Deputy Minister of Energy of the Russian Federation Sergey Mochalnikov.
Russia is one of the world’s leading coal producers and exporters. The reserves are gigantic, there is a great demand. But a lot of it comes down to logistics. How has the coal industry been rebuilt due to sanctions and embargoes? Is there potential to increase production? And how to deliver coal to consumers in the current conditions? Sergey Mochalnikov, Deputy Minister of Energy of the Russian Federation, spoke about this and not only at the Komsomolskaya Pravda study at the International Economic Forum in St. Petersburg.
– What is the current situation of the coal industry? How much do we produce, how much do we export?
– In total, we have more than 500 million tons of coal mining capacity per year. Last year we produced a little over 440 million tons, the same as in 2021. We consider this to be a good indicator. Export – 50% of this volume, a little more than 220 million tons. It is export that has been the engine of development for many years. Coal companies have always seen their main market in the Asia-Pacific region. Since 2012, with the direct participation of the Ministry of Transport, with the support of Russian Railways, the development of the Eastern test site has been carried out. So one of the drivers was the coal industry, when they said that the future was in the East, in the global South. Because coal is a relatively cheap resource, it is readily available. And at the same time it can be found, bought. The Russian Federation is ready to present it according to quality, at the best price.
– That is, in fact, coal miners did not switch to the eastern consumer in the last year, as many other industries had to do?
– Until 2022, our East-West ratio was also 50 to 50. But since August last year, after the introduction of the embargo, our products left all Western markets. The Asia-Pacific region and the global South are now fully becoming its main consumer. Our original consumers remain in the Atlantic: countries in Africa, the Middle East and Turkey are strengthening their position as a consumer of Russian coal. But now the focus has finally shifted to the Asia-Pacific region and Southeast Asia.
– In the Ministry of Development of the Far East they said that we can take a lot, but there are problems with exporting to the East. It does not give a “narrow” neck on the railway. How much can you estimate the volume of under-export of mined coal?
– Let’s not count the loss of profit. Because it can be considered in different ways. It will be more correct in terms of physical volumes. Only our big companies had guaranteed contracts, which would be one hundred percent paid, for an additional 80 million tons. This was for 2022. The vast majority of these volumes is the Asia-Pacific market.
– What do colleagues from the Ministry of Transport and Railways of Russia say? To be fair, the railway is gradually increasing volumes and optimizing the existing transport network. But is there any potential for more active growth in transported volumes?
– It’s not just potential. There is a presidential order and a government decree. The first stage of the BAM expansion is now planned to be completed. The second stage of the expansion of the Eastern test site is scheduled to be completed in December 2024. The Ministry of Transport and the Russian Railways are trying to speed up their expansion as much as possible. Therefore, the cargo capacity will increase significantly, from 158 million tons in 2023 to 180 million tons. However, this is 20 million tons for the entire cargo, and only the need for coal is about an additional 100 million tons, and these 100 million tons will close excess port capacities in the Far East.
– Do we have other ways?
– There are always ways. The question is its value. Either you gain in cost, you lose in speed, or you gain in speed, you lose in cost. But sometimes it happens that there is neither one nor the other. Coal companies quite actively use the South and North-West ports for deliveries to Asia-Pacific countries. When the economy allows, they actively use this route. But here all the components that affect the final cost and profitability of sales are important.
– Can the Northern Sea Route, which has been talked about a lot in this forum, help here?
– Maybe. We see that the ice sheet is completely cleared in the summer. It is possible to escort without icebreaker escort. You definitely need to use it. But for that, it is necessary to stimulate the economy of all the participants in the process so that coal is used massively, including for NSR.
-What problems have coal companies faced because of the sanctions? And how were they able to solve them?
– All branches of an industrial nature faced problems. The coal industry is no exception. And they all get through them in roughly the same way. Something that they try to produce as much as possible at home. Spare parts, consumables. They are looking for something, buying a replacement (spare parts and assemblies) in friendly countries. They are looking for a replacement for all the equipment both in the domestic market, which is produced in our country, and in the external circuit, which is produced in countries with which we have good neighborly relations.
– What maximum production can be expected in 2030 if the bottlenecks are opened?
– I think, if you look in 2030-2035, then this is in the region of 300 million tons of exports to the East. Total production is in the region of 550-600 million, but here the problem is largely not with us. Delivery question. The production potential: we can handle a billion. We have new fields in the Far Eastern Federal District, which can be developed well, have short leverage. Here the question is exclusively in logistics, in transport. We have a lawsuit. Russian coal has good quality characteristics. We have such a wide palette that we can provide coal for any production required. For energy, for metallurgy, for the foundry industry, for the construction industry, for coal chemistry, for the chemical industry.
– It is often said that coal is the energy of the last century. Will it turn out that the demand in the world will fall?
– It all depends on the horizon. By 2100, we will definitely have new technologies. It will be possible to obtain cheap electricity in large quantities. I do not know what. From what cold fusion is invented, small modular reactors will learn to contain hydrogen, solar panels will become highly efficient, or something else. But it definitely will. In terms of obtaining energy after 2050, we will have a transition, we should have another industrial revolution, we will receive cheap and environmentally friendly energy. At the same time, the metallurgy and foundry industry is much more conservative, it has been around for more than a century, and technologies are improving much more slowly. So there will definitely be a demand for our coal.
SPIEF 2023 takes place from June 14 to 17 in Saint Petersburg. According to the Roscongress Foundation, more than 17,000 people from 130 countries and territories participate in it. The main theme of the forum is “Sovereign development is the foundation of a just world. Let’s join forces for the sake of future generations.” Komsomolskaya Pravda is the official media partner of the event.