Brief on Thar Coal Potential & Way Forward on Mining Development & Downstream Applications

1).

Introduction
The worlds second (2nd) largest coal deposits in Thar, Pakistan with estimated reserves of nearly 200 billion tons have been overlooked by the global forecasters and energy experts. While the Thar coal field discovery is relatively new (1992), sufficient geological data is now available to move ahead for the mining development and application. In this context, on a comparative basis, the enormous deposits of coal in the USA, China, India etc. provide for a tremendous resource and substitute for oil. With oil prices being above $60-$80 / barrel, extensive coal mining and the new coal utilization technologies become economical as well as environment friendly. The Thar coal field is located in the Thar desert of Pakistan, about 400km east of Karachi, Pakistans primary sea port and largest city (Population 16 million). Whereas several studies have been undertaken by international and local experts and consultants, actual coal production or a pilot project is yet to be undertaken. As such the Thar coal reserves remain untapped. Numerous energy studies and outlooks by global energy companies and organizations for 2030-2050 have projected that Coal use will increase in all scenarios. A MIT Study concludes that Coal will continue to be used to meet the worlds energy needs in significant quantities. This is so, as Coal is abundant, lower in cost and located in areas away from the Middle-East, which is prone to instability and possible supply disruptions of oil (35% of global supplies) and LNG (45 % of global supplies). The National Coal Council of America (NCC) in a comprehensive study which has led to the formulation of a USA Coal Strategy up to 2025 for the USA, has recommended that USA coal production be more than doubled from the 2005 level of 1.1 billion tons/year to 2.4 billion tons/year by 2025. This increase while contributing $ 3 trillion to the GDP of America will reduce the cost of energy to the American people by 33%. The contribution of this, more than doubling of USA Coal production, will be

in the form of 100,000 MW of new electric power generation, 2.6 million barrel/day of clean liquid fuel, 4 tcf of SNG (synthetic natural gas), plus significant production of ethanol, coal bed methane, hydrogen and fertilizers. The yet untapped resource of Thar coal which are estimated at 175 - 200 billion tons presents a unique global opportunity which when translated to a 50% scale of the USA model, will provide outputs of SNG of 2 tcf/yr and liquid fuels/FTD of 1 - 1.5 mbd in a 10 - 17 year period up to 2025. Pakistan now has a unique opportunity to take advantage of its huge coal reserves, not only to meet its own Electric energy and fertilizer needs but also to produce abundant quantities of synthetic natural gas, clean liquid fuels, fertilizer and chemicals for export. The experts group has accordingly prepared an initial Concept Report and Road Map to move to the bankable feasibility for Thar coal field development.

2).

Thar Coal Deposits and Reserves

Thar coal field area is covered by dune sand composed of sand, silt and clay that extend to an average depth of around 70 meters. Under the sand dunes is a thick bed of alluvium of an average depth of 70 meters to 150 meters containing sandstone, mudstone and coal. The coal beds are of variable thickness ranging from 0.5 30 meters.. The maximum number of coal seams found in some of the drill holes is 20. The average cumulative thickness of the coal bed is about 20 meters The coal is brownish black, black and grayish black in color. It is poorly to well cleated and compact. The quality of coal is better where percentage of clay is nominal. The drill hole geology shows the presence of three possible compact sand aquifer zones at varying depths: i) above the coal zone; ii) within the coal zone and iii) below the coal zone. It is known that two lower aquifers, having high hydrostatic heads are saline with total dissolved salts (TDS) varying from 3000 7000 ppm are saline, unfit for human consumption. The characteristic of the Thar coal are summarized below; Moisture (%) Ash (%) Volatile Matter (%) Fixed Carbon (%) Sulphur (%) 43.24 5.18 26.50 19.35 0.92 to 49.01 to 6.56 to 33.04 to 22.00 to 1.34 Heating Value ( Btu/lb) As Received 5780 Dry 10723 DAF 11605 MMM Free 6101

to 6398 to 11353 to 12613 to 6841

While Pakistan has twice the coal reserves of India, its coal production is only 1% of India. Coal production in India is about 500 million tons/year and is produced from various fields spread throughout the country, whereas the Pakistani reserves are almost

completely located in Thar and adjoining Badin areas (175 billion tons). Thus, it is reasonable to assume that in the next 10-17 years, Pakistan can not only achieve Indias current coal production levels of about 500 million tons per annum but exceed it to levels of 600 million tons /year or more.

