The President of the Fossil Fuel Foundation, Mr Dick Kruger
Ladies and gentleman
Let me first thank you for giving us the opportunity to take part in this conference. It has been said that the currency of the future is knowledge and this conference is one of those critical events that add to the body of knowledge for an equally critical industry – the mining industry.
I am aware that the narrower focus is on coal and the research that goes into making this energy commodity usable well into the future in a cleaner way. Our approach as government is that it takes the contribution of all the different sectors of the society to make a nation great. It is for this reason that we value the importance of a conference like this and its potential to make meaningful contribution to the available and usable body of knowledge.
Government recently endorsed a “New Growth Path”, which sets a target of five million jobs in the next five years. This strategy seeks to address one of the biggest challenges facing the post-democratic South African society – poverty and unemployment.
Government has contended that “this employment target can only be achieved if the social partners and government work together to address key structural challenges in the economy”, and one of these challenges that is most relevant to us is “bottlenecks and backlogs in logistics, energy infrastructure and skills, which constrain economic growth and raises costs”.
We have committed this government to make a difference in people’s lives in a real and meaningful way. This challenge needs to be balanced with ensuring that in our quest to change the lives and create economic growth, we find sustainable ways of balancing growth and the natural environment. After all, there would be little in achieving this noble goal at the expense of a healthy future for our children and their children.
Our quest to do things better, faster and more efficiently is underpinned by research. As I mentioned earlier, societies that value knowledge are forging ahead and are meaningfully enriching the lives of their citizens.
An US university has described research as a “discovery; it is the exploration of the edges of knowledge to expand our understanding. Research sometimes produces an immediate benefit... Research sometimes appears to produce no benefit at all, as the discovery of lasers appeared to almost everyone twenty-five years ago that now serves as an essential device in surgery and consumer electronics devices such as CD players. Research often produces the opportunity to expand our understanding and build the foundation so that future research can produce results. So the apparently abstract research in physics on measuring nuclear magnetic resonance led, eventually, to the production of magnetic resonance imaging (MRI) machines that help us understand and remedy a host of previously fatal or disabling medical conditions.”
Gathered here are the stars of the future. These are the researchers who will make it possible for governments to marry the quest for economic growth, and therefore a better life for all, with sustainable exploitation of our natural resources.
It is no secret that coal plays a fundamental role in South Africa’s energy mix, accounting for 70 percent of the primary energy consumption, 93 percent of electricity generation and 30 percent of petroleum liquid fuels. South Africa is ranked seventh in terms of production, behind China, the US, India and Australia.
Last year, South Africa produced 250 Mt of coal with 75 (<180 Mt) percent of this coal was sold locally and the remainder exported (<60 Mt). Electricity generation accounts for approximately 64 percent of the coal sold locally, synthetic fuels account for almost 18 percent with the remainder sold to processing industries, mining and merchants. The export market generates just over R30 billion in foreign exchange earnings.
As a finite resource and after years of mining, the quantity and quality of the coal reserves in South Africa is steadily declining. The main field of Witbank and Highveld still contain significant reserves. On the other hand, the Waterberg coalfield in Limpopo Province is largely untapped and has been touted as the next major coalfield to be exploited.
But there are challenges. The Waterberg fields have thick coal seams and are embedded in siltstones and shales. This means that the extraction will be harder and require more input costs than in other fields.
The other major problem with the Waterberg coalfield is the geographical location (far from industrialised locations) with very poor infrastructure. There is shortage of water which is important is the beneficiation of coal and transportation facilities are limited.
This is where research becomes important. How do we extract the coal in Waterberg and still mitigate other negative factors like the challenge of water availability? How do we find ways of extracting this energy reserve at a cost that is not prohibitive? I am told that at the moment, one of the challenges in getting coal in this region is the cost which is way over R300 per ton, a serious departure from the industry standard of at least R150 per ton?
But it is not only about how best to mine this commodity. It is also about adding value to our industry through the beneficiation of our commodities.
Coal has been identified as one of the minerals that could contribute significantly to the country’s beneficiation agenda. Currently, when we refer to coal beneficiation, we are referring to the washing of coal to reduce impurities to get the desired quality for a specific market. Surely there should be more that can be done with this material that is also used in processing other minerals such as steel making, cement manufacturing and other industrial processes.
