Clare Nuttall in Almaty -
The Kazakhstan government has been flirting with ideas to introduce nuclear and renewable energy, but due to the country's abundant reserves, coal remains the primary source of energy. As Kazakhstan seeks to ramp up electricity production to feed growing industrial demand, expanding coal generation capacity is the cheapest and quickest way to achieve this.
The Ekibastuz coal basin in the north of the country has reserves of around 10bn tonnes of coal, and boasts the world's third-largest open pit mine, Bogatyr. With another massive coal basin near Karaganda, in the centre of the country, and numerous other smaller deposits, Kazakhstan has recoverable coal reserves of around 34bn tonnes, putting it among the world's top-10 producers.
When Kazakhstan was part of the Soviet Union, it produced around 140m tonnes a year (t/y), the bulk of it burnt in the Ekibastuz power plants or exported to the industrial cities of Siberia and the Urals. Today, Kazakhstan has a pressing need to expand and modernise its power generation sector. The country enjoyed a brief respite during the recent economic crisis when power consumption fell slightly, but as the economy is now growing rapidly again, demand for electricity is also rising. The Ministry of Industry and New Technologies (MINT) forecasts that electricity generation will increase from 82.6bn kilowatt hours (kWh) in 2010 to 103.5bn kWh by 2015, slightly ahead of consumption, which is expected to reach 100.5bn kWh by 2015. Kazakhstan plans to invest over KZT2.3 trillion ($15.6bn) into the power sector by 2015, including KZT235.91bn for the coal mining sector.
Several of the power projects in Kazakhstan are for new coal-based generation capacity. Major projects include the expansion of the Ekibastuz GRES-2 power plant, and plans to upgrade Ekibastuz-1 and build a new coal-fired power station near Lake Balkhash. Small coal-fired thermal power plants and CHP (combined heat-and-power) plants are also being rebuilt. "Kazakhstan has significant reserves of high-quality coal and low production costs. Therefore, the coal power plants account for 60-70% of total electricity produced in Kazakhstan," says Evgeny Vinokurov, director of the Eurasian Development Bank's centre of integration studies. "In the coming years, a significant change in the share of coal-fired power plants in Kazakhstan's energy mix is not expected."
Leila Kulbayeva, director of mining sector research at Visor Capital, agrees that coal will remain the major power source, as building coal-fired plants is the cheapest way to increase generation capacity. "We don't expect Kazakhstan to get its first nuclear power plant before 2020 at the earliest, and renewables contributed under 1% of total energy in 2010," she points out.
Producing the goods
Coal production is expected to reach 134m t/y by 2015 and 151m t/y by 2020, according to the MINT. All the country's major producers say they are planning to increase output. "Several of Kazakhstan's big listed mining companies produce coal, and they are planning to increase output. The biggest production increase will be from Bogatyr, a joint venture between Samruk-Energo and Rusal," explains Kulbayeva.
Bogatyr Coal is planning to deliver around 38m tonnes of the coal to its customers in 2010, the company said in a press release. Production is expected to almost double to around 55m t/y by 2020.
Kazakhstan's largest metals companies are also active in the coal sector. The energy division of ENRC is one of the largest producers of electricity and coal in Kazakhstan. The company has steadily increased coal production to reach 20.1m tonnes in 2010. Kazakhmys Power has a 50% interest in Kazakhstan's largest coal fired power plant Ekibastuz GRES-1. It also owns the Maikuben West coal mine.
ArcelorMittal, which has eight coal mines in the region of Karaganda providing the Temirtau steel plant with captive coal, plans to increase production from 10.8m tonnes in 2010 to 13m t/y from 2015. "This added capacity in coal will support the planned expansion of the steel plant's capacity from 4m to 6m t/y of liquid steel," spokesman Roman Ilto tells bne. "The expansion is subject to favourable market conditions, of course." ArcelorMittal plans to invest around $300m into the expansion of its coal capacity between 2011 and 2015.
While most of the coal produced in Kazakhstan is used either to generate electricity or is coking coal for the metallurgical industry, there are also plans to increase exports from their current level of 20m-22m t/y at present, to 32m t/y in 2014. "As coal is abundant and cheaply available in Kazakhstan, demand for coal is fully satisfied from domestic production," says Zaurbek Zhunisov, an analyst with investment bank Troika Dialog. "Furthermore, we export around 30-35% of total production, primarily to Russia. Given the fact that a number of thermal power capacity expansion initiatives are underway in both Kazakhstan and Russia, the coal producers will also be ramping up output, for which they have the resources."
While renewable energy is expected to only account for a small share of the energy mix for the foreseeable future, both the Kazakh government and private companies are paying greater attention to the environmental impact of coal production and power generation. Several of the major generation companies have installed state-of-the-art filtering systems, and both the government and international financial institutions, including the Eurasian Development Bank and European Bank for Reconstruction and Development, are supporting clean-coal investments with funding.
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