Descending from the Cloud

In recent decades, particularly in times of high prices, revenues from coal exports have allowed our country to enjoy a loose view of the foreign sector. Despite the corruption, coal royalties generated employment and funded work for the benefit of communities.

Clouds are on the horizon. Today, there is much more pressure to lower the price of coal than there is to raise it. This phenomenon is illustrated by the fact that the price of coal in January was $110 per ton and is now estimated at about $60 per ton. The Department of the Treasury hopes that in 2013 the price of coal will increase to $75 per ton and production will rise to 98 million tons, from an estimated 93 million tons this year. I fear, however, that these predictions are too optimistic. An error of $20 per ton could mean that the country takes in $1.96 billion less than the expected revenue — a considerable sum. A new push from China and India, whose coal consumption is unlimited, could obviously blur this picture. But both Australia and South Africa are more competitive than us.

The price decrease is largely due to changes in the energy consumption matrix of the U.S. Of course, it is the world’s primary consumer of energy and so, for obvious reasons, it has a strong global impact on how other nations view energy. New technologies in hydraulic fracturing “have permitted the development of important unconventional gas and petroleum resources, drastically changing the global energy equation,” reports a recent press release. The shale revolution began ten years ago and today the U.S. is the primary producer of gas in the world, far ahead of Russia. The International Energy Agency estimates that between 2009 and 2035, shale gas will account for an increase in natural gas production, representing 46 percent of all global extraction. In the case of raw materials, the U.S. reversed the decline in oil production in 2008, and by 2017 the country will once again be the primary producer of hydrocarbon, generating surpluses that will significantly add to global markets.

But why would a change in energy consumption in the U.S., especially in the gas sector, have significant consequences for Colombia’s coal? The first reason is that the U.S. has ceased to be a net importer of coal. (With the price of gas dropping to $2.50 dollars per one million British Thermal Units, the majority of electricity-generating thermal plants have stopped feeding their kettles with coal, in favor of gas.) Additionally, environmental authorities have not returned to grant licenses to plants that operate on coal. The second reason is that the majority of American coal, having no outlet in the domestic market, is going to end up in international markets. This will significantly increase the overall export supply, helping push prices down. Finally, domestic demand in the U.S. will be unable to absorb the increased gas production, leading the U.S. to export some of its gas. It is very likely that gas will replace coal demand in Europe and Japan, and this will, in turn, decrease prices once again.

Can Colombia do something about the bleak and uncertain future of its coal? In the short term, no. In the long term, we should extract the methane gas associated with coal coating. But the biggest challenge