The Russian Coal Industry

Compared to other Russian fuel sources, the coal industry has the best raw material base. Resources are concentrated in 22 coal basins and 118 individual deposits, spread unevenly across the country. Total resources are approximately 200 billion tons (bt); reserves under development, about 105.2bt, with open pit mineable reserves at 74.9bt.

Production: Since 2001, production has risen steadily, except for 2002, when Siberian hydroelectric power abruptly increased and demand for coal decreased. Abnormally warm climate conditions affected consumption. However, for the last five years, coal production increased by 12.7%.

Companies: SUEK is a leading exporter of thermal coals with surface and underground mines from the west of Siberia to the Far East; annual production approaches 90Mt; another, Kuzbassrezrezugol, produces about 45Mtpa of coal.

Several big producers, Raspadskaya, Yuzhkuzbassugol, Yuzhny Kuzbass, Kuzbassugol, Vorkutaugol, Yakutugol and Sibuglemet, share the coking coal market. Two large new deposits planned in Yakutia and the Republic of Tyva require several billion USD to develop infrastructure before implementation.

Transport: Russia’s coal travels vast distances by rail to the nearest seaport. Growing railway tariffs and the strengthening ruble may make it uneconomical to export steam coal by 2010. One possible solution is to adopt flexible market-based railroad tariffs. During the first half of 2007 coal exported from ports in Russia, Ukraine and Eastland (Baltic states) increased by 5.1% over 2006 levels.

The move from Gas to Coal: Russia’s main energy source is gas at 43%; coal 23%; hydroelectric power stations 18%; and nuclear power 16%. However, this balance will change. The Government has approved new allocations for power stations through 2020. Gas will drop from 68% to 50-57% and coal will increase from 25% to 38-39%.

According to the RAO Unified Energy System of Russia, coal consumption will increase 2.5 times. To achieve this, RAO will build many new coal power stations, with half of them located in Siberia. Price weighting determines the increase in coal’s power generation, because coal generation costs will fall compared with gas.

Safety: In spring 2007 in the Kuzbass, accidents killed about 150 miners, revealing serious safety problems. Closer attention is now being paid to degasifying and ventilating underground mines. Employees are working at improving their own safety actions.

SRK Experience: In Russia, SRK is assessing reserves and resources of coal mining companies to meet international accounting standards; improving efficiency with practical advice; geology modeling and long-term planning; working with Russian mining institutes (giproshakht) on detailed design issues; helping attract foreign partners and advising them on investments.

Andrey Melnikov: amelnikov@srk.ru.com 
Keith Philpott: kphilpott@srk.co.uk


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