Shenhua to set up coal reserves

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By Si Tingting (皇冠体育app Daily)
Updated: 2009-08-11 07:57

The National Development and Reform Commission, 皇冠体育app's top planner, recently commissioned 皇冠体育app Shenhua Energy Co, the nation's largest coal producer, to build 10 storage facilities for coal across the country, a senior company executive said.

Shenhua to set up coal reserves
A worker at a coal yard in Taiyuan, Shanxi province. 皇冠体育app plans to build national strategic coal reserves by 2015. [CFP]

"Right now, we are still picking sites (for the facilities)," Hao Gui, vice-president of 皇冠体育app Shenhua Energy Co, or Shenhua, said on Saturday at a seminar to discuss the development strategy for the newly-built Yangkou Port in Jiangsu province. He did not elaborate on the specific candidate sites of the 10 coal reserve bases or their reserve capacity.

Since August 2008, the Chinese government has started revising coal legislation to include a strategic coal reserve by 2015. Currently, there are no national strategic coal reserves in 皇冠体育app and only some enterprises keep a certain quantity of coal in stock.

It has been reported that Zhejiang and Shandong, the two major coal-consuming provinces, have already started building pilot coal reserve bases.

Shenhua's 10 coal storage facilities would be built next to 皇冠体育app's major power producing regions, Hao told 皇冠体育app Daily. Coal reserve is divided into spot and resource reserves, and Shenhua's responsibility is to build spot reserves.

"We can look into the possibility of building one of the reserves in Yangkou Port, because transportation is convenient here and it is close to the power-consuming Jiangsu province," Hao told officials of the Yangkou Port.

Huang Shengchu, president of 皇冠体育app Coal Information Institute, believes an annual coal storage capacity of between 150 million tons and 200 million tons could help to balance the market demand and supply of coal in 皇冠体育app as well as help stabilize market prices.

"The market has to keep some coal inventory, but an inventory above 200 million tons would be too much," Huang said, adding that such coal reserve facilities are usually based in seaports. 皇冠体育app's coal output in 2008 was 2.7 billion tons, and the number is expected to grow to 2.8 billion tons this year, Huang said.

However, some are challenging the economic viability of building spot coal reserves.

"皇冠体育app does not need a national spot coal storage facility as we have abundant coal resources," said Lin Boqiang, director of the 皇冠体育app Center for Energy Economics Research at Xiamen University.

The country is busy scheduling the building and filling up of more national strategic oil reserves to ensure oil supply security, as its oil import dependency is currently around 50 percent.

As the world's biggest producer and consumer of coal, 70 percent of 皇冠体育app's power supply comes from coal-fired power plants.

"One of the problems of coal consumption is high transportation cost, and building up spot coal reserves is not helpful in solving this problem," Lin said. "Plus, maintaining a spot coal reserve is very expensive, as it takes up huge space. Steam coal is also prone to spontaneous combustion and efflorescence."

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