21 September 2012

China SignPost™ (洞察中国) #65–Xinjiang Poised to Become China’s Largest Coal Producer: Will Move Global Coal, Natural Gas, and Crude Oil Markets

Gabe Collins and Andrew Erickson, Xinjiang Poised to Become China’s Largest Coal Producer: Will Move Global Coal, Natural Gas, and Crude Oil Markets,” China SignPost™ (洞察中国) 65 (20 September 2012).

China SignPost™ 洞察中国–“Clear, high-impact China analysis.”©

Key points:

–In 2011, Xinjiang produced 120 million tonnes of coal. In our base case estimate, Xinjiang will produce ~240 million tonnes per year of coal in 2015 and slightly over 750 million tonnes per year in 2020.

–This would make Xinjiang one of the world’s 5 largest coal producers by volume.

–By 2020, Xinjiang could export 200 million tonnes per year of coal to other parts of China by rail, 200 million tonnes per year as electricity, and potentially 100+ million tonnes per year as chemicals and liquid fuel.

–Low-cost thermal coal and coal-by-wire electricity from Xinjiang could pose a significant competitive threat to shale gas development in Central and Southwestern China, which are target markets for coal and electricity produced in Xinjiang.

–Xinjiang coal could be delivered in physical form to Central China at a cost of around US$3.30 per million BTU, whereas shale gas in the region is likely to cost US$5 per million BTU or more to produce.

–Xinjiang could produce more than 250,000 bpd of liquid fuels from coal and potentially as much as 1 million barrels per day if producers increased their water use efficiency and China’s National Development & Reform (NDRC) allowed the expansion.

Rising production costs, an unacceptably high death rate in underground mines, and rail bottlenecks in eastern and northeastern China are setting the stage for a new phase in domestic coal production. The largest new coal provider will be Xinjiang. This northwestern region has the potential to become the world’s single largest producer of thermal coal. Xinjiang is in the early stages of a mining and economic boom like that which Inner Mongolia has experienced over the past decade.

In 2011, Xinjiang produced 120 million tonnes of coal. Industry sources estimate that by 2015, the province is likely to be producing well over 200 million tonnes per year, with production potentially rising to 1 billion tonnes per year by 2020. In our base case estimate, Xinjiang will produce ~240 million tonnes per year of coal in 2015 and slightly over 750 million tonnes per year in 2020. …