Peak coal puts SA growth at risk

Apocalyptic prophecies abound. Bludgeoned by messages of growing global economic doom and ambushed by information overload, it is easy to ignore predictions of impending change, particularly when they come from scientists or geologists rather than economists.

But now even economists are sounding a warning and perhaps it is time the world took heed.

Although not new the stern warnings that 'peak coal' might be nearer than we think has been ignored. Similarly, the prospect of peak oil was largely dismissed until oil prices threatened to reach US$150 a barrel.

The reality is that it's the next major energy crisis and not the next major recession that will change the way we live.
While conventional thinking was that we would never reach peak oil, the savage rush for the last of the world's last high-grade, easily-accessible oil deposits has left the world's largest oil producing regions in North Africa in tatters.

Again conventional thinking suggests that we have roughly enough coal reserves for at least 200 years. The crux of the 'peak' commodity theory is, however, less about the reserves and more about how easy it will be to get to the product. So the peak would signal the point of maximum global production. Thereafter, the theory suggests that the rate or production would enter terminal decline.

According to analysis in the journal Energy last year, the global peak of coal production from existing coalfields is predicted to occur close to 2011. After this year the production rates are seen as dropping to 1990 levels by 2037 and reaching 50% of peak production by 2047.

Future mines are also not likely to reverse the trend.

The World Energy Council's Survey of Energy Resources in 2010 showed that the US sits on the world's largest coal reserves. Its reserves make up 22.6% of the world total. Russia and China have the world's second and third largest reserves while South Africa is ninth with reserves making up just 3.5% of the world's total.

In terms of production, however, China produces 48.3% of the world's coal while the US and Australia produce 14.8% and 6.3% respectively. South Africa, the world's seventh largest producer making up 3.8% of the global total, is the world's fifth largest exporter.

Coal production is already in decline for most countries while demand for the product, despite its lack of green credentials, continues so soar.

In his recently released book Red Alert, economist Stephen Leeb - who was one of the few that correctly called the economic collapse of 2008 - suggests that the most disconcerting statistics have to do with China. China's coal consumption rose by a massive 134% in the first ten years of this century and its insatiable hunger for the fossil fuel has driven prices higher.

"China is burning nearly half of the world's annual coal production. At its current rate of growth, the country's demand will soon soak up every available ton on the export market," said Leeb. This means that between the end of 2009 and 2015 China would need coal supplies equivalent to three or four Australia's entire coal output.

This might well be good news for the near term - particularly for major coal exporters like SA - but in the longer-term danger lurks.

Geologist Chris Hartnady, in a paper prepared for the SA Journal of Science, last year forecast that SA would reach peak coal production in 2020 at about 285-million tonnes a year. Others have hinted that the country's coal production has already topped out.

Just to remind you, coal provides 70% of the SA's energy supply, supports 90% of electricity generation and is used to make a quarter of the country's liquid fuels while earning more foreign exchange through exports than gold.

Given our overwhelming dependence on coal, this issue has huge ramifications for our future development path. Simply put, our growth could be at stake unless we do something now.