LookAtVietnam Bridge - As the demand for coal has already exceeded supply, the coal sector is now faced with a big challenging task of implementing its long-term development strategy to ensure the nation’s energy security.

According to statistics, Vietnam needs at least 4,000MW every year from now until 2025 for economic production and household consumption. While the potential for developing hydro-electric power plants is overexploited, plans to build thermal-power stations are already in the pipeline.

The Government has approved a scheme to build 7 big thermal power stations in Mong Duong, Nghi Son, Vinh Tan, O Mon, Tra Vinh, Soc Trang and Thai Binh. It is also considering similar other thermal power stations in Hai Duong, Quang Ninh, Nghe An, Thai Nguyen, Phu Tho, Lang Son, Thanh Hoa and Binh Thuan provinces.

This means that Vietnam needs a great deal of coal to run these plants once they are operational. In addition, many other key economic sectors such as cement, paper and fertilizer need coal for production, while the demand for household consumption is also increasing.

The coal sector says that the national demand for coal is estimated at 37 million tonnes by 2010 and this will rise to 308 million tonnes by 2025. In fact, the sector is expected to produce 47 million tonnes by 2010 and only 80 million tonnes by 2025. This means Vietnam will have only 12 million tonnes for export by 2010 and two years later it will have to import coal.

The plan to import coal has been considered by the Government and it has directed the sector to seek out import sources to ensure the supply of coal for future production and household consumption.

Under the 2006-2010 coal export plan, the volume of coal for export will fall from 11 million tonnes in 2006-07 to 10 million tonnes in 2008, 9 million tonnes in 2009 and 8 million tonnes in 2010 to serve the domestic demand.

However, in a report unveiled by the coal sector, 23.8 million out of 40.9 million tonnes mined in 2007 were exported, an increase of 10.5 percent against 2006. Other sources said that more than 32.5 million tonnes were shipped abroad in 2007, tripling the Government’s authorised level.

In the first half of this year, the sector produced 21.5 million tonnes, of which more than 11 million tonnes was exported. The export volume was even 1 million tonnes more than the Government’s authorised level for the whole of 2008. This excludes the illegal export of a large amount of coal across the border, which has become a hot issue for the coal sector in the past six months.

Why did the coal export volume keep rising? Why did the sector not follow the Government’s instructions? Many such questions have been raised amidst the growing public concern about the future of the country’s energy security. It’s worth mentioning that the coal sector itself is also meeting difficulties in importing coal and is even investing in coal mining overseas.

There is only one answer to these questions and that is the practice of “living from hand to mouth”. For the immediate interests, the coal sector needs capital for re-investment. It must now mine coal 500m deep under ground or even deeper in Quang Ninh province. It has also expanded coal mining to other areas in the Red River delta.

Paradoxically, while the sector pockets big cash from exports, the national economy incurs a loss, as the price of coal for domestic consumption is much lower than that of coal for export. Currently, the power sector purchases coal at a cost of only US$20/tonne while coal export prices fluctuate at between US$50-60/tonne. Therefore, the coal sector is implementing a long-term export plan under which it exports more than 20 million tonnes a year. Meanwhile, the exploited volume fails to meet domestic demand.

The coal and power sectors have recently experienced tough negotiations with foreign partners to import coal at a cost of US$160/tonne, tripling Vietnam’s export price. Vietnam would have lost billions of US dollars if it has exported coal at a price of US$50/tonne since early 2007. In addition, every year the exported volume is 10 times higher than 3.5-million tonnes that Vietnam has tried very hard to reach an import deal with Indonesia.

The Vietnam National Coal Mineral Industries Group (Vinacomin) has proposed that coal be included on the list of State-control monopoly products and preferential policies be devised to stimulate coal mining in Quang Ninh province and the Red River delta. These are viable solutions, because only when coal mining is stimulated, can the coal sector ensure an adequate supplies for the national economy.

As coal is a non-renewable and limited resource, it is regarded as the nation’s “black gold”. Without proper management methods, Vietnam will continue to lose billions of US dollars from coal exports and more importantly, it will not have coal for key economic sectors and household consumption.

The crux of the matter is that the sector should immediately implement the coal export scheme approved by the Government to reduce the export volume and later stop exporting the product to ensure the nation’s energy security.     

(Source: VOV)