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Why coal exports through the Pacific Northwest may not happen
The Pacific Basin is already crowded. The four largest coal producers are located in the region. Russia is planning to move more coal into the Pacific Basin. This could cause the oversupply to increase.
China accounts for almost half of the world’s raw steel production. In 2013, China produced 779 million tons of steel. This was a 7.5% increase over 724 million tons in 2012.
Coal is losing market share to renewable and nuclear energy sources. However, it could also lose some share to natural gas in the long run. Recently, Russia and China started working on a natural gas pipeline.
Coal is the cheapest fossil fuel, but it’s also the most polluting. With its massive electricity generation capacity—mainly coal-fired—China emits the most carbon dioxide in the world.
Coal accounts for less than a 20% share in electricity generation in Russia (RSX). Coal production is much higher than the domestic demand. As a result, most of Russia’s thermal coal is exported.
Apart from shipping companies, coal producers (KOL) around the world benefit from China’s coal imports. However, competition in the Pacific market remains steep.
Over the years, China has built a massive mining capacity. It extracts as much coal as it can. The current mining capacity stands at 4.2 billion tons—four times greater than the U.S.
In 2013, China produced 3.7 billion tons of coal. State-owned enterprises—like Shenhua Group and ChinaCoal—make up a significant part of China’s total coal production.
Thermal power will continue to hold a dominant position in China’s energy mix. However, China is betting big on nuclear, wind, and solar energy. It plans to add 132 GW of nuclear capacity by 2030.
The majority of China’s power transmission is carried out by the government enterprise State Grid Corporation of China (or SGCC). SGCC covers 88% of China’s territory—spread across six separate grids.
70%—or 883 gigawatts (or GW)—of China’s massive 1,260 GW capacity is fired by fossil fuel. Most of the fossil fuel is coal. China is the largest coal consumer and importer in the world.
China’s installed capacity has grown 10.8% every year over the last decade. It adds 80–90 GW every year—this is equal to the United Kingdom’s entire installed capacity.
China (FXI), by far, consumes the most commodities—like coal, iron ore, and cement—in the world. With an installed capacity of over 1,260 gigawatts (or GW), China ranks first in terms of installed electricity generation capacity.
On September 12, the U.S. imposed sanctions on Russian hydrocarbon producers—Gazprom, Gazprom Neft, LUKoil, Surgutneftegaz and Rosneft. Gazprom is the largest energy company in Russia.
According to Baker Hughes estimates, the U.S. rig count currently exceeds the total number of rigs in the rest of the world combined. Until August 2014, there was an average of 1,904 active rigs in the U.S.
Natural gas liquids (or NGLs) are hydrocarbons. They’re produced when “wet natural gas”—primarily methane and condensable heavier hydrocarbons—is processed in natural gas plants.
Since mid-2011, natural gas production increased even though the number of natural gas-targeted rigs has fallen. Dry natural gas production is set to increase to 69.7 billion cubic feet per day (or bcf/d) in 2014.
For the week ending September 26, 2014, the number of horizontal rigs increased by six to 1,347—compared to 1,341 last week. This is the highest horizontal rig count on record.
The number of offshore rigs was unmoved at 62 in last week’s rig count. Last week’s offshore rig count continued to stay close the four-year high attained on September 12, 2014.
The Permian Basin is located in western Texas and southern New Mexico. The name “Permian Basin” usually refers to a combination of the Delaware Basin and the Midland Basin.