RAK Minerals director to speak at MENA Mining Congress 2008

Landscape

According to the Federation of Gulf Cooperation Council (GCC) Chambers of Commerce and Industry, the GCC domestic product will grow by 27.9% this year to reach $1 trillion with the increase in oil prices.

Global energy needs are projected to grow by 55% between 2005 and 2030, at an average annual rate of 1.8%, with almost half of the growth due to soaring demand in China and India. Fossil fuels will account for 84% of the overall increase in demand between 2005 and 2030 and Electricity use will nearly double, with most new plants burning coal.

Coal is already being touted as an alternative energy source to oil; the UAE imported nearly 500,000 tonnes of coal in 2007, most of which, was destined for energy supply.

Challenge

With the current boom, comes a demand for energy and infrastructure. This has seen spiraling costs due to commodity price fluctuations, causing huge inflation and as a result causing many infrastructure projects to be re-assessed in the private and public sectors. This problem continually leaves the GCC governments open to being affected by any price fluctuations and with the Middle East's coal usage projected to reach 0.5 quadrillion Btu by 2030 (source: IEA) this could become a serious problem.

In the private sector manufacturers and metals processing plants are heavily dependant on the availability of electricity and closing this energy gap is a key issue for them. Aging less-productive oil fields and resistance among major oil exporters to build spare oil capacity will make crude oil and natural gas more expensive. There is a need for developing countries to turn increasingly to coal as fuel. (IEA)

Solution

Total Indonesian coal exports grew from 53.4m tonnes in 2000 to 181m tonnes in 2007 with Indonesia now the world's fourth largest producer of coal and the largest exporter of thermal coal. Indonesia is expected to produce 205 million tonnes of the fuel in 2008, with domestic demand seen at 52 million tonnes and the rest set for export, according to energy ministry data.

The argument for coal has already been set with it being a more manageable energy commodity that is more scalable than oil for electricity generation and more affordable and cost effective than Oil & Gas but what remains to ensure against is the negative affects of price fluctuations. Direct investment in coal mining is a solution which minimizes any impact that price spikes can have.

Already the Ras al-Khaimah government is investing heavily into coal as an alternative viable energy source through RMMI, enabling them to bridge current energy gaps. The strategy of which is to gain a foothold directly at the source of the commodities in resource rich regions; directly hedging against future infrastructure costs.