3)

Application of New Technologies

As Thar Coal is not suitable for transportation, it is clearly more advantageous to utilize applications in an integrated mode at Mouth of Mine (MM) applications such as IGCC, CTL, GTL technologies to produce SNG, liquid fuels, fertilizer, chemicals etc. which can be transported inland as well by ships on international lanes, or through Trans National Oil and Gas Pipelines to India and China. As would be clearly evident from a cursory review of the Worlds Energy Export routes and the concept of an Asian Energy Corridor, Pakistan occupies center stage and is ideally located as an essential player as the Asian Energy Hub and Corridor. This, however, requires strategic planning and focused cooperation for project development with the concerned countries and global energy companies. The cost of coal conversion to liquid fuels and SNG ranges from $30 to $45 per barrel equivalent of oil. The returns on investment in coal mining and CTL, GTL, IGCC, fertilizer, chemicals etc is in the range of 20% - 25% +. The market for these fuels is expanding at an exponential rate and oil and gas prices are likely to maintain levels above $60 per barrel equivalent, irrespective of any short term reprieve caused by the current economic slowdown in the United States, Europe and some OECD countries. There is clearly a tremendous opportunity for Pakistan with the Worlds second large deposits of coal to capitalize on the new opportunities, by developing their coal mining production and setting up of IGCC, CTL, GTL and SNG plants. The various applications of these new technologies is briefly reviewed below: i) Power Generation with Gasification Based on latest coal gasification technologies, coal can be used as a feedstock to produce electricity from gasification. This particular coal-to-power technology allows the continued use of coal without the high level of air emissions associated with conventional coal-burning technologies. This is possible because in gasification power plants the pollutants in the syngas are removed before the syngas is combusted in the turbines

ii)

IGCC Power Plants An Integrated Gasification Combined Cycle (IGCC) power plant combines the gasification process, with a combined cycle power block (consisting of one or more gas turbines and a steam turbine). Clean syngas is combusted in high efficiency gas turbines to produce electricity. The excess heat from the gasification reaction is then captured in a HRSG, converted into steam, and sent to a steam turbine to produce additional electricity Transportation Fuels Gasification is the foundation for converting coal and other solid feedstocks and natural gas into transportation fuels, such as gasoline, ultra-clean diesel fuel, jet fuel, naphtha, and synthetic oils. Two basic paths are employed in converting coal to motor fuels via gasification. In the first, the syngas undergoes an additional process, the Fischer-Tropsch (FT) reaction, to convert it to a liquid petroleum product. The FT process, with coal as a feedstock, was invented in the 1920s, used by Germany during World War II, and has been utilized in South Africa for decades. Several global oil/gas/energy companies have developed new and efficient technologies for coal gasification and conversion. Chemicals and Fertilizers Modern gasification has been used in the chemical industry since the 1950s. Typically, the chemical industry uses gasification to produce methanol as well as chemicals, such as ammonia and urea, which form the foundation of nitrogen based fertilizers. The majority of the operating gasification plants worldwide are designed to produce chemicals and fertilizers. And, as natural gas and oil prices continue to increase, the chemical industry is developing additional coal gasification plants to generate these basic chemical building blocks.

iii)

iv)

4.

Road Map for Implementation

Pakistan currently is facing an acute electric power shortage of about 4,500 MW due to high GDP growth in the last three (3) years and unavailability of natural gas for new power plants, and a severely constrained oil supply chain. Pakistan however has coal reserves of 184 billion tones with an annual production of only 6 million tones. Pakistan is currently the worlds most gas dependent country with about 51% of total primary energy being gas based. With no new major gas finds in the past several years, the country is faced with an emerging gas supply-demand gap of about 0.5 bcfd by 2010 with the gas deficit expected to reach 3.0 bcfd by 2015, 6 bcfd by 2020 and 10 bcfd by 2030.

