[Ferro-Alloys.com] A pair of recent reports from Gabe Collins and Andrew Erickson, specialists on Chinese energy and security issues at U.S.-based think-tank China SignPost, argues that a coming “flood” of low-cost thermal coal from Xinjiang will challenge shale gas for market share in the power generation sector in a number of China’s central provinces.

 

“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,” the authors noted.

 

Xinjiang produced 120 million tons of coal in 2011, but Collins and Erickson expect this to double to 240 million tons per annum (mtpa) in 2015, and slightly more than 750 mtpa by 2020.

 

By 2020, Xinjiang could be supplying 200 mtpa of coal to other parts of China by rail, and a further 200 mtpa as coal-by-wire electricity.

 

Collins and Erickson, meanwhile, believe the lack of new exploration blocks in Xinjiang highlights a geographic reality - shale gas reserves near major low-cost coal production areas such as Xinjiang face tough development challenges because shale gas is likely to cost substantially more per unit of heat than the coal it must compete with in the power generation market.

 

“The bottom line is that shale gas developers in north and west China may be forced to consider residential and industrial uses as the primary markets for projects, even though these sectors provide much less demand than power generation,” the authors concluded.