year decline in output from the nation’s biggest field, while Oil and Natural Gas Corp. Ltd, the country’s biggest explorer, is struggling with fields that are more than four decades old.
Coal-fired power stations provide about 59% of India’s electricity. State-owned Coal India Ltd, which supplies more than 80% of the nation’s needs, has been unable to meet demand that is forecast to climb 43% to 730 million tonnes by 2017 from last year’s levels. Supplies from local coal mines may gain 38% in the period, the nation’s Planning Commission said last year.
India’s natural gas production declined at the fastest pace in Asia last year, according to the BP Statistical Review. The government estimates the share of gas-based power capacity to fall to 6% in 2017 and 3% in 2030 from 9% last year, said Ashish Sethia, Bloomberg New Energy Finance’s India country manager.
In India, gas is not expected to be a major challenger to coal for power generation any time soon, Sethia said. Falling gas production in India makes availability uncertain and mutes the gas play in favour of coal.
In contrast, natural gas production increased 9.9% in China last year, the BP data showed. The pace of growth in the US, the world’s largest producer, was 4.1%, the highest in two years.