MAC: Mines and Communities

New coal folly for India?

Published by MAC on 2008-12-15

An Indian journalist has examined the adverse consequences of extracting and converting coal into so-called energy fuels, though Coal to Liquids (CTL) technology.

Mines and Communities has covered this issue since 2006, when we outlined China's policy which - while not banning CTL altogether - sets quite strong limitations to the use of the technology . See:

Late last year, the renowned World Watch Institute in the US also damned CTL in no uncertain fashion:

Now, a CTL project is on the drawing-board for the Indian state of Orissa. which, if permitted, could be the largest of its kind anywhere.

Should Orissa have India's first coal-to-oil project?

Prasanna Mishra

Daily Pioneer

12th December 2008

Bhubaneswar - Showing its grave concern at the huge financial burden on our economy due to the spiralling price of crude oil, the Government of India is considering a proposal for liquefaction of coal, which is presently receiving the consideration of an Inter Ministerial Group. This subject undoubtedly is of great relevance for our country, but I thought of flagging a few issues, which perhaps need to be addressed seriously.

Three huge coal mines have been identified in the Talcher area for this project. The mines have huge deposits -- Srirampur Block with over 3,000 million tonnes, Ramachandi Block 1,500 MT and PalasBani Block 1,500 MT.

It is proposed to utilise one of these mines to extract 30 MT of coal annually through underground operation. Perhaps, nowhere in the world do we have underground operation from one mine yielding this volume of coal.

Indian mining industry is no doubt familiar with underground coal mining for many years, but the largest underground mine in India is much smaller. The proposed scale of operation for extraction of coal for the Coal to Liquid (CTL) project, therefore, appears too ambitious to be operationally successful. Investment on this CTL project would be of the order of 8 billion dollars. In the context of the present turbulence in the financial sector in the major economies, it is doubtful whether it would be possible to muster resources of this order for such a project the like of which has not so far been implemented in our country.

CTL project of this magnitude would encounter release of carbon dioxide of mind-boggling magnitude. It is doubtful if a foolproof technology can be put in place for wholesome carbon sequestration to ensure an acceptable regime of carbon-release. The coal deposits selected in the Talcher area of Orissa are in the vicinity of large coal bearing areas where good deal of coal-mining goes hand in hand with large scale industrial activities. The NTPC has two coal based power plants including the super thermal power station.

Nalco has its captive thermal power station and also its smelting plant where aluminium ingots are produced, Mahanadi Coalfields produces around 50 MT of coal from this area.

In addition, quite a few green field thermal power plants are coming up in this region in addition to a large number of iron and steel related industries. Acute scarcity of industrial water has been noticed in this area. There is a good deal of concern over the area becoming intolerably warmer. In summer the temperature shoots up to the level of 50 degree Celsius.

Liquid coal would emit 10 per cent more global warming pollution than gasoline, all at a time when we are wrestling with how to slow and reverse global warming. It is also extremely wasteful - taking 3.5 gallons of water to make just one gallon of fuel.

Such huge quantity of water would not be available from the nearby Brahmani river. We may have to think of using seawater by putting up a desalination plant on the coast, about 200 km away, and drawing the water to the project site or plan for drawing water from the Mahanadi.

The project's viability needs to be viewed in the context of the present bearish trend in the crude market when the price of crude has plummeted to below 60 dollars per barrel. This aspect has to be seen also in the context of the limited shelf life of about 15 years of the oil extracted from coal, which would not make it the preferred oil for strategic storage. The recent diplomatic break-through in the nuclear energy sector would lead to establishment of more and more nuclear power stations in our country. Dependence on oil for transport fuel would therefore go down (with more and more trains being moved by electric power) with more electricity coming from nuclear power stations. Such a scenario may not warrant immediate going ahead with the CTL projects on a mega scale. T

he USA seems to be looking at the associated issues cautiously and have not been in a hurry. China is going ahead with CTL project with the flagship project of Shenhua Corporation with a production capacity of only 20,000 barrels per day. If this succeeds, they plan to augment the capacity to 80,000 barrels per day. Recently, China took a bold step and halted immediately its plans to build all but two of its proposed coal-to-liquids projects due to environment and economic concerns. According to many, liquid coal simply makes no financial or environmental sense.

I am not sure if the State Government is in the picture while such an important project is being planned. A project, which would produce 30 MT of coal in one mine would throw up a number of serious issues. Ash disposal would be one of them. The possibility of carbon dioxide emission in this densely populated zone and the likely impact of the project on the fragile ecosystem of the area are matters which need in depth analysis and stakeholders need to be kept on board.

The State Government should have a major role in deciding whether a new project of this nature and magnitude should be in this region. In the interest of energy security, it may be desirable that we start producing oil from coal but we could start off with a 20,000 barrel per day project and very carefully select the location. Talcher does not seem to be the ideal area for such a project.

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