Coal and coal-seam gas
For many years, African coal production meant just one thing: South Africa. The country has long been one of the world’s biggest coal exporters and relies on its plentiful reserves of cheap coal to fuel its own power sector.
However, massive reserves have been discovered in Mozambique’s Tete Province that could see that country challenge South Africa’s leading position within a decade. Botswana too has sufficient reserves to become a substantial producer, followed to a lesser extent by Zimbabwe and Tanzania.
South Africa produces about 255m tonnes of coal a year, of which about 65m tonnes a year are exported overseas via Richards Bay Coal Terminal (RBCT). Most exports previously went to European customers but the EU is seeking to reduce the role of coal in its generation mix in favour of natural gas and renewable energy.
At the same time, rising demand in India and China has opened up new markets for South African mining companies. India is now the biggest market for African coal, as Delhi has been forced to liberalise its domestic coal market because local mines have been unable to meet demand.
Mozambique too is expected to ship coal to Asian customers and it is geographically well placed to target India. As a result, Indian firms are taking equity stakes in the country’s coal and LNG projects.
The biggest obstacle to the development of the Mozambican coal industry has been the lack of transport capacity but new railways and port terminals are now being developed or are planned at Beira, Nacala and close to the mouth of the River Zambezi.
At the same time, terminals are being expanded or developed on greenfield sites in southern Mozambique to handle exports from South Africa and Botswana, making Mozambique the most important coal transport nexus to emerge anywhere in the world over the past decade.
It is in Southern Africa too, that unconventional gas production could take off. Coal seam gas (CSG) is a form of gas that is associated with coal reserves and which can be tapped through a process known as fracking to provide an alternative fuel.
The development of CSG has revolutionised the gas industry in North America to such an extent that planned LNG terminals could now be constructed to export gas rather than to receive it. Botswana and South Africa have the biggest CSG reserves on the African continent, although exploration is still at a relatively early stage. South African power utility Eskom, which is the biggest power company in Africa, has already developed several gas-fired power plants in coastal areas but CSG-fired plants would offer an excellent alternative to coal as power plant feedstock in the heart of Southern Africa.