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Global coal demand to overtake oil by 2018

Cost is the main driver behind steep increase, consultancy says

Global demand for coal will overtake oil consumption by 2018 as China’s energy needs continue to soar, William Durbin, from consultancy Wood Mackenzie told the World Energy Congress 2013. 

According to Wood Mackenzie research, global coal demand will reach 4.5 billion tonnes of oil equivalent (toe) by 2020, up from 3.6bn toe in 2010, a rise of 20%. Two-thirds of this rise in demand will come from China.

In 2020, global oil demand is expected to reach 4.4bn toe, Wood Mackenzie said, a 10% increase on 2010 levels. The International Energy Agency expects global gas demand to reach 3.9 trillion cubic metres (cm) in 2018, up from 3.4 trillion cm last year. China’s power demand is expected to reach 8,600 terrawatts per hour (Twh) in 2020, up from 5,000 Twh last year. Coal-fired power generation will account for 46% of that growth.

Durbin, who is president of global markets at Wood Mackenzie, said the main force driving coal demand to outstrip oil was its price competitiveness. “China can source coal for around $5 per million British thermal units (Btu). Pipeline gas is two or three times the cost of coal and LNG (liquefied natural gas) is three to four times the cost,” he said.

Last year China consumed 1.9bn toe of coal, according to Cedigaz figures. This is more than 50% of total global coal consumption last year.

While China’s soaring demand for coal will “almost single-handedly propel the growth of coal”, Wood Mackenzie said, India, the US and Europe will contribute significantly to global coal demand. “It’s a China and India story. They need low cost fuel for economic development,” Durbin told WEC Congress News.

The US Energy Information Administration (EIA) says China, India and the US will be responsible for 75% of total global coal demand, which is expected to reach 220 quadrillion Btu, by 2040.

India’s total energy demand is expected to rise from 712m toe in 2012 to 1.4bn toe in 2030, according to Wood Mackenzie figures.

Giles Dickson, vice president of Environmental Policies at Alstom, said that over the next five years around 600 gigawatts of new power capacity will be built in Asia and over half of this will be coal-fired. Dickson added that regulatory uncertainty could curb some of China’s coal demand. China has set targets to cut the proportion of coal in its energy mix.

The government wants coal to make up 65% of its energy by 2017, down from around 67% last year. This is being driven by concerns over carbon emissions and air quality. Dickson said that a lack of government subsidies was preventing carbon capture and storage technology from being more widely used.

By 2030 the cost of using CCS could be as little as €73 ($98.80) per tonne in Europe, €64/t in the US and €62/t in southeast Asia. “That is cheaper than offshore wind,” Dickson said. “Carbon capture and storage is not expensive. We’ve just got to persuade governments to put the right financial mechanisms in place.”

Europe’s coal use has soared since the financial crisis took hold. Spain’s coal use, for example, increased by 80% in the first five months of last year, to 5.8m tonnes.

Wood Mackenzie said there would need to be a carbon price of €40/t to encourage fuel switching away from coal to cleaner-burning natural gas. This is unlikely to occur before 2020, the consultancy said.

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