Malaysia seeks more coal for electricity

Malaysia, which has been largely dependent on natural gas to generate electricity, will switch to coal more as it is much cheaper and this will also reduce its reliance on the traditional source of fuel.

Minister of Energy, Water and Communications Lim Keng Yaik said that by 2010 the share of coal in the fuel mix for electricity generation would rise to about 40 percent from the current 28 percent.

"Being too dependent on gas is just as risky as being too dependent on oil during the 70s. Therefore it is incumbent upon the industry to mitigate these risks by increasing the usage of other sources of energy including coal to generate electricity," he said in his opening speech at the fifth International Conference and Exhibition CoalTech 2004 in Kuala Lumpur.

At present, under the Four-Fuel Policy, introduced in 1981 to reduce the country's dependence on oil as the main source of energy in the aftermath of the 70's oil crisis, Malaysia diversified to natural gas, coal and hydro power for power production.

Now, nearly 65 percent of electricity generation comes from natural gas.

"The government has turned to coal as a major fuel in the country's fuel mix to reduce its reliance on gas and therefore coal will become a crucial pillar of power generation in the long-term," said Lim.

Coal is competitively priced and its supply relatively stable compared with other fuels due to the abundance of supply worldwide, he said.

Moreover, much progress has been made in coal extraction technology which is not detrimental to the environment. Once billed as dirty fuel, the commodity is returning as a competitive energy source in Malaysia and globally, he said.

But there is also a flip side to the move. At present coal price is about US$40 per ton, it jumped from about US$25 per ton in the span of 18 months.

Malaysia spent a cool RM1.2 billion (US$ = RM3.8) to purchase some eight million tons of coal this year and by 2009 when demand tips 19 million tons, it is expected to pay a whopping RM3 billion.

At the same time, coal resources in Malaysia are limited, estimated to be about one billion tons and they are low grade lignite and sub-bituminous coal, the minister said.

Hence, Malaysia imports virtually all its coal with Australia supplying nearly 60 percent, Indonesia 30 percent and China and South Africa five percent respectively.

"The Malaysian government expects that an investment of RM9.7 billion will be required in the electricity sector up to the year 2010. Much of that investment will be for coal-fired plants," he said.

However, Lim said it would be still cheaper to use coal compared to natural gas and the government may even increase the use of coal if they could source for cheaper supply, especially from its Asean neighbour, Indonesia.

Lim said it was also time for Malaysia to seek local coal suppliers and urged companies to explore underground mining. (alex)