Sunday, July 3, 2022

Coal, the black diamond gets an extended lease of life

The Russia and Ukraine war could be a silver lining for the coal industry, which for years has been battling attempts to shut it down in preference for cleaner energy. However, western countries seeking to cut down on gas imports from Russia are looking at coal imports as an alternative energy source, much to the glee of countries like Botswana that have coal in abundance.

President Mokgweetsi Masisi who this week gave a keynote address at the Mining Indaba conference in Cape Town told Reuters news agency that the country has already received interest from European countries for coal exports, with demand expected to reach 50,000 tonnes a month.

Botswana has an estimated 212 billion tonnes of coal resources, with only two coal mines currently in production. While coal mining companies have been struggling to find funding due to environmental concerns, there is demand for the product. Even more instructively, there is a sliver lining in the horizon. Coal prices have more than doubled since the beginning of the year, giving coal miners more incentive to ramp up production.

Coal production in Botswana has increased over the years, with official data from Statistics Botswana showing that production has increased from the 1.4 million tonnes a year in 2012 to 2 million tonnes in 2021. According to the Index of the physical volume of mining production report for the fourth quarter of 2021, coal output increased by 9.3 percent from 429, 382 tonnes during the fourth quarter of 2020 to 469, 481 tonnes in the last quarter of 2021.

“The increase came as a result of the efforts made to meet increased demand from both domestic and international markets, particularly that new markets have been identified,” Statistics Botswana said in the report.

Privately owned coal miner Minergy that operates the Masama coal mine in Botswana has a capacity of churning out 125,000 tonnes per month and has seen a 50 percent increase in sales for the six months ended 31 December 2021. Minergy has received financial support from the Botswana government through the state-owned Minerals Development Company Botswana (MDCB), which borrowed the miner P63 million in July 2021.

Morupule Coal Mine, wholly owned by MDCB, in April shipped its first coal export to Mozambique port to supply global markets. The state coal miner last year November commissioned its Motheo project which will expand the mine’s production capacity from 2.8 million tonnes to 4.2 million tonnes per annum of coal.

Besides the existing two coal miners, top Indian industrialist, Jindal Steel and Power, announced in November plans to start a coal mine in the Mmamabula area, famed for its large deposits of coal. Jindal is looking at an annual production of 4.5 million tonnes of coal. Construction of the mine is expected sometime this year.

Ironically, the demand for clean energy sources has also been a key factor in driving the coal bed methane market (CBM). Seen as a cleaner alternative, gas projects involve CBM recovery from underground coal resources during the mining operations. The extraction of CBM is carried out using vertical and horizontal drilling into the coal seams and eliminating the water content of the seam gas. This has created opportunities for CBM projects to set up operations in the country, lured by the vast coal reserves and the critical shortage of power supply.

At the forefront is Tlou Energy, proprietors of Lesedi CBM project, the most advanced gas project in Botswana. The company made impressive progress last year, achieving  sustainable gas flows, while negotiations progressed well with the government, and investors showing keenness to plough their money following good prospects.

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