VZCZCXRO1764
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHSA #0510/01 0761514
ZNR UUUUU ZZH
R 171514Z MAR 09
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 7716
INFO RUCPDC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEHC/DEPT OF LABOR WASHDC
RUEHAK/AMEMBASSY ANKARA 0225
RUEHBJ/AMEMBASSY BEIJING 0953
RUEHBY/AMEMBASSY CANBERRA 0818
RUEHLO/AMEMBASSY LONDON 1715
RUEHMO/AMEMBASSY MOSCOW 0966
RUEHNE/AMEMBASSY NEW DELHI 0551
RUEHOT/AMEMBASSY OTTAWA 0776
RUEHFR/AMEMBASSY PARIS 1550
RUEHSG/AMEMBASSY SANTIAGO 0241
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHZO/AFRICAN UNION COLLECTIVE

UNCLAS SECTION 01 OF 02 PRETORIA 000510 
 
SIPDIS 
SENSITIVE 
 
STATE PLEASE PASS USAID 
STATE PLEASE PASS USGS 
DEPT FOR AF/S, EEB/ESC AND CBA 
DOE FOR SPERL AND PERSON 
DOC FOR ITA/DIEMOND 
 
E.O.   12958: N/A 
TAGS: EMIN EPET ENRG EINV EIND ETRD SENV SF
SUBJECT: SOUTH AFRICAN COAL IS KING - AND WILL REMAIN SO 
 
REF: A) PRETORIA 478 
B) PRETORIA 393 
 
This cable is not for Internet distribution. 
 
¶1.  (SBU) Summary: South Africa is unique in its dependence on coal. 
 The country is dependent on coal for over 90 percent of its 
electricity, almost 25 percent of its gasoline and diesel fuels, 90 
percent of its iron and steel reduction, and large volumes of 
foreign exchange from exports.  The government is committed to 
building more mega-coal-fired power plants, as a result of the 
recent postponement of plans for new nuclear power stations.  At the 
same time, some South Africans are calling for greater 
implementation of clean coal technologies and control of carbon 
emissions.  End Summary. 
 
¶2.  (SBU) Minerals/Energy Officer and Specialist attended the Fossil 
Fuel Foundation Clean Coal Technologies Indaba March 11-12 in 
Johannesburg.  The conference highlighted South Africa's growing 
dependence on coal, but also emphasized the need to implement clean 
coal technologies, such as carbon capture and storage.  Coal is 
inevitably dominant in South Africa, given its 30-50 billion tons of 
proven reserves - the eighth largest in the world.  South Africa 
ranked sixth in world coal production in 2007 at 247.7 million tons 
per year.  The bulk of South Africa's coal is high ash requiring 
washing and processing for either power plant combustion or export. 
The country ranked sixth in the world for exports of 67.7 million 
tons in 2007, representing beneficiated, higher-grade coal mostly to 
Europe.  Exports declined to 63 million tons in 2008 due to greater 
domestic purchases and infrastructure constraints.  South Africa's 
power crisis of early 2008 has abated somewhat because of increased 
capacity, better management of existing power plants, and reduced 
power demand, but state power utility Eskom still faces inadequate 
reserve margins. 
 
¶3.  (SBU) South Africa is constructing among the largest coal-fired, 
dry-cooled power plants in the world to satisfy its electricity 
supply needs.  The 4,800 MW Medupi plant is under construction in 
Limpopo Province and will be completed over 2013-2015.  The next 
plant in line is the 4,800 MW Kusile plant in Mpumalanga Province 
targeted for completion in 2016.  The government cancelled the Eskom 
tender for a new nuclear power station late in 2008.  The government 
reaffirmed its commitment to building new nuclear power plants, but 
the tender cancellation will delay the program by at least two 
years.  Therefore, the third and fourth mega-projects yet to be 
determined are now more likely to be coal -- located in coal-rich 
Mpumalanga or Limpopo Provinces. 
 
¶4.  (SBU) Eskom Coal Specialist Johan Dempers told the conference 
that South Africa will need to invest up to $11 billion in coal 
mining by 2020 and dig at least forty new mines by that time to meet 
growing demand.  Dempers said Eskom would itself require 200 million 
tons per year of coal (out of 374 million tons overall) to supply 
Qits needs by that time, including the four mega-stations.  He called 
for greater work and collaboration on assessing South Africa's coal 
resource.  Dempers told Energy Officer that Eskom had increased 
average power station coal stock-piles to 34 days, well above the 
squeezed stockpiles which contributed to last year's power crisis. 
He complained that Eskom was unable to cover its operating costs 
with current low prices, among the cheapest in the world even after 
the regulator approved a 30 percent increase last year.  Wood 
Mackenzie Senior Analyst Xavier Prevost said port and rail capacity 
constraints are limiting transport and export of coal.  Mpumalanga 
and Limpopo Provinces are not keeping up with road maintenance from 
increasing coal traffic on its roads.  Dempers was also critical of 
the government for not facilitating the awarding of mineral rights 
and not adequately addressing skills shortages.   He said a growing 
share of the coal supply will have to come from smaller reserve 
blocks mined by junior companies. 
 
¶5.  (SBU) Wits University Coal Researcher Lionel Falcon told the 
 
PRETORIA 00000510  002 OF 002 
 
 
conference that clean, efficient, safe, and economical coal 
technologies were crucial for South Africa, given its growing 
dependence on coal (over 90 percent and increasing).  Use of water 
in water-scarce South Africa is a special concern, so many of South 
Africa's existing and new power plants are or will be dry-cooled. 
Many conference participants were optimistic about the potential for 
implementing carbon capture and storage (CCS) technology to mitigate 
carbon emissions, but IEA Clean Coal Center Managing Director John 
Topper said the technology is "not just around the corner".  He said 
there was no commercial-sized, integrated CCS project yet in 
existence.  Topper said existing CCS technology produced a huge 
energy penalty of about a 26 percent hit to efficiency, which is 
difficult to justify economically.  South African SANERI researcher 
Tony Surridge said South Africa was engaged in compiling an atlas of 
potential CCS sites with the ambitious intention of creating a 
prototype by 2015. 
 
¶6.  (SBU) Other conference participants offered research and 
commercial examples of efficient combustion and beneficiation of 
coal in South Africa.  For example, paper manufacturer Mondi is 
working with British Babcock on a new multi-fuel-fired bubbling 
fluidized bed project to increase energy efficiency.  Eskom 
Researcher Priven Rajoo said South African power plants had been 
designed by northerners, even though southern hemisphere coals are 
different than those of the north.  He said Eskom was carrying out 
research on improving combustion efficiency of South African 
low-grade coal.  Underground coal gasification and coal bed methane 
are other methods under study for beneficiating South Africa's 
significant coal resources. 
 
¶7.  (SBU) COMMENT: South Africa is not unique in the world for a 
growing dependence on coal, but it is unique in the great extent 
that many of its airplanes fly on coal and many vehicles run on coal 
(from coal to liquid technology) -- and consumers' lights and 
industry's furnaces all run in effect on coal.  South Africa's 
economy will remain overwhelmingly coal-based for the foreseeable 
future, despite conflicting commitments to diversify the country's 
energy mix and reduce its carbon footprint.   The government's 
decision to delay new nuclear build will constrain South Africa's 
ability to be a leader on reducing carbon emissions. 
La Lime