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COAL INDUSTRY IN MONGOLIA: STATUS AND PROSPECTS OF DEVELOPMENT
Punsalmaagiin OCHIRBAT
Mining Institute of Mongolian State University of Science and Technology, Ulan Bator, Mongolia
Currently, Mongolia ranks 10th place in the world in terms of coal reserves. According to the Ministry of Mineral Resources and Energy of Mongolia, the total explored coal reserves in the country amount to 150 billion tons. The Government of Mongolia considers the development of industrial coal processing industry to be one of the most important strategic directions of its activity. At present, the Cabinet of Ministers of Mongolia has developed a target program for the development and support of projects for the production of synthetic fuel from coal. At the same time, foreign companies are waiting for the government of Mongolia to provide a stable and favorable environment for conducting business.
The article deals with the issues related to the current state of coal industry in Mongolia, as well as prospects for the development of this industry, the expected levels of increase in production and changes in the structure of coal use.
Key words: coal industry, power industry, level of coal production and structure of coal use, demand for coal, coal strip mine
How to cite this article: Ochirbat Punsalmaagiin. Coal Industry in Mongolia: Status and Prospects of Development. Zapiski Gornogo instituta. 2017. Vol. 226. P. 420-427. DOI: 10.25515/PMI.2017.4.420
Current state of the Mongolian coal industry. Currently the Mongolian coal industry is fully a market segment of the Mongolian economy, and coal is the main primary energy resource. As part of the economic transformation of Mongolia, a new economic mechanism is being formed, based on free coal prices, a selective approach to state support measures for coal enterprises, changes in ownership patterns and creation of new organizational and economic structures. The first stage of privatization of the coal industry enterprises was carried out. In connection with the change in ownership type, the management system of the industry is being transformed.
The goal of coal industry transformation in Mongolia is to create competitive highperformance enterprises (joint-stock coal companies) that can meet the demand for coal on both the domestic and foreign markets. The main attention is focused not only on the quantitative increase in coal mining production volumes, but also on technological and economic transformations aimed at improving the quality indicators, and expanding range and ensuring competitiveness of coal products.
At the first stage of privatization, most of the coal enterprises assets went to the disposal of financial groups, coal-energy holdings, which currently control almost all production and sale of coal.
There are 47 coal mines in the Mongolian coal industry, which produce about 33.3 million tons of coal per year [2, 4] (data as of January 1, 2016).
Over the past ten years, we have observed sharp growth and decline in coal production (Fig.1). The increase in production is due to economic growth and increase in the volume of coal exports. The periods of decline in coal production and its exports are caused by the crisis in world economy and the fall in coal prices. By 2013, total coal production increased 6.6-fold (by 28.3 million tons) compared to 2000. This was made possible, in particular, due to the increase in exports and the intensification of open-pit coal mining at the largest deposits.
The proportions of coal production, export and domestic consumption are graphically illustrated by the data shown in Fig.2. It also shows that the volume of coal exports is 2.5 times or more higher than domestic consumption of coal in the country. So, in 2011, while mining 33.1 million tons of coal, 22 million tons were supplied for export, that is 66 % of Mongolia's total coal output.
A characteristic feature of the Mongolian coal industry is the monostructure of mining method. Due to favorable mining and geological conditions of coal deposits, coal is extracted mainly by open-pit method. The majority of pits (40 of 47) produces relatively small volumes of coal, mainly
Punsalmaagiin Ochirbat
Coal Industry in Mongolia...
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q 20000
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e 15000
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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Fig.1. Dynamics of changes of total coal production volume from 2000 till 2015
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□ 2010 25753 25296 18241 7055
□ 2011 33120 30190,6 27326 7464,5
□ 2012 31939 28899 20500 8399,6
□ 2013 33340 26076 18188 8687,9
H2014 24449 27305 19513 8779.6
□ 2015 23979 22125.4 14467.5 6748
Fig.2. Dynamics of coal mining and consumption
for local needs. In five to six of the largest pits, the annual coal output is from 3 to 20 million tons, while more than half of these coal is delivered to power plants and for export.
State of raw materials base of coal industry. The projected coal reserves of Mongolia located in 15 coal basins are estimated at 173.5 billion tons. The balance reserves of coal categories A, B and C1 as of January 1, 2016 amounted to 31.7 billion tons. The exploration of reserves was carried out, mainly, to a depth of 300 m from the surface. Most of the balance reserves of coal are concentrated in the central economic region, where the Umungi and Choyr-Nyalgyn basins are located (Fig.3). The central economic region ranks first in terms of the number of licensed coal reserves of category A + B + C1.
