The Conversation (0)
Canada is a significant coal producer and plays a dominant role as a transmission point for North American coal heading to Asian markets. The country recently became a global leader in seeking ways to reduce GHG emissions from coal generation but a nagging issue has been the inability to update the infrastructure in order to meet the growing coal demand.
By James Wellstead – Exclusive to Coal Investing News
When one thinks of the Canadian energy market, coal is rarely the first commodity to spring to mind. But with 6.6 billion tonnes of proven recoverable coal reserves, and more energy than all of its oil, natural gas and oil sands combined, maybe it should.
Though still small in international terms, representing less than 1 percent of the world’s coal resources, the country is a significant producer and plays a dominant role as a transmission point for North American coal heading to Asian markets.
While not as dominant as China, Australia or the U.S., the Canadian coal market is no slouch. As a significant source of coal deposits, operators and clean coal technology expertise, the country is well rounded in many market areas.
Internationally, Canada is seventh in terms of gross exports, with 28 million tonnes (MT) sent abroad, 21 MT of metallurgical coal and 7 MT thermal. In total, the exports count for some CA$4.8 billion in 2007, with met coal dominating this mix at CA$4.2 billion in revenues.
Geographical distribution
More than 90 percent of Canadian coal is located in its Western Canada Sedimentary Basin, extending across the western half of the country from Manitoba and Saskatchewan, into Alberta and north-eastern British Columbia.
Small-scale sources were historically developed in New Brunswick and Nova Scotia, but these mines now play diminishing roles within the national picture. Currently, eastern Canada is the largest importer of coal which relies mostly upon the U.S. Appalachian basin producers due to their cheaper transport costs compared to sources in Western Canada. In total, the country imported over 18 MT in 2007 which was used dominantly for electricity production.
“Asia is Canada’s primary export area, accounting for more than half of its exports,” says Natural Resources Canada. Currently Japan is the country that imports the most coal from Canada, but China is increasingly figuring in to its mix as exports increased from 405,639 tonnes to 3,615,487 tonnes between 2008 and 2009.
Clean coal technology
While not the only country seeking ways to reduce greenhouse gas (GHG) emissions from coal generation, the country recently became a global leader when the province of Saskatchewan decided to update an aging coal-fired plant with clean coal technology. The Boundary Dam facility near Estevan, Saskatchewan will be the “very first commercial-scale power plant with a fully integrated carbon capture system,” said Rob Norris, minister responsible for SaskPower, the provincially owned utility. The federal government had agreed to contribute CA$240 million to the $CA1.24 billion project.
The federal government will play an important role in further developing this technology as for the time being, some companies have backed away from similar projects due to the prohibitive costs involved within the country which lacks a national carbon tax, and has abundant fossil fuel resources. The federal government has developed a Clean Coal Energy Roadmap which it intends to use to lead to the commercialization of clean coal technology in Canada.
Political developments
The recent push of some provincial governments to minimize their GHG emissions has driven coal down on the list of the Canadian energy mix. The provincial government of Ontario set itself the goal of eliminating all coal-fired electricity generation by the end of 2014. With 6,315 MW of coal-fired capacity in 2009, Canada’s largest coal consumer, the deal would have significant impacts in the province, which relies primarily upon American imports to supply that power demand.
However, recent concerns over rising electricity prices within the province have brought questions as to whether the provinces will uphold the plan. One candidate for the lead provincial political positions, Tim Hudak, noted if elected this October he would revoke many of the province’s green-energy deals, which were expected to replace the majority of power from the dismantling of coal-fired plants. Certainly the provinces coming election will be one to watch closely as for the fate of coal in the province.
Another nagging issue within the Canadian coal industry has been the ability to update infrastructure in order to meet the growing demand. Currently there are three coal ports in British Columbia, two of which are based in Vancouver and another in Prince Rupert in Northern BC. Vancouver’s Westshore is North America’s busiest coal port, but remains pressed to keep up with growing export demand. Recent efforts have been rekindled to begin construction on a fourth port in Port Alberni on Vancouver Island to support the growth of mining on the island. While the development of the port is contested by some within the province and the community itself, there is strong support by both the provincial and federal government to increase infrastructure to support the shifting of focus toward the East in the country’s international trade.
Canadian coal projects
Teck Cominco Ltd. (TSX:TCK.B)
The world’s second largest supplier of metallurgical coal, Teck operates 5 mines in British Columbia and one in Alberta. Coal accounts for 43 percent of Teck’s business, and represented CA$5.4 billion in profit, before amortization and depreciation, some 70 percent of its profits in 2011. More than 90 percent of Teck’s coal production is rail transported to the coast of British Columbia and shipped from there to Asia, Europe and South America. Teck’s largest markets in Asia have traditionally been Japan, Korea and Taiwan, and China has recently emerged as a significant importer of steelmaking coal.
Kailuan Dehua, is a joint Chinese-Canadian project that was incorporated in 2008 to exploit metallurgical coal resources in its Gething Coal Project. Located 25 km south of Hudson’s Hope in Northern British Columbia, the project is projected to produce 2 MT/yr of met coal predominantly from the Trojan and Superior seams, for a mine of life of approximately 30 years. With more than 780 MT of coking coal deposit, the project is currently undergoing a provincial environmental assessment before production begins.