Coal imports in East Asia

I saw these interesting charts from Index Mundi. Data until 2013 only but useful nonetheless. Source is US EIA. The medium-users in East Asia — MY, TH and PH.

coal1

https://www.indexmundi.com/energy/?country=ph&product=coal&graph=imports

The medium users, TW and HK. VN is a small user but there was a huge uptick in importation starting 2005.

coal3

And the big coal users in East Asia — China, Japan and S.Korea.

coal2

So claims like “East Asia coal use has declined” are not true. Asia needs cheap and stable electricity supply.

Cheap oil and the OFWs

Last week, I was invited by Kapatiran DLSU, a student organization, plus some development studies classes, to speak on this subject.

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My presentation was divided into two parts, with an open forum after Part 1, before proceeding to Part 2.

Part 1: Cheap oil and gas

  1. Oil and gas, prices and output
  2. Oil and gas, number of rigs vs. production
  3. Medium term outlook
  4. Concluding notes

Part 2: Employment impact

  1. Macroecon, jobs indicators, rich & emerging markets
  2. Global remittances by country
  3. OFWs destination countries
  4. Saudi government finance
  5. Concluding notes

0203

Glut in oil storage is mainly due to fast growth in US shale oil output, from 5-6 M bpd in the previous decade to current 9+ M bpd. An  interesting chart below — as the number of shale rigs decline, output increases. Meaning only high output rigs are running while the smaller output rigs are closed, temporarily.

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US and global demand stabilizing while supply keeps expanding, meaning the supply curve moves to the right. The decline in prices (from P1 to P2) is much larger than the increase in output from Q1 to Q2.

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Yes, no mercy for both Saudi and non-OPEC oil exporters. Both did not cut their output. The uncompleted fracking wells are just closed temporarily.

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U.S. crude oil production (including lease condensate) increased during 2014 by 1.2 million barrels per day (bbl/d) to 8.7 million bbl/d, the largest volume increase since recordkeeping began in 1900. On a percentage basis, output in 2014 increased by 16.2%, the highest growth rate since 1940.

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If already low nominal  prices are deflated or adjusted for inflatio  in to get real prices, it’s down to $20, $17 a barrel.

The same story can be said  of natural  gas. The number of shale gas rigs is declining but the overall output is rising.

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Concluding notes:

* Cheap oil is good. Especially for us oil consumers. Cheaper cost of air, land and sea transport. Cheaper cost for farmers using tractors, harvesters; for fisherfolks; for manufacturing, etc.

* Cheap oil though has negative effect on many OFWs based in Saudi Arabia and UAE.

* Cheap oil hurts dictatorial governments more, many of them in OPEC. Like Saudi Arabia, Iran, Venezuela. Also outside OPEC like Russia.

* Global capitalist competition is good. OPEC oil vs. Russia oil vs. US shale oil and gas vs. others

* Medium term outlook, cheap oil will stay. Something like $40/barrel average for the next few years.

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The  open forum questions centered on the medium term outlook, for how long is cheap oil going to be sustained. Then I continued in Part 2.

Part 2: Employment impact

  1. Macroecon, jobs indicators, rich & emerging markets
  2. Global remittances by country
  3. OFWs destination countries
  4. Saudi government finance
  5. Concluding notes

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Notice that unemployment rate in rich and middle class economies have tapered off, somehow. Meaning the feared dislocation of workers from oil-dependent sectors and sub-sectors could be bloated.

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Fiscal effect on Saudi Arabia — from budget surplus to budget deficit, rising from $14 B in 2014 to $98 B in 2015, highest in Saudi’s fiscal history, despite significant spending cuts. Meaning lower budget for public health, social sectors, physical  infrastructures, etc. Both direct and indirect spending (via private contractors and suppliers).

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I think one indicator if there are indeed “so many” displaced workers now back in the country is the volume of vehicle traffic at NLEX, SCTEX, SLEX. If there is high increase in vehicle volume in 2014 vs 2015, that means more motorists are driving more frequently, the tourism sector in many provinces in Luzon — and the rest of the  country — is booming, thanks to cheap oil.

