What is Coal?

Coal is a black or brownish black, solid combustible rock containing less than 40% non-combustible inorganic components formed by the accumulation, decomposition and compaction of plant materials under long-acting geological processes.

What are the uses of Coal?

Coal is used mainly in the generation of electricity and manufacture of cement. Currently, coal-fired thermal power plants remain as the number one producer of electricity and account for a total of 3,967 MW or 25% of the country’s total installed powered generating capacity.

How is Coal being mined?

Coal is mined either by open pit or underground mining methods depending on the geology of the deposit. Coal deposits that are flat lying where the coal is thick and overburden is relatively thin is usually mined by open pit mining method while deep-seated and steeply dipping coal is mined by underground mining methods.

Where are the country’s coal deposits and coal mines?

Coal deposits are scattered over the Philippines but the largest deposit is located in Semirara Island, Antique. The country’s largest coal producer is Semirara Mining Corporation (SMC), which contributes about 92% of the local coal production. Coal mines are also located in Cebu, Zamboanga Sibuguey, Albay, Surigao and Negros Provinces.

How much is local coal production to date?

Based on the 2006 Update of the Philippine Energy Plan (PEP), coal production in 2004 surpassed the 2003 level by 34 percent from 2.0 MMMT in 2003 to 2.7 MMMT in 2004. Improved coal production of big mining companies such as the Semirara Mining Corporation (SMC) as well as good weather conditions contributed to this positive development. SMC produced a total of 10.09 MMBFOE of coal from its Panian Pit on Semirara Island, Antique, increasing by 1.39 MMBFOE from its 2004 production level. In 2005, local coal production reached 3.1 MMMT or an increase of 26% from the 2004 level.

Domestic coal production is estimated to yield an 11.7% increase in the next 10 years from 3.1 MMMT in 2005 to 6.6 MMMT in 2014 @10,000 BTU/lb.

Coal production in 2006 as of December 12 stands at 2.3 MMT run-of-min, 2.5% of which came from small-scale coal mining operations.

What is current coal demand?

With the cement industry, power generating plants and process industry as major coal users, coal consumption for the year 2005 reached 33.76 MMBFOE or 1.45 percent lower than the 2004 consumption figure of 34.45 MMBFOE.

Coal consumption of the industrial sector reached 7.3 MMBFOE in 2005, 8.75 percent lower than the 2004 level of 8 MMBFOE. This is primarily due to the decreased consumption of some of the local cement factories and coal-fired power plants.

The country’s coal requirements are sourced from domestic production and importation. As of 2005, total importation reached 6.3 MMMT*, 50% of which came from Indonesia, 33% from China, 10% from Australia and 7% from Vietnam.

Coal consumption for 2006 as of December 12 is 9.5 MMT, 73% of which for power generation, 22.5 % for cement production and 3.75% for other industrial operations.

What is the Philippines' coal potential?

The Philippines has a vast potential for coal resources. As of 31 December 2005, we have delineated in-situ coal reserves amounting to 446 million metric tons, or 18.8 % of the country's total coal resource potential of 2.37 billion metric tons.

Does the Philippines' have high quality coal?

There are Philippine coals which are of such quality that they can be used 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 (IRDC), and in Batan Island by Rock Energy International Corporation (REIC). The coal deposits in Catanduanes Island and the coal areas in Gen. Nakar, Quezon are also of good quality.

What programs are being undertaken by the Department to spur coal exploration and development activities?

With the onset of the rising cost of fossil fuel in the world market and its eminent threat to the worldwide energy supply and security, the Philippine invigorates its program of continuous energy exploration and promotion of development, production and utilization of the country’s indigenous energy resources which includes coal. Deriving motivation from this renewed interest in coal mining, the Geothermal and Coal Resources Development Division (GCRDD) continues its resource assessment particularly in un-explored and un-developed coal prospect areas. Coal resources assessment is conducted through reconnaissance to semi-detailed surveys. This is done on a regular basis.

The effort has resulted to the granting of several Coal Operating Contracts (COCs) and Small-Scale Coal Mining Permits (SSCMP) for coal areas in the provinces of Cebu, Sultan Kudarat, South Cotabato, Isabela, Quezon, Masbate, Samar, Surigao Del Sur, Albay, Zamboanga Sibuguey, Zamboanga Del Norte, Saranggani, and Catanduanes among others.

The milestones in the coal industry sector are the launching and conduct of the following projects:

• Philippine Energy Contracting Round (PECR) 2005
  In continuous support of our quest for energy independence, the Department of Energy (DOE) launched the contracting round for energy resources, the Philippine Energy Contracting Round (PECR) 2005 which offers petroleum, geothermal and coal areas, in cooperation with the USAID's Energy and Clean Air Project (ECAP) under its "Investment Promotion for Sustainable Development of Indigenous Energy Resources" program.
  For the coal sector, prospective coal areas in the provinces of Quezon, Negros Occidental, Negros Oriental, Zamboanga Del Norte, Surigao Del Norte and Surigao Del Sur were offered as prospective areas for investment.
  There were five (5) companies who participated in the coal contracting round: Lucanin Resources and Eastsun Mining and Power Corporation for the coal area in Polillio, Quezon; Miocene Mining and Energy Corporation for Gigaquit, Surigao Del Norte; and Guidance Management Corporation for coal areas in the provinces of Negros Occidental and Negros Oriental. None of the companies qualified based on the criteria set for the contracting round.

• Coal Bed Methane (CBM) Project
  A joint collaboration between the United States Geological Survey (USGS) and DOE was launched to determine the methane gas content and adsorptive capacity of Philippine coals. The recent study from the USGS entitled “Assessment of Philippine Coal Bed Methane” submitted to DOE in 2005 identified several coals, from lignite to semi-anthracite, in the country that possess large gas storage capacity compared with coals in known coalfields in the US. With the gas holding capacity of coals in the Philippines coalfields known, a detailed study was proposed to determine the amount of Coalbed Methane (CBM) resource and prove recoverable reserve potential. Coalbed methane is an emerging natural gas resource that has evolved worldwide as an alternative clean-burning fossil fuel.

Research on coal market development with the view of providing sustainable market for local coal is likewise being undertaken. This activity aims to stabilize the domestic coal mining industry to enable the local coal production to compete with imported coal from Indonesia, Australia and other coal exporting countries.

What are the investment opportunities in the coal sector?

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 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.

Investments for the exploration and development of indigenous coal covering the period 2005 – 2014 are estimated at PhP 162.3 billion. Of the said amount, PhP 45.6 billion will be used to develop potential areas in Luzon, PhP 77.4 billion for Visayas and PhP 39.3 billion for Mindanao.

What are the incentives under the Coal Operating Contract (COC) System?

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
• Entry of alien technical personnel
• Recovery of operating expenses

How does coal use affect the environment and what are the mitigating measures?

The combustion of coal and other fossil fuels emits oxides of Sulfur (SOX) and Nitrogen (Nox) as well as Carbon dioxide (CO2) to the atmosphere but these are minimized or eliminated using clean coal technologies such as fluidized bed combustion, flue gas de-sulfurization and electrostatic precipitation.

How do you plan to address mounting opposition on coal?

In order to address environmental concerns, the DOE shall encourage operation of coal power plants that utilize clean coal technologies. There will be efforts to educate the public on the real impact of and the available mitigating measures for coal operations.