The Coal and Atomic Energy Industry in Kazakhstan: the Current Situation and Future Outlook
Vladimir Shkolnik, Minister of Energy and Mineral Resources of Kazakhstan, answers questions from our magazine
The Ministry of Energy is monitoring the coal and uranium industry in Kazakhstan alongside the oil and gas complex, whose role has been discussed a great deal recently. What can you say about the development of these industries today?
Kazakhstan is one of the ten largest coal producing and exporting countries. It is the leading CIS country in per capita coal production. These results have been achieved due to measures taken in 1996-1998 which attracted strategic investors into the coal industry.
The acquisition of large coal producers by foreign investors improved their management, allowing these enterprises to fit into the market. To provide a sustainable market and production profitability two vertically integrated structures have been created: coal-metal and coal-electricity. Thus, the coal business and metal production of Ispat-Karmet, and the coal business and power utilities of Kazakhmys Corporation, Eurasian Energy Corporation and Bogatyr Access Komir have now been restructured.
The government also closed a number of unprofitable Karaganda coal mines, spending about 5.4 billion tenge from the budget over eight years. The special state enterprise Karagandalikvidshakht and its contractors have shut down eight mines to date, with another five to be liquidated by 2008.
Reorganization measures have saved the country’s main coal producers, and sustained fuel production at the level of consumer demand, thus achieving the immediate and short-term goals. The key staff have remained at their jobs, and problems over wages have been settled, all of which has certainly had a positive influence on the coal industry.
This industry has gradually been recovering and increasing coal production since mid-1999. About 66.6 million tonnes of coal have been produced during the last ten months, which is 8.3 million tonnes, or 14.3%, more than in 2002. On this basis it is expected that coal production will reach 80 million tonnes by the end of 2003, about 85 million tonnes by 2010, and 95 million tonnes by 2020.
So, in spite of a significant decrease in coal production during recent years, the coal industry has maintained its potential. Today, coal industry ensures generation of 79% of electricity and almost 100% load of chemical-recovery facilities, and satisfies all public and municipal fuel demand.
The raw material base of the coal industry and the production potential of current coal producers completely satisfy domestic and foreign effective demand for coal. About 300 coal fields have been discovered, with in-situ reserves making up 283 billion tonnes, and balance reserves of 39 billion tonnes.
In terms of uranium, Kazakhstan is the fourth largest producer in the world, and has every chance of becoming the third. This degree of certainty arises from the country’s huge raw material potential (we have 19% of the world’s uranium) and the scientific and technical potential of that industry. Kazakhstan produces uranium with the help of underground leaching, which increases profitability, does not damage the environment and does not directly involve people in the process.
In 2002, the Kazatomprom National Company established two joint ventures, Katco (with French Cogema) and Inkai (with Canadian Cameco), both of which have successfully started to produce uranium. In order to develop the Zarechnoye field a joint venture has been established with the Russian Ministry of Atomic Energy. We are also negotiating with Japan and China on the joint development of Kazakhstani uranium fields.
You mentioned that Kazakhstan is a leading coal and uranium producing country. But are the enterprises producing and exporting these products able to maintain their position? Are there any hindrances to product promotion? Have any new coal consumers appeared on the domestic and foreign markets?
Currently, coal production in Kazakhstan is concentrated around eight enterprises belonging to a number of large corporations. The largest of these are Bogatyr Access Komir, Eurasian Energy Corporation, Ispat-Karmet and Kazakhmys Corporation.
About 30% of Kazakh coal is exported, mostly to Russian power stations. In addition, the geographical range of international coal supply has expanded dramatically in 2003: Romania, Poland, the Czech Republic and Turkey now all consume Kazakh coal. Taking into account the production potential of the coal industry, Kazakhstan should be able to increase coal exports to 30-35 million tonnes very soon.
There has been a decrease in exports of Ekibastuz coal to Russia. In this situation it is only fair to admit that Ekibastuz coal has high ash content and a low heat value (compared to coal from the Kuznetsk basin). Until now this has been compensated for by its low price. However, the heavy cost of rail transport through Russian territory influences the competitiveness of our coal on the Russian market. The competitiveness of Ekibastuz coal was greatly reduced when the 25% discount for coal transport by rail through Kazakhstan to Russian frontier stations was cancelled in 2001.
