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Asian Petroleum Review : Jan-March 2011
8 "The global coal industry has undergone a mas- sive transformation because of China's demand and the import appetite can only grow bigger in the long term, " said Mark Pervan, chief resource analyst at the Australia and New Zealand Bank. As shallow-lying resources become depleted, miners are burrowing as deep as 1,500 metres in search of coal. Some experts predict China's coal reserves could actually run out. "China accounts for around 14 percent of global coal reserves but its share of global coal con- sumption is already over triple that at 47 per- cent, which is unsustainable, " Hong Kong-based brokerage CLSA Asia-Pacific Markets said in a report. According to state news agency Xinhua, Beijing is considering capping domestic coal output at an annual 3.6-3.8 billion tonnes in the 2011- 2015 period. Analysts said the cap was unrealis tic. "If demand is higher than the cap, then China is not going to start shutting down facto- ries and turning off lights in cities. They are go- ing to try to satiate that demand, " said Sindica- tum's Creedy. At least in the short term, production could well exceed any proposed cap. "We expect coal out- put to be higher than that (3.6-3.8 billion). We are seeing a lot of non-coal companies produc- ing coal and they've never done that before, " said Angello Chan, analyst with Bank of America Merrill Lynch. But experts see China's production inevitably slowing down. Data from energy major BP Plc shows China can only maintain current rates of production for 38 years before its 114.5 billion tonnes of proven reserves are stripped bare. That compares with 245 years in the United States and 105 years in India. China has already started to import large quantities of coal. "As they import more and more, it is impacting on world coal prices, and if they suddenly want more, then the price is going to rocket. There will be a shortage of ships and they have a limited boat ca- pacity, " Creedy said. EFFICIENT INDUSTRY Some suggest China's energy plight has been exag- gerated. Economic growth - -- and energy demand - - could slow. And a newly consolidated mine industry is expected to increase output. "An expansion phase will naturally come after con- solidation. When 8-10 large firms start to have at least 100 million tonnes of capacity per year, with massive economies of scale and sophisticated tech- nology, it would be no sweat for them to ramp up output by at least 10 percent each year," said the chief of a private coal firm. "The central government may have aspirational output targets, but they even- tually have little control over these mines because these mine bosses have powerful political backing from factional groups," he said. He declined to be identified as his firm is planning a listing. China's attempts to boost energy efficiency could also relieve pressure on coal supplies. Thomson Reuters Asia Petroleum Review A coal-burning power plant on the outskirts of Zhengzhou. REUTERS/Donald Chan