Coal

Coal

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, graphite-like 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 44.5% in 2015. But, local demand for coal is not limited to power generation. In 2015, the cement industry utilized 15.22% of the country’s coal supply, 5% went to other industries such as alcohol, sinter, rubber boots, paper and chemical manufacturing, fertilizer production and smelting processes.

The coal industry has never been so robust than these past years. From a historical yearly average of 1.5 million MT, local coal production began increasing at a steady rate since 2002. Within a span of 13 years, coal production has more than quintupled to an astounding 8.17 million MT in 2015, with a production high of 8.4 million MT in 2014. This increase in production is attributed to the conversion of exploration contracts into production agreements, as well as the development of production contracts into full blown operations. 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 December 2015, our in-situ coal reserves amount to 470 million metric tons or 19.7% of the country's total coal resource potential of 2.39 billion metric tons.

Continuing Exploration and Development Program

Recent upswing development in the coal industry encouraged increased interest in coal exploration. There are 30 Coal Operating Contracts in the Development and Production phase, 48 Coal Operating Contracts in the Exploration phase, and 83 small-scale coal mining operators as of July 2016.

To supplement these exploration activities, the Coal and Nuclear Minerals Division (CNMD) continuously conduct reconnaissance to semi-detailed mapping of under explored coal areas.

The Philippine Energy Contracting Round (PECR) 5

PECR 5 was launched on 09 May 2014, and offered 15 prospective coal areas in Mindanao. 5 companies submitted a total of 9 applications for 7 coal areas. The 7 coal areas applied for were located in the provinces of Agusan del Norte, Agusan del Sur, Surigao del Sur, Zamboanga del Norte, and Zamboanga Sibugay. On 18 December 2014, all 7 Coal Operating Contracts were awarded to companies who satisfactorily complied with the technical, legal, and financial requirements of the Department of Energy.

Investment Opportunities

It is but very timely to invest in coal facilities as the price of oil continues to rise with 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.

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.

Some Clean Coal Technologies presently being utilized are:

(1) Coal washing/preparation – This is a wet method of cleaning low-rank coal by separating coal from the wastes using their specific gravity differences. This method reduces ash and sulfur contents of coal and increases its heating value.

(2) Circulating Fluidized Bed (CFB) Combustion Technology – Crushed coal is fed with crushed limestone or dolomite to a fluidized bed furnace with a bed material (silica sand). At a controlled furnace temperature of 800-950 C, the limestone or dolomite due to its reactive CaO or MgO absorbs and reacts with SOx gas, thereby reducing the formation of this gas. At the said temperature, NOx emission is also controlled.

(3) Flue Gas Desulfurizer (FGD) - This equipment is installed to control the SOx emissions by spraying or scrubbing the flue gas with limestone slurry whose MgO content absorbs and reacts with SOx to form a stable substance (gypsum).

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 areas
  • Recovery of operating expenses

Click to read more on : PECR5

Click to read more on : Coal Laws and Issuances