In Pakistan's National Energy Plan approved in 2005, the energy gap was projected to be bridged with imported oil, about 1 bcfd of RLNG thru Mashal LNG and private sector LNG projects and large volumes of gas (7 bcfd) through three (3) Transnational pipelines, and increased production of local coal (only 50 m tons/yr) up to the 2030 scenario. However all these projects have stalled due to regional geo-political issues and are much delayed, thereby putting Pakistan in a severe Energy deficiency in 2010 and beyond. The main issue in the successful development of the Thar coal field is lack of reliable mining data, methodology, costs, economic applications etc, which form the basis of a bankable feasibility. It is thus considered essential that the development of a production mine either of Blocks I - IV be undertaken to establish the most appropriate mining technology, hydrology, bulk production methodology and highest economic value applications.

5.

Summary and Conclusion

It is clearly established that Thar Coal has immense potential, not only to meet Pakistans primary Energy requirements for Power generation (IGCC, CCPP), Transport fuels (CTL, FTD), Natural gas (SNG), fertilizers, petro chemicals etc ramping up from 2012 to 2030, but sufficient quantities can be produced for bridging the gap in Asian Energy markets. As no detailed mining study or applications analysis on economic basis, or actual mine production has been undertaken, a true bankable study has not been prepared to-date. Further, Thar Coalfield has not been developed due to incorrect project development approach, which has been based on one, or two 1000 MW power plant set-up. It is essential that a new modality be followed now and a Master Plan be prepared, for full field development and downstream multiple applications based on highest economic returns. To move forward on a fast-track it is essential that the initial Concept Report be followed up with a full feasibility ($ 5.0 m) for a coal production mine which would form the basis of financing arrangements ($ 40 m) and award of contract for the full development of the respective concession block. On successful demonstration of a production mine with proper engineering, mining methodology and analysis of bulk samples, a full Thar coalfield development bankable feasibility and Master Plan will be prepared to undertake the multibillion dollar project in phases from 2010-2030

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THAR COAL FIELD LOCATION MAP

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COUNTRIES WITH THE LARGEST COAL RESERVES

Oil Equivalent
United States United States

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Coal Reserves

Pakistan

Pakistan

3% 5%

3% 24%

Russia

178.00 , 5%

4%

3%

Russia

China

25% 7%

China

7%
India

India

8%
Australia

8%
Australia

8% 16%

Germany

8%

13%

Germany

South Africa

South Africa

11% 15%
Ukraine

11% 16%
Ukraine

Kazakhstan

Kazakhstan

Country United States Pakistan Russia China India Australia Germany South Africa Ukraine Kazakhstan

Coal Reserves Billion Tones 274.00 184.00 173.00 126.00 93.00 90.00 73.00 55.00 38.00 37.00

Coal Reserves (%) 24.0 16.1 15.1 11.0 8.1 7.9 6.4 4.8 3.3 3.2

Oil Equivalent Billion Barrels 887.00 480.00 560.00 407.00 301.00 291.00 236.00 178.00 123.00 120.00

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PRIMARY ENERGY MIX

Pakistan India Malaysia China Japan Indonesia UK USA Canada

Oil Natural Gas Coal Nuclear Hydel

30.76 47.59 7.90 0.86 12.89

31.78 8.95 51.43 0.99 6.85

41.19 44.33 12.04 2.44

19.75 3.25 70.37 0.76 5.87

44.24 15.69 24.22 12.20 3.65

47.47 26.53 24.26 1.75

36.22 38.12 18.16 6.53 0.97

39.94 25.23 24.29 8.14 2.41

31.80 26.30 9.45 6.56 25.89

80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 Pakistan India Malaysia Oil China Natural Gas Japan Coal Indonesia Nuclear Hydel UK USA Canada

BP Statistical Review of World Energy 2008

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HOW DOES GASIFICATION WORK AND PRODUCTS

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THAR COAL FIELD CROSS SECTION AND BOREHOLE LOG