Carbon capture and storage (CCS), a process of capturing green house gasses and sequestrating them in geological formations in an attempt to mitigate against global warming, also presents an opportunity for researchers to find a way of using the gases that have been captured for other uses, such as energy regeneration.
Mining, by its very nature, is not very friendly to the environment. We are all painfully aware of the challenges we are facing regarding acid mine drainage – one of the greatest global threats to the environment after ozone depletion and global warming.
The South African coal processing sector currently generates more than 12 million tons of ultrafine slurry per annum, the majority of which is disposed of in slimes dams. These ultrafine coal wastes contain sulphide-bearing minerals, particularly pyrite, which oxidize and give rise to acid rock drainage (ARD) under which results in extensive and prolonged contamination of local ground and surface waters.
As a coal-based energy economy we are all too aware that this energy comes at a price. Coal contributes about 70 percent to primary energy supply and approximately 93 percent of South Africa’s power generation.
However, the side effects of using coal for energy generation is the emission of carbon dioxide from its conversion process into the atmosphere contributes to global warming and climate change.
Notwithstanding government’s policies to change the energy mix and increase the use of renewable energy sources contribution and energy efficiency measures, South Africa’s energy economy is likely to rely on coal for the next few decades. Previous study commissioned by the then Department of Minerals and Energy indicated that there was potential for carbon capture and storage in South Africa. Based on that premise, the Atlas study was initiated. The Centre of Carbon Capture and Storage was also established in March 2009, to address human capacity development.
South Africa is a non-Annex I Party to the Kyoto Protocol and is aligned with the G77 and the China Grouping. South Africa is also signatory to United Nations Convention on Climate Change and the Kyoto Protocol, and is obliged to decrease greenhouse gas emissions, and is committed in creating a safe and healthy sustainable environment.
President Jacob Zuma recently announced, during the global climate change conference in Copenhagen, that South Africa would reduce carbon emissions by 34 percent in 2020, and by 42 percent in 2025, depending on financial and technological support from the developed countries.
Furthermore, Parliament has endorsed the proposed concept and preparatory process for the hosting of the COP (Committee of Parties) 17 and the Kyoto Protocol (CMP 7) in November/December 2011.
To consolidate, advance and fortify primary arrangement, the Inter-Ministerial Committee (IMC) on Climate Change will be reconvened to oversee the preparations for the conference. The Department of Environmental Affairs is currently working on climate change policy, to be released during the first quarter of 2011.
Again, I hope that the minds that are here will be looking at these challenges and say: How best can we mitigate the potential harm that is a result of energy need for growth?
One of the challenges that we are confronted with as we create the enabling environment for growth is the regulatory framework. That is the role of government to look at the regulatory framework and to ensure that the needs of the country are taken into consideration. We would be shirking our responsibility in not mentioning the apparent race in the developing countries to drive this growth with coal as one of the primary drivers.
The growth in electricity demand in line with the growth in the South African economy over the past several years has resulted in the erosion of Eskom’s generation reserves resulting in a shortfall in coal supply.
This has been compounded by the global increase in demand for coal, with countries such as India and China showing so much interest in South African Coal. Historically, the lower grade coal was sold to Eskom for electricity generation but Eskom now faces the threat of this low grade coal being sold to India and China, as its competitors. For many coal producing companies in South Africa it is more lucrative to sell coal on the export market (India and China in particular) than to sell to Eskom – resulting in Eskom losing some share of its historical market.
Eskom build programme will result in an increase in coal consumption to approximately 160Mt per annum in 2020 – will there be enough coal to meet this increasing demand?
Despite South Africa’s economy being so heavily reliant on coal for power generation, there is no explicit policy that regulates the coal industry. The department will be looking in the coming months into amendments of the principal act – the MPRDA and I am not sure whether it not in our interests to classify coal as one of those strategic minerals. While we welcome the role of companies to play in the markets in the best way for their survival and making money, this cannot be at the expense of providing the country with a stable supply of coal to meet its energy and therefore growth imperatives.
Mr Kruger! I have taken enough time but I do hope that conference will look at a number of the issues that we are confronted with and as partners, give advice to government about the best possible way forward.
I thank you for this opportunity and wish you well in your deliberation over the next two days.
I thank you.
Source: Department of Mineral Resources
