C l S l d Ch llCoal Supply and Challenges(27 September 2012)

Mohd Shaiful Bahri HussainM i DiManaging Director

TNB Fuel Services Sdn. Bhd.

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Presentation Outline

1. Fuel Reserves2. Seaborne Coal Trade3 Coal Market3. Coal Market4. Energy Prices5. Malaysian Energy Mix6. Issues

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Thermal Coal reserves are abundant compared to Oil and Gas

1400

1600

1800

Oil 54.2

1000

1200

1400

1991

2001

Oil years

Natural 63 6

400

600

800 2001

2011Natural

Gas63.6 years

0

200

Oil Gas Coal • Coal reserves are being depleted heavily within the

Coal 112 years

Coal reserves are being depleted heavily within the past ten years due to its competitiveness in pricing.

• South and Central America oil reserves are the main contributor to the increase of oil reserves by an increment of about 11.9 thousand million barrels

Represent the years of global production. Reserve as at end-2011 Source: BP Statistical Review of World Energy June 2012

Source: BP Statistical Review of World Energy June 2012Unit in the graph is not at a parity level. Please refer below:Oil : (‘000 mil barrels)Gas: (trillion cubic metres)Coal (‘000 mil tons)

barrels.

800 mil tons coal are seaborne traded with 70% going to Asia.

0.10 

Coal Supply 2012Australia

Canada

Coal Import Demand 2012

g g

163.5 

6 285 3

72.0 

32.9 

Canada

China

Colombia

Indonesia

New Zealand

184.0

6.2 5.7 

82.1 0.1 

2.1 

4.6 85.3  New Zealand

Norway

Poland

Russia

South Africa

11.2 26.7

586 1

339.7 

South Africa

USA

Venezuala

586.1

EUROPE

NORTH AMERICA

OTHER AMERICA

ASIA

Asian buyers dominate three quarters of the global coal production. Leading are the North East Asian :•Japan 120 mil tons

Indonesia remains as the largest world coal producer followed by Australia, Russia and South Africa. The weakening freight rates have made US coal competitive into

ASIA

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Source: McCloskey Steam Coal Forecaster

•Korea 100 mil tons•Taiwan 60 mil tons

Europe and even Asia.

Coal main market i.e. Pacific and Atlantic have merged, providing more choices for Buyers.

ATLANTIC PACIFICATLANTIC C C

Coal market is open with 800 mil Price is much

i fl d b

Coal price is fair and transparent.

Sufficient numbers f b d

Coal domestic price is transparent

Buyer is adaptive to changes inopen with 800 mil

ton seaborne trade.Asia 70%Non Asia 30%

influenced by Supply and

Demand instead of sentiment driven.

of buyers and sellers. More

industry players than Gas industry

providing more options.

price is transparent (e.g. China FOB

QHD price, Indonesian

HBA)

to changes in quality (e.g. Korean buying 5500 NAR

23% Ash Australian coal)

Regional Fuel Price Analysislast month closing

Coal is indeed a cheaper fuel.

CRUDE: WTI Parity Price

GAS: Henry Hub

14.886 2.874

CRUDE: Brent Parity

PriceGAS: NBP

LNG Spot Price:

Britain des

COAL: API#2 DES ARA

17.498 8.568 8.396 3.498

LNG Spot Price: Japan

des

COAL Term Price : FOB

Aus

COAL Spot Price : FOB

Newc14.225 3.787 3.497

80%

90%

100%

Gas and Coal Price Parity Level Compared to Oil

Oil Price (Brent)

20%

30%

40%

50%

60%

70%

Gas Price (NBP)

Coal Price (NewC)

0%

10%

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Brent USD/mmbtu NBP USD/mmbtu NewC USD/mmbtu

All figure in US$/mn BTU. Figure for Crude, Gas and LNG are the front month figures by ICIS Heren.

Historical Gas and Oil Prices by Thomson Reuters.Historical Coal Price by globalCoal

Malaysia energy mix is heavily dependent on gas and coal.

2011 Installed Capacity - Fuel Mix

• Japan, Korea and Taiwan are the three leading Asian utilities• Very dependent to the global

energy market e g80%

100%

energy market e.g. coal, natural gas and oil.

• Their generation mix is stable, well balanced and di ifi d

60%

diversified.

Conclusion:Their energy mix is based on the

20%

40%

Their energy mix is based on the security and reliability of supply; and the diversification of risks. 0%

Japan Korea Taiwan Malaysia

C l N l Oil G H d d RECoal Nuclear Oil Gas Hydro and RE

Due to its cost competitiveness, coal is an important fuel of Malaysia but the challenges must p y gbe well mitigated.

S l i t i• Supplying countries• Buying countriesInfrastructure

• More robust than LNG shipping marketShippingpp g

• New technologyNew technology • CCS• Minimizing emission effect.

Environmental Issues

Coal Procurement Strategy balances the cost competitiveness with security of supply..p y pp y

CostCost Competitiveness• Differential Cost

Supply Securitypp y y• Diversification policy• Proactive in

managing country g g yrisk

Terima Kasih

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