To reduce these negative trends, the Ministry of Energy and Mineral Resources has developed and approved the Ekibastuz Coal 2003-2005 programme, which addresses the role of the Ekibastuz coal basin in the fuel and energy balance of the country. An Integrated Project for the Development and Exploitation of Ekibastuz Coal Field to 2015 will be approved by the end of 2003. These programmes will permit efficient use of coal resources, provide a level of coal production sufficient for domestic consumption and export, and preserve markets by maintaining a competitive price for coal.
It happens that 100% of domestic uranium production is being exported. Kazakhstan is the general supplier of fuel pellets for all types of Russian nuclear reactors, the pellets being produced by Ulba Metallurgic Plant (UMP). This unique plant used to service military needs in the days of the USSR, but it has been completely restructured for peaceful purposes.
UMP produces beryllium, one of the most important materials in nuclear technology. Beryllium is used in the atomic energy, aerospace, electronic and oil industries. Two new beryllium products have been introduced at UMP. These are alloys produced by carbothermic reduction and beryllium bronze, which constitute 70% of the beryllium market.
The production of tantalum/columbium at UMP is also noteworthy. The development of electronics is increasing the demand for tantalum powder on the global market. It is used in capacitors in computer microchips and cell phones. This industry consumes about 70% of the world’s tantalum.
As a part of UMP, the tantalum plant can provide the background for scientific research, technological development and the production of all tantalum products (ingots, chips, roll) and associated columbium items. It is the only plant in the CIS with this kind of potential. It is expected that tantalum powder and wire for new generation capacitors will start to be produced in 2003.
In order to broaden the market, Kazatomprom, Russian Minatom and Ukrainian Mintopenergo have established a joint Ukrainian-Kazakh-Russian enterprise for nuclear fuel production with equal 33.3% shares. This joint venture will produce nuclear fuel for VVER-1000 reactors.
The enterprise will provide UMP with long-term orders for production of fuel pellets for Ukrainian nuclear stations. UMP will produce the pellets, the TVEL concern will produce the fuel assembly, and the National Atomic Energy Company of Ukraine will produce zirconium rods for the fuel assemblies.
The fuel assemblies will be supplied to Ukrainian atomic power stations (the country has more than 20 such stations). According to Kazatomprom, Ukraine needs about 300 tonnes of fuel pellets annually.
Another joint venture by Kazatomprom is BerillUM, established together with the Moscow non-ferrous metal processing plant, which will help Kazakhstan to supply its flat rolled beryllium bronze to Russian and foreign markets.
What innovative technologies have already been introduced into the power industry in order to enlarge the processing of mineral resources?
The use of alternative and renewable energy sources, including coal seam methane, is one of the current development trends in the fuel and energy sector of Kazakhstan.
Integrated development of gas-bearing coal fields enables coal to be won along with this excellent energy resource, which is the most accessible, cheap and environmentally safe alternative gas fuel in the world.
The western and central coal-producing regions of Kazakhstan can easily supply themselves with gas fuel from the methane resources found in coal fields. I am referring primarily to the Karaganda and Pavlodar regions.
The huge gas deposits in the Kazakh coal fields make it possible to organize commercial production of coal seam methane on a wide scale. The methane reserves in the Karaganda basin exceed 550 billion cubic metres, and 75 billion cubic metres at Ekibastuz. This is enough for 70-80 years of large-scale production at 800 metres depth. If the production depth were increased to 1,200 metres, the reserves could last as long as 100 years.
The production of synthetic liquid fuel is another goal of integrated coal processing. It is planned to build a mini-plant on the basis of the Kenderly coal and shale field in Zaisan district (East Kazakhstan), which will process black and brown coal and shale to produce of synthetic liquid fuel, lubricants and paint materials.
Are there any plans to build new facilities or increase the capacity of existing power plants utilizing traditional energy sources alongside alternative and nuclear ones?