Governments should not introduce new oil taxes or raise existing ones because that would mean lesser freedom and mobility for the people.

The full 27-slides powerpoint is posted in my slideshare account.

On low global oil prices

* Based on a publication by the Alas Oplas and Co. CPAs, Economic Update, August 2015.

Global oil prices have slightly recovered in recent days, West Texas Intermediate (WTI) for instance went down to as low as $38/barrel in late August, then recovered to $48+, and $46 a barrel as of this writing. Still, these are very low compared to prices 5-6 years ago.

My sister’s accounting and auditing office, Alas Oplas & Co. CPAs, produced its most recent monthly Economic Update, August 2015 entitled Opportunities for Low Oil Prices. Among the data shown there are the following.

Net increase in global oil supply (supply minus demand) has increased from a deficit of 0.2 million barrels per day (mbpd) in 2013 to a surplus of 1.1 mbpd in 2015, and rose to an average of 2.9 mbpd in July this year. That is a huge number. If it is 2.9 million barrels per week, the price should not decline significantly. On the other hand, oil demand by Organization for Economic Cooperation  and  Development  (OECD) countries is declining, from an average of 46 mbpd in 2012-2014 to only 45.4 mbpd in the second quarter of this year.

oil
Non-OPEC supply keeps rising, led by the US then Canada. These are mostly shale oil. Russia is still the second largest oil producer in the world (third is Saudi Arabia). Four ASEAN countries retain their average annual oil output with a combined supply of 2.2 mbpd. Indonesia has left OPEC several years ago.
oil1
source: OPEC
Developing countries like ASEAN members except Singapore can seize this opportunity to further expand and optimize economic growth. For instance, there is low total primary energy supply (TPES), expressed in tons of oil equivalent (toe), and low electricity consumption among developing ASEAN economies. High TPES means higher energy input for agriculture, industry and services sectors.
oil2
The opportunities for them, among others, are the following.
One, higher electricity production at lower prices because oil-based power plants that are used only for peak hours can be made to run more frequently.
Two, the cost of air, land and sea transportation should decline and hence, more people and goods can be transported at lower costs.
Three, agriculture and fishery sectors can benefit as more farmers and fisher folks can afford to use more hand tractors and motorized boats in their work.
Governments, often prodded by the World Bank and IMF to raise oil tax rates during periods of low global oil prices, should not heed these institutions. Low oil prices has better welfare impact on the poor compared to high oil prices due to higher oil taxes.

PH power supply and the AEC

* This is my article for the maiden issue December 2014 of ASEAN Voices, pages 28-31. It is a new magazine based in Jakarta scouring important news and opinions about the region. The pdf copy is posted in slideshare.
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1The Asean Economic Community (AEC) is to begin operations by the end of 2015, as trade, investments, tourism and cultural exchanges are expected to see further increases among the member economies. However, ensuring an adequate and stable supply of electricity at affordable or competitive rates will pose a significant challenge to Asean economies.

It is generally understood that growth in electricity production in the Philippines has been slower than that of its neighbors in the Aseancountries. China, South Korea, Indonesia, Malaysia and Vietnam have expanded their electricity production by five times or more in just two decades, causing some anxiety mixed with optimism, over the potential impact of the region’s fast-approaching economic integration.

Figure 1. Electricity production in Asia, 1990 vs 2011 in billion kWh

2Source: ADB, Key Indicators for Asia and the Pacific 2014, Table 6.1

In the Philippines, a number of reports have claimed that rotating brownouts and power outages will be inevitable in the hot months of March to May 2015, when electricity demand is high and power reserves are thin. The Department of Energy (DOE) has asked Congress to grant President Benigno Aquino the authority to deal with the projected power supply deficit in an emergency.

