| Coal is defined
as a sedimentary rock composed predominantly of solid organic materials
with a greater or lesser proportion of mineral matter. It is derived
from the accumulation of plant remains in sedimentary basins, and
is altered to solid rock by heat and pressure applied during the basin’s
development. Its quality varies according to the content of ash, impurities,
and volatile matter which decreases as coal rank gets higher. It has
a natural dark brown to black, graphitelike appearance and is primarily
used as a fuel. Types of coal according to increasing rank (in terms
of hardness, purity and heating value) are peat, lignite, subbituminous,
bituminous and anthracite.
Worldwide, coal is a sought-after energy source. It has the largest
reserve and is often the cheapest of the fuel options. Now that
clean coal technologies are available, the demand for coal has remained
steady despite the current stringent standard on environmental concerns.
The Philippines is largely a coal consuming country with coal having
the highest contribution to the power generation mix at 27% in 2005.
But, local demand for coal is not limited to power generation. The
cement industry utilized 20% of the country’s coal supply in
2005, 1 % went to other industries such as alcohol, sinter, rubber
boots, paper and chemical manufacturing, fertilizer production and
smelting process.
The coal industry has never been so robust than these past three
years. From a historical yearly average of 1.5 million MT, local
coal production doubled to 3 million MT in those three years. Increased
production is expected in the near future as new contracts get to
full blown production, and exploration contracts convert to production
agreements. Renewed interests in coal mining improved as coal contractors
as well as small-scale permittees increase. Consumption likewise,
increase steadily as new coal-fired power plants are installed and
industries switch to coal because of the highly volatile price of
oil.
Potentials
The Philippines has a vast potential for coal resources just awaiting
full exploration and development to contribute to the attainment
of the country's energy self- sufficiency program. As of 31 September
2005, our in-situ coal reserves amount to 458 million metric tons
or 18 % of the country's total coal resource potential of 2.53 billion
metric tons.
Coal Programs/Technologies/Systems
Continuing Exploration and Development Program
Recent upswing development in the coal industry encouraged increased
interest in coal exploration. To date, there are 36 coal operating
contracts, 16 of which are under exploration stage to verify potentials
of the coal fields, and 43 small-scale coal mining operators.
To supplement these exploration activities, the Geothermal and
Coal Resources Development Division (GCRDD) continuously conduct
reconnaissance to semi-detailed mapping of under explored coal areas.
The Philippine Energy Contracting Round (PECR) 2
PECR2 which promoted 7 coal areas for investment concluded by the
end of 2005 receiving 5 applications for four coal areas: 1) Polillo,
Quezon; 2) Gigaquit, Surigao Del Norte; 3) Candoni/Bayawan, Negros
Oriental; and Calatrava, Negros Occidental. The applicants, however,
did not qualify per the results of the evaluations.
Other Programs on Coal
The Department through the Alternative Energy Program has entered
into cooperation efforts with research entities to determine the
potential of our coal deposits for coal liquefaction, coal briquetting
and coal bed methane.
Investment Opportunities
It is but very timely to invest in coal facilities as the price
of oil continues to rise, coal being still the cheapest option with
abundant supply worldwide. For private companies, the key investment
opportunities in the coal sector are (1) the setting-up of coal
preparation plants to upgrade the quality of Philippine coals and
make them acceptable to current coal users; (2) the expansion of
production volumes of higher-rank Philippine coals which can be
used without upgrading and/or blending with high-quality imported
coal; (3) the introduction of clean coal technologies (i.e., circulating
fluidized bed combustion) to ensure utilization of Philippine coals
with minimal adverse effects on the environment; and (4) the putting-up
of mine-mouth power plants designed to utilize the abundant low-rank
coals that have no alternative markets.
Setting-Up of Coal Preparations
On the island of Cebu where the majority of small-scale coal mines
are located, two feasibility studies (one funded by the U.S. Trade
Development Program and the other by the Canadian International
Development Agency) have established that it would be technically
and economically viable to put up a central coal preparation plant.
Said plant will guarantee a market for all of Cebu's coal users
that will ultimately consume over 500,000 tons per year.
Expansion and Development of Higher Rank Coals
There are Philippine coals which are of such quality that they
can be used by current users without the need for any coal preparation
or blending with imported coals. Among these are the coal deposits
being mined in Malangas by the Philippine National Oil Company (PNOC)
with its Taiwanese partner, in Southern Cebu by Ibalong Resources
and Development Corporation, and in Batan Island by Rock Energy
International. The coal deposits in Catanduanes Island which have
been contracted out to Monte Oro Resources and Energy, Inc. for
coal exploration while the coal areas in Gen. Nakar, Quezon are
not contracted out at present. Adjacent to Malangas mine are two
(2) other coal fields of good quality, namely: Integrated Little
Baguio (ILB) and Lalat. ILB is covered by PNOC's coal operating
contract. On the other hand, the Lalat area will be developed through
a joint venture between PNOC and Filsystems, Inc.
Introduction of Clean Coal Technologies
In the downstream coal sector, particularly the utilization of
coal for power generation and cement manufacturing companies, which
can introduce clean coal technologies in existing and future power/cement
plants to minimize adverse effects of coal on the environment and
still be competitive, are definitely welcome.
Setting-Up Mine-Mouth Power Plants
Finally, companies wanting to get involved in the Philippine coal
sector in a major way are invited to consider putting up coal-fired
mine-mouth power plants in the country's major undeveloped coal
areas through joint ventures with existing holders of coal operating
contracts. As in the case of natural gas and geothermal, private
companies are allowed to put up their own plants at the mine site
to assure a market for the coal by selling electricity to the grid.
The same transmission lines to be built by the government to bring
geothermal power from the Visayas to Luzon and Mindanao islands
will be used to transmit power from mine-mouth power plants.
Specific programs, forecast and coal project schedules are found
in the Philippine Energy Plan.
Incentives
The current coal operating contract (COC) system gives the following
incentives to contractors:
• Exemption from all taxes except income tax
• Exemption from payment of tariff duties and compensating
tax on importation of
machinery/equipment/spare parts/materials required for the coal
operations
• Allow entry of alien technical personnel
• The right of ingress to and egress from the COC area
• Recovery of operating expenses
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