Coal deposits of the western economic region are located on the territory of three aimags and two coal basins - Harhiraa and Mongolian Altai. In this region there are 13 deposits, the balance reserves of which are about 1.5 billion tons of coal. The area of the fields is divided into 40 licensed areas.
In general, the state of coal resources in Mongolia, taking into account modern requirements for reserves, can be assessed as satisfactory. The exploration and prospect evaluation works cover 33 % of the territory of Mongolia at a scale of 1: 50,000 and 85 % of the territory on a scale of 1: 200,000. At the same time, the amount of reserves favorable for development is small, the degree of their
Punsalmaagiin Ochirbat
Coal Industry in Mongolia...
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| | Pit coal | | Brown coal
Fig.3. Location of coal deposits at the territory of Mongolia
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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Fig.4. Dynamics of investments in geologic exploration in Mongolia from 2000 till 2015
Other 25.3%
Building materials 17.5%
Gold 28.5 %
Tungsten 0.9 % Fluor spar 9.7 %
Iron 3.5 %
Coal 14.5 %
Fig.5. Structure of licenses by types of mineral resources dated as 1 January, 2015
1
exploration remains low, and the reserves growth rate is behind the growth rate of coal production. This indicates the need to increase the coal resource base by carrying out prospecting, prospecting-evaluation and exploration works at the expense of the state budget and foreign investment, and at the expense of the operating coal mining companies of the country. This task is currently being solved by issuing a license for geological exploration to national and foreign entities and economic organizations (Fig.4).
Taking into account the limited financial capacity of Mongolia, special attention is paid to attracting foreign investment by creating mutually beneficial conditions for investors and owners of resources.
As a result of the government's targeted policy in 2006, Mongolia entered the list of world's top ten countries in terms of investment in geological exploration. As of January 1, 2015, the share of coal licenses (Fig.5) was 14.5 %. In the country, as a whole, the number of licensed permits for geological exploration in economic regions and aimags is 7-8 % higher than the number of licenses issued for mining operations, which corresponds the set tasks.
Mongolian coals vary considerably in composition and qualitative characteristics, which determine energy, metallurgical, ecological and economic efficiency of their use. The quality of coal is determined by the following characteristics: formation ash content Ad, coal moisture in the formation (as-fired moisture) Wrt, sulfur content in dry coal Sdt, yield of volatiles by weight Vdaf, higher calorific value of coal Qrl.
Depending on the chemical composition, physical and technological properties there are singled out the following types of coal: brown, hard and anthracite. All brown coals belong to rank B. According to the content of as-fired moisture, they are divided into three technological groups 1B -Wrt > 40 %; 2B-3F - 40 %; 3B < 30 %. The following grades of coal are considered as hard: longflame (LF), long-flame gas (LFG), gas (G), gas fat lean (GFL), gas fat (GF), coke (C), coke lean (CL), coke low caking (CLC), lean caking (LC), short-flame caking (SFC), low caking (LC) and lean (L). In the group of hard coals there are singled out coking coals of G, GF, F, CF, C, LC, and SFC types.
The generalized data on the qualitative characteristics of coals of various types in the main coal-mining basins of Mongolia are given in Table 1-3. From the data given in Tables 1-3, we can see:
• Brown coals are concentrated in the eastern and central economic regions. From other types of coal they are distinguished by high ash content, high moisture content, high level of volatilization and low calorific value.
• Hard types of coal are mainly presented by long-flame and gas coal and a group of caking sinter coals.
• Extraction of long-flame and gas coals is concentrated mainly in the territories of the western and central economic regions in the basins of the Mongolian Altai, Harhiraa, Umungobsky (Ho-shoot deposits, Nariinsuhait, Baruunnaran).
• Valuable types of caking and low caking sinter coals are mined in the Tabuntolgoi field at the sites of Baruun, Zuun Zanhi and Uhaahudag deposit.
Table 1
Qualitative characteristics of brown coal group
Coal region, basin Coal type Wrt, % Ad, % Sdt, % Vdaf, % Qri, kcal/kg
Eastern region, Choibalsan basin 1B 7.02 12.67 0.75 44.63 4800
2B 32.6 13.9 0.44-1.23 31.4 2786.5
Central region, Choir-Nialga 3B 15-20 18.8 0.73 47.4 5500
3B 10 13.4 1.0 45 6000
1B 9.2 18.23 0.68 47.55 4029
Table 2
Qualitative characteristics of long-flame and gas coal groups
Coal basin Coal type W, % Ad, % Sdt, % Vdaf, % Qri, kcal/kg
Hangaiski economical region LF 4.81-9.22 27.87 0.72 3.75 6783-8503
3B-LF 0.1-16 20 0.2-2.0 34.2 5010-8130
Ih-Bogd basin GL 7.3 27.4 0.29-2.9 27.71 4366
GFCL 1.6-2.8 5-30 0.16-0.81 28-40 6431-6935
Table 3
Qualitative characteristics of caking and low-caking sinter coal groups
Coal basin, deposit Coal type Wrt, % Ad, % Sdt, % Vdaf, % QH, kcal/kg
Umungobyski basin C 8.5 10 0.6 24.4-31.4 6500-7500
Tabuntolgoi deposit CL 0.5 28.12 0.83 20.89 5764
GFL 11 2605 0.82 26.4 5506
F 0.8 21.69 1.22 26.63 6077
To achieve the set goals in the development of Mongolia's energy strategy and the program for the development of the coal industry for the period up to 2030, it is necessary to conduct studies on the reassessment of the raw materials bases of the current and planned fund of coal-mining enterprises. In coming years, it will be necessary to conduct research aimed at clarifying the qualitative characteristics of coal resources, especially C, CL, CF, which are the basis for metallurgical plants feed.