Figure 2. Power supply-demand in Luzon, 2014-2019, as ofNovember 2014

3Source: Department of Energy (DOE); abridged version

The above medium-term supply-demand outlook for Luzon, the largest island in the Philippines, is based on the assumption that the Required Reserve Margin is a 4% regulating reserve, as well as a contingency and dispatchable reserve requirement. It also assumes that there will be a 4.2% peak demand growth rate in 2015, compared with the current year, based on the observed 0.6 elasticity ratio of demand for electric power, with a projected GDP rate of 7% in 2015. Also, there will be a 4.8% peak demand growth rate in 2016-2020, based on a projected 8% GDP growth rate for this period, and assumed average forced outage or scheduled maintenance, while the monthly percentages of the total available capacity are as follows.

4Figure 3.
However, available capacity calculations and committed projects do not deliver 100% of their rated capacity. Old conventional power plants tend to require more frequent maintenance or scheduled shutdowns, or they suffer from more unscheduled shutdowns. For new renewable sources of energy, such as wind and solar power, their dependable capacity is only some 20% of their rated capacity. Thus, a 100 MW solar or wind plant can deliver only around 20 MW, on average. When there is little to no sunlight or wind, the energy output from these plants is zero or minimal. The DOE’s outlook fails to adequately reflect future dependable supply (FDPS), and so, the true gap between peak demand and available capacity/committed projects cannot be effectively addressed.

For its part, the National Grid Corporation of the Philippines issues alert levels in cases of power deficiencies. “Red Alert,” for instance, means the contingency reserve is near zero, if not negative. Red alerts have already been issued a number of times between June and September 2014, well ahead of the launch of the AEC.

Here are some critical periods in 2014, they can give a preview of supply outlook in 2015.

Actual peak demand this year was 8,717 MW, made in May 21, 2014. “Red alert” have been issued on June 17 (natural gas restriction), June 25 (3 coal plants have unscheduled shutdowns, 1 has derated power), and July 12-13 (natural gas pipeline problem).

Thin reserves were also experienced last September 8-11 (natural gas restriction), last August 30 – September 28 (Sual coal unit 2 maintenance, 647 MW), September 26 – October 25 (Sual coal unit 1 maintenance, also 647 MW).

Figure 4. Detailed view of 2014 and 2015

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Thin reserves, if not power supply deficit, will be most critical on April-May 2015. But big industrial and commercial consumers have back up power.

Metro Manila and Luzon provinces are heavily dependent on a number of power facilities, many of which are already more than 20 years old; hence, they either require more frequent maintenance shutdowns or are prone to unscheduled shutdowns. From 2002 to 2013, only one new power plant was commissioned: the Mariveles GN Power coal plant. The oil barge by TMO is an old power plant that had remained inactive for at least five years and was re-commissioned in late 2013, purely to help prevent brownouts during last year’s Christmas season.

Figure 5. Existing major power plants in Luzon, early 2014

6Source: DOE

(Smaller plants not included in this list. Marked in red are power plants that are 20 years or older.)

So, is the Philippines ready for the anticipated energy demand surge when the AEC begins operations?

If existing and committed power plants are to be relied on, then the answer is no. Many of them are old, and many new plants utilize intermittent sources, such as wind, with low dependable power capacities.

If large industrial and commercial consumers use back-up power, as part of the Interruptible Load Program, then the answer is yes.

However, the latter would drive up the price of electricity, as these large consumers would use their own generators, and the reduced demand in the national grid would have to be compensated. This would come in the form of higher “universal charges” in succeeding months or direct payments by the DOE, using taxpayers’ money.

Still, there are a few solutions that could help expand the country’s power supply capacity.

First, power companies should bring in more peak-load plants, similar to mobile diesel power barges. The drastic decline in global oil prices presents an opportunity to lower the cost of fuel for these power plants and, in turn, lower their power-generation prices. Second, large industrial and commercial consumers can enter the power-generation business, as well. Third, media campaigns can be run to request the public, households and commercial offices to reduce their power demands by using more energy-efficient lights and appliances.

Further, government agencies should limit the bureaucratic red tape involved in getting the permits required to commission and build new power plants. DOE Secretary Jericho Petilla once said that for some projects, about 100 signatures are needed to launch and maintain a single large power plant.

Over the medium term, the government should reduce taxes and royalties for power generation, as these impositions significantly contribute to high electricity prices. The natural gas tax, for instance, amounts to 60% of the net price of gas.