The growing energy demand caused by the increase in domestic electricity consumption, also the expansion of electricity exports, is encouraging direct investment in the modernization and construction of power plants.
There are some large power plants in the northern area of Kazakhstan’s energy system that require modernization (including the Ekibastuz GRES-1 and Aksu power plant).
The joint Kazakh-Russian enterprise established on the basis of the Ekibastuz GRES-2 power plant is allowing a third 500-megawatt unit to be completed. This will cost US$190 million.
It is expected to create new facilities running on oil-well gas to increase electricity production in the west of the country.
New power plants to be built in West Kazakhstan will utilize a supercharged boiler cycle to generate electricity, because a given volume of flared gas produces 1.4 times more electricity using this method. The total investment in building the new combined-cycle plants will make up about US$1,800 million by 2015.
A substantial power shortfall may occur in southern regions by 2015. To avoid this, existing power plants will be rehabilitated and a few new plants built in Almaty and South Kazakhstan regions, under projects valued at US$5 million and US$1.68 million respectively.
Wind, solar and geothermal power plants utilize renewable power sources.
The use of wind power is the most promising area of the long-term programme for energy development in Kazakhstan. It is expected that wind power plants will be built in the Jungar Gates and Shelek corridor (Almaty region).
A 5-megawatt pilot wind station is being built in the Jungar Gates under a joint project with UNDP, the Global Environment Facility, and the government of Kazakhstan.
The Kazakh government has devised a strategy which envisages two directions of development for the wind industry:
• to establish a wind-power system, i.e. a large-scale wind industry on the basis of “wind fields” with 500-1,000-kilowatt wind facilities in the most promising regions;
• to establish a small-scale wind-power system, i.e. build isolated wind stations of smaller capacity equipped with standby generators of equal capacity to supply electricity during windless or low wind periods, situated in remote power supply zones (where consumers are located at a distance from the electricity grid).
Kazakhstan also possesses promising territory in terms of solar energy. The main obstacle preventing this energy source from being developed is the need for heavy investment. Solar plants cannot compete with traditional ways of generating power, so it would be wise to use them to produce thermal energy (hot water and heating).
An analysis of the country’s geothermal sources has shown that they also have inadequate potential and quality. Therefore it would be better to use geothermal energy for hot water supply, heating and the greenhouse industry.
The lack of electrical and thermal energy, an absence of fossil fuels, and the considerable uranium deposits in the southern regions make it possible to establish a national nuclear industry in that area. One of the options under consideration is to build a nuclear station in Balkhash.
How is the integration of energy sector progressing in EurAsEC? What can you tell us about the prospects for co-operation in this area?
Co-operation between EurAsEC members in the sphere of power industry is aimed at accelerating integration and developing the concept of creating a common inter-state energy market.
The Energy Policy Council of the EurAsEC Integration Committee has established a commission that will have to form a common power market for the EurAsEC countries and develop a strategy for 2003-2004 that will solve the most urgent integration problems in the power industry, including:
• Stable parallel operation;
• Mutually beneficial power transit over the Community’s power grids;
• Joint construction of new power facilities;
• Energy saving.
Current analysis of market relations among the EurAsEC member-states shows that there is great variation in the levels and speed of reform in their power industries.
At present, on the basis of governmental agreements on parallel operation of the CIS energy systems, the EurAsEC countries are trying to establish market interaction mechanisms aimed at providing stable parallel operation of their systems.
We believe that there are several important reasons for developing a conceptual basis for establishing an inter-state EurAsEC market:
• to bring the different levels of power industry reform into balance and liberalize the domestic energy markets of the EurAsEC states;
• to develop a conceptual framework for an inter-state energy market in the EurAsEC states;
• to harmonize the legal frameworks of the EurAsEC countries in order to allow companies from other countries to access the domestic energy markets of member states;
• to define the time scale and limits for a gradual opening up of the home markets in the EurAsEC countries;
• to create conditions for easier access by companies from one country to energy transit services over the power grids of another on a contractual basis.
A joint effort will be needed by all the EurAsEC members in order to achieve these goals.
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