The need to increase the resource base and capacity of coal industry enterprises is caused by the constantly growing demand for coals of various types of the basic branches of the fuel and energy complex, ferrous and non-ferrous metallurgy, coal-chemical and coke-chemical industries.
Technical level of mining industry. On the open pits of Mongolia, the most laborious technology of overburden and mining operations is used when applying the transport development system. Due to the diversity of mining-geological and mining conditions of open pits, various technological schemes of coal mining and stripping operations are applied. When conducting mining and stripping works on the sections of Mongolia, the drilling rigs SBSH-250 (made in Russia), CAT-6290, Sandvik D45KS, Sandvik DP1500, etc. are used.
The analysis of main performance indicators of the coal pits operation showed that the equipment used is characterized by a high degree of reliability and economic efficiency.
The coal industry development strategy has the following types: defensive, offensive, prosecution. According to the author of this article, for Mongolia, the most preferred strategy is prosecution, which involves the development of the fuel and energy complex with reliance on relatively cheap economic resources to produce products that are competitive in the world market.
Successful implementation of the prosecution strategy requires a program-targeted balanced approach at various levels - public and private, sectoral and regional. At the same time, the basic complex program should be considered as the base one. To implement the chosen strategy for the formation of the fuel and energy complex of Mongolia, it is necessary to develop the following interrelated main programs: «Mongolian coal», «Slate oil», «Coal-chemical industry» (production of synthetic liquid, gaseous fuels from coal), «Uranium», «Oil», «Renewable energy source», «Energy saving», «Reproduction of SME energy».
The coal industry strategy of Mongolia should be aimed at implementing the «State policy in the field of mineral resources», the highest priority of which is to maximize the efficient use of natural fuel and energy resources and the industry's potential for economic development and improving the quality of life of the country's population. To successfully implement this strategy, it is needed:
• to maintaining a reliable raw material base and ensuring sustainable development of the fuel and energy complex
• to minimize the technogenic impact of coal production on the environment through the introduction of new technologies for the extraction and processing, transportation, sale and consumption of coal products
• to support and reinforce export potential
• to create favorable conditions for foreign investments
• to provide energy safety of the country.
Mongolian coal is the area most supported by explored, industrial and geological reserves of all fuel resources. With a normally functioning market economy, coal prices in most countries are significantly lower than those for gas and oil products. In the global energy industry, it is more profitable to use coal, and not other types of fuel. This is confirmed by the following facts: the share of coal-fired power generation in the US - the country with the most rigid market economy- is more than 50 %, in Germany - with a socially oriented market economy - 54 %, in China - with intensively developing economy - 72 %, in Mongolia - with the transition economy - 90 %.
In Mongolia, where there is no gas, oil, nuclear power plants, it is almost impossible to refuse thermal power stations for coal fuel in the near future. To maintain and increase the level of coal consumption, taking into account modern environmental requirements, it is necessary [1, 6, 7]:
• to improve the quality of coal by developing and introducing new technologies for washing and enriching coal, which significantly reduce the ash, sulfur and moisture content.
• to increase the technological level of power plants in order to reduce particular type of emissions into the atmosphere.
• to establish strict standards that limit carbon dioxide emissions to coal-fired power plants.
• to expand the use of coal not only in energy, but also in coal-chemical production.
• to introduce clean coal technologies, such as fuel cells, coal liquefaction, coal gasification.
• to implement efficient carbon dioxide utilization technology.
The coal industry of Mongolia has a high degree of concentration of production. About 80 % of the total volume of production falls on five large companies. The forms of ownership of coal companies are diverse: private, joint-stock, and state. Foreign investment in energy coal is directed to deposits with large brown coal reserves to create fuel and energy complexes on their basis with subsequent export of electricity.