It is equally important to ensure that the trade of liquefied natural gas, coal and oil among Asean countries is further assisted to help boost national and regional power supplies.

More on expensive renewables in Germany

* Originally posted on December 30, 2014.

Another compilation of news reports and charts here, about the costly and unreliable electricity from renewables despite all the subsidies.

(1) From Spiegel International, September 4, 2013.

1Altmaier and others are on a mission to help people save money on their electricity bills, because they’re about to receive some bad news. The government predicts that the renewable energy surcharge added to every consumer’s electricity bill will increase from 5.3 cents today to between 6.2 and 6.5 cents per kilowatt hour — a 20-percent price hike.

German consumers already pay the highest electricity prices in Europe. But because the government is failing to get the costs of its new energypolicy under control, rising prices are already on the horizon. Electricity is becoming a luxury good in Germany, and one of the country’s most important future-oriented projects is acutely at risk.

Even well-informed citizens can no longer keep track of all the additional costs being imposed on them. According to government sources, the surcharge to finance the power grids will increase by 0.2 to 0.4 cents per kilowatt hour next year. On top of that, consumers pay a host of taxes, surcharges and fees that would make any consumer’s head spin.

“On Thursday, a government-sanctioned commission plans to submit a special report called “Competition in Times of the Energy Transition.” The report is sharply critical, arguing that Germany’s current system actually rewards the most inefficient plants, doesn’t contribute to protecting the climate, jeopardizes the energy supply and puts the poor at a disadvantage.

The experts propose changing the system to resemble a model long successful in Sweden. If implemented, it would eliminate the more than 4,000 different subsidies currently in place. Instead of bureaucrats setting green energy prices, they would be allowed to develop indepedently on a separate market…

Becker wants to prevent his clients from having their electricity shut off for not paying their bill. After sending out a few warning notices, the power company typically sends someone to the apartment to shut off the power — leaving the customers with no functioning refrigerator, stove or bathroom fan. Unless they happen to have a camping stove, they can’t even boil water for a cup of tea. It’s like living in the Stone Age.

(2) From Reuters, August 18, 2014

Energy intensive industries in particular have lost confidence in the future of Germany as a business location,” said Thomas Mayer, a former chief economist at Deutsche Bank who now runs the Cologne-based Flossbach von Storch Research Institute. “I think this is a major issue that will burden German industry for years to come.

Good chart, Renewables’ rated capacity vs. actual energy output, cases of the US, UK and Germany, 2008 to 2013. Huge gap between the promise (rated cap) and reality.

(3) From WUWT, RenewableEnergy – Solar and Wind-Power: capital costs and effectiveness compared,  November 21, 2014

3And this,

4The inefficiency of intermittent sources like wind and solar in Germany can be offset by the efficiency of nuke in France and coal in Poland, thus Germany won’t have brown outs. What the renewable fanatics in Germany (and abroad) forgot is that if they shut down their nuke or coal, then Germany will buy power from France, which is largely nuke power. Or buy from Poland, which has huge coal power. Same banana.

See this chart for instance. Germany needs up to 75 GW power on certain hours of the day, but solar + wind can supply a max of 25 GW. On other hours, solar + wind power is… zero, the wind doesnt blow, the Sun doesn’t shine. Subsidize renewables more.

(4) From https://contrary2belief.wordpress.com/2014/11/26/mind-the-gap/ November 26, 2014.

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(5) From NTZ,

Price of power for all EU countries. cents/kWh, 2013. Denmark has the most expensive, Germany (Deutschland) is second.

http://notrickszone.com/2014/12/07/germanys-electricity-price-more-than-doubles-electrocuting-consumers-and-markets/

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And the cost of feed in tariff (FIT) and subsidies, Euro cents per kWh imposed on German consumers. Consumers are happy with ever more expensive electricity? Maybe if WWF and Greenpeace will conduct a survey, “Do you support FIT and more expensive electricity in the PH to subsidize renewables?”, most likely they can produce result like “90 percent said Yes”.