The open method of coal mining used in Mongolia is considered the most productive way of developing deposits. At the same time, open mining has a significant negative impact on the conservation of natural and landscape conditions in mining areas [5, 3]. Therefore, one of the most important areas of environmental protection is the reclamation of land. Ideally, it is necessary for each enterprise to develop a production development program that ensures rational and safe use of natural resources, both during the whole period of operation of the enterprise and after its closure.
The program «Mongolian coal» provides the establishment of coal-chemical and coke-chemical production. In addition to traditional technologies for coal processing, advanced coal processing is needed, including technology for producing fuel briquettes, gasification, semi-coking, the production of synthetic liquid fuels, and the production of methanol. In particular, plants for the production of synthetic oil from coal are planned to be built at the Baganuur field by the company of Baganuur Energy and at the Aduunchuluun field by the MAK company. A project for the production of methanol is being developed at the Aduunchuluun power plant. The exploration work is carried out to determine the methane reserves in the fields of Tabuntolgoi and Narain Suhait.
The program «Mongolian coal» for the period until 2030 should cover the following priority areas:
• Increase of competitiveness of coal due to radical improvement of quality of coal products. The competitiveness of coal should be ensured both by the satisfactory quality of coal products and by lower production costs in comparison with foreign producers.
• The state policy in the field of Mongolian coal exports should be based on the geoecological interests of the country and the need to ensure a sustainable sale of coal products, which makes it possible to smooth fluctuations in the demand for coal in the external and internal markets. There is a forecast for an increase in demand for Mongolian coal in the markets of North-East and SouthEast Asia - in China, Japan, Taiwan, South Korea and India.
• One of the main factors that reduce the competitiveness of Mongolian coals in the external and internal markets is a high share of transportation costs, which limits the growth in the volume of coal exports. In this regard, it is necessary to accelerate the construction of railways that provide access to the seaports of China and Russia.
• The most important task of the state is the reproduction of the mineral resource base of coal. Mechanisms of legal regulation are necessary to stimulate and increase the interest of subsoil users in investing in geological exploration of mineral resources.
• It is necessary to create conditions for attracting foreign investment.
According to the models of sustainable economic development in Mongolia, the necessary indicators of the economic growth of the mineral and raw materials and fuel and energy complex for the period 2015-2030, can be achieved due to the following assumptions:
• By 2030, in terms of the production of gross national income per capita, Mongolia should be included in the category of countries with a level of development on a par with the "Asian tigers".
• The country's economy should have an investment development type and is oriented towards integration into the world economic system.
• Fuel and energy policy of the country should be based on state priorities, implemented through investment programs and projects involving all types of investment sources: private, public, foreign, mixed, etc.
Prospects for the integration of Mongolia with the countries of the Asia-Pacific region.
The export of Mongolia is mainly of mineral and raw materials. The most promising is international cooperation in the field of fuel and energy complex with the countries of Northeast Asia (NEA). The most likely importers of Mongolian coals are China, Japan, the Republic of Korea, the DPRK and India. The possibilities for exporting coal products to these countries will depend on favorable energy diplomacy and energy markets condition, the development of export infrastructure and the availability of seaports.
In the future, energy and coking coals, oil and electricity can be supplied to the markets of NEA countries from Mongolia. There are grounds for this. Mongolia and China are negotiating the feasibility of building a large power plant in Mongolia with a final installed capacity of 9,000 MW, with the subsequent transfer of electricity to China.
Three-party negotiations between interested companies in Mongolia, China and Japan are being now conducted to jointly develop the Tabuntolgoi coking coal deposit.
A group of Mongolian and Japanese specialists studied the development of Mongolia's coal industry and assessed the feasibility of coal exports for the long term.
Issues of mutual development of the Dabuntolga coking coal field by the DPRK and Mongolia and the subsequent supply of coke to the metallurgical industries of the DPRK are being considered.
China presents Mongolia the possibility of using seven seaports for export and import purposes. A railway is being built to the Chinese-Mongolian border for the transportation of coals from the Tabuntolgoi and Narinsuhait deposits in Mongolia.
Demand for energy resources in the NEA countries is growing from year to year. In Mongolia, the supply of fuel and energy resources to these countries is quite high.
The abovementioned facts show that Mongolia's fuel and energy strategy should be determined taking into account the needs of Northeast Asian countries and be an indispensable element of the infrastructure of this large region.
Punsalmaagiin Ochirbat
Coal Industry in Mongolia...
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Author Punsalmaagiin Ochirbat, Doctor of Economic Sciences, Academician of Mongolia AS, advisor, Professor, [email protected] (Mining Institute of Mongolian State University of Science and Technology, Ulan Bator, Mongolia). The paper was accepted for publication on 1 April, 2017.