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(6) From WUWT, December 10, 2014

the silverback of the “big four” German energy producers who group the bulk of the country’s conventional and nuclear power production is about to close shop at short notice. The others will probably follow suit.

…both the minister for economic affairs and the chancellor’s office hastily preparing new legislation aiming at enhancing the situation of coal-fired plants by implementing an all-new market design. It will most certainly provide for compensation payments for coal-fired plants forced to turn idle or at minimum load when the grid is clogged by an oversupply of wind and solar energy.

German electric energy prices, already the second-highest in Europe, are increasingly choking off economic growth. More and more key sectors such as the aluminum, steel making and chemical industry are increasingly opting out of investing in the country, turning to regions offering more reasonable energy prices, notably the US….

(7) From NTZ, December 3, 2014

Holger Steltzner at Germany’s flagship Frankfurter Allgemeine Zeitung writes that the Eon move presents the German government with 2 major problems: “It has to make sure that the decommissioning of the nuclear power plants succeeds, and it must explain where the power will come from when the wind doesn’t blow.”

With 23 billion euros annually, the government subsidizes renewable energy that is worth only 2 billion on the market.

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(8) From Business Recorder December 5, 2014.

Coal, not wind or solar, is Germany’s electricity backbone.

Coal generation is still the backbone of German power supply in a country set on moving away from nuclear power and favouring renewable energy over fossil fuels. The country in January to September used hard coal for 43 percent of coal generation, of which 17 percent was hard coal and 26 percent domestic brown coal, industry statistics showed.

(9) From NTZ, December 9, 2014

DIE ZEIT, an influential publication among Germany’s green centre-left, writes, “Germany will not even come close to reaching its climate target despite the massive investment in wind and solar energies….

It’s a blunder with ugly consequences. The Energiewende, as it is now set up, is not making the air cleaner, but dirtier.

(10) From the NYT, December 24, 2014

Dozens of protest groups have sprung up over the past year along the 500-mile path of the project, SuedLink, one of four high-voltage direct current lines that are to carry wind-generated power from north to south.

The lines are described as essential to the success of the country’s pivot away from nuclear and coal power and toward mostly renewable energy. But nearly a year into the plans, the SuedLink project has set off an outbreak of not-in-my-backyard syndrome that threatens to disrupt a linchpin of Germany’s commitment to a lower-carbon future.
Finally, here is the actual electricity production in Germany from November 1-30, 2014 (above) then December 1-30, 2014 (below). Dark blue is fossil/coal and nuke; medium blue is wind, yellow is solar, green is biomass. When the wind does not blow, when the Sun does not shine, electricity output is zero. It is really the “non-renewables” that give stable and reliable electricity to Germany and all other countries in the planet.

9source: agora-energiewende.de 

Bottomline: Governments should NOT intervene in electricity pricing, should NOT force, coerce and arm-twist all other electricity consumers to buy and subsidize from expensive and unstable power sources. Let consumers buy expensive electricity voluntarily so they can put their money where their mouth is. Those who are not convinced of such policy should not be coerced.

Coal power and GDP expansion, any correlation?

* This is my article in in thelobbyist.biz last August 29, 2014.

1Energy is development. The more energy and electricity that an economy can provide for its citizens and private enterprises at low price and stable supply, the bigger is the growth and development potential of the economy.

There is growing public interest for renewable energy like solar and wind and this is fine. But when there is also corresponding high opposition to coal, petroleum and even natural gas, then public policy is distorted, like more taxation of conventional sources, royalties for Malampaya natural gas. While the renewables are guaranteed of high electricity prices that will be passed on to the consumers, via feed in tariff (FIT) for wind, solar, biomass and run-of-river hydro. People do not recognize and appreciate the value that conventional energy sources have played in alleviating poverty and underdevelopment in the developing world.

For instance, there are claims like “more coal energy = more climate crime”, or “more coal power plants are anti-developmental.” How true or untrue are these and similar claims?

Let us check some regional and global energy and economic data. In particular, global coal consumption as this is among the pet peeves of those pushing for more environmental regulations, energy rationing and carbon taxation.

In 2010, the latest comparative energy data of Asian Development Bank’s (ADB) Key Indicators, slightly more than one-third of the Philippines’ total energy production came from coal. For Indonesia, it is 40 percent. Those that are highly dependent on natural gas are Brunei, Singapore, Thailand, Malaysia and Vietnam.

Table 1. Energy Mix in the ASEAN, 1990 vs. 2010, Percent of Total Energy Production

2Source: ADB, Key Indicators for Asia and the Pacific 2013

Here now is the global data for coal consumption.

Table 2. Top Coal Consumers Around the World, 1985 to 2013
(in Million Tons of Oil Equivalent,MTOE))

3Source: http://www.bp.com/en/global/corporate/about-bp/energy-economics/statistical-review-of-world-energy.html

The last column is not part of the original data, added and created only in this paper.

The above numbers show the following:

First, China consumes half of all coal power in the entire planet as of 2013, and the level is almost 5x that of their 1985 consumption level. Its appetite for more coal power seems to remain the same in the coming years.

Second, India and Indonesia join China as among the world’s biggest consumers of coal. India’s 2013 consumption was 4.7x larger than its 1985 consumption. Indonesia’s is 60x much larger. This is because Indonesia has become a major coal producer and exporter in recent years.

Third, by continent and economic group, Asia-Pacific countries consume nearly three-fourth of the total coal output of the planet. Coal however, is least preferred in Africa as well as South and Central America. And it is in the Asia-Pacific where substantial economic growth and poverty alleviation has been happening for the past three decades or more.

Now,  let us review global economic growth over the same period.  The figures for 1995, 2005, 2011 and 2012 are also given for additional information that some readers may wish to see. Data from the International Monetary Fund (IMF).

Table 3. GDP Size Based on Purchasing Power Parity (PPP) Valuation, 1985 to 2013
(in Billions of international dollars)

4Source: IMF, World Economic Outlook April 2014 Database, www.imf.org

The last column is not part of the original data, added and created only in this paper.

Notice that countries highlighted in bold in Table 2 are generally the same as those highlighted in Table 3. Meaning those that consumed coal energy faster also grew economically faster. Of course this is not to say that coal power consumption is the primary or sole important contributor to faster economic growth.

We now lay down the major players in both coal consumption and GDP growth over nearly three decades. Is there any correlation?

Table 4. Ten Fast Coal Consumers and their GDP Expansion, 1985-2013

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Sources: Tables 2 and 3 above.

This summary table shows the following:

* Of the 10 countries that were fast coal consumers over the past 28 years, meaning their 2013 coal consumption were at least 4.5x their 1985 level (in contrast to many other countries with coal consumption multiples of only around 2.5x),   eight have high GDP expansion over the same period. For instance, China and India GDP levels have multipled by 25x; S. Korea and Malaysia GDP levels multipled by nearly 10x, in just 28 years.

* Only Mexico and the Philippines in the above table, fast coal consumers, whose  GDP expansion were the not-so-fast of less than 6x.

*  Singapore and Vietnam economy expanded by 11 – 12x, also very fast compared to many other countries, even though they are not major or fast coal consumers. They are largely dependent on natural gas, as shown in Table 1.

* This crude comparison has established  a general correlation between coal consumption and GDP expansion. Of course other studies would use more sophisticated econometric models to make any categorical statement. But such finding is easy to explain.

Coal is relatively cheap and a stable energy source. A 100 MW coal power plant can deliver 100 MW 24 hours day, not 80 or 60 MW or lower. In contrast, a wind or solar power plant with rated cap of 100 MW will be very lucky if it can deliver 40 MW sustained for 24 hours. Usually their average dependable capacity is only around 20 percent, or just 20 MW only. So how can an economy develop fast if there is frequent brown out, because the power plant can deliver only 10 or 20 or 25% of its rated capacity? Industries and factories, malls and offices depending on wind and solar must have back up generator sets running on expensive fuel, that must run any hours daily, and this will raise their cost of production and operation.

The WWF yearly campaign of “celebrate darkness” even for one hour is idiotic.  WWF gets lots of money from donations and UN or government funding, by promoting irrationality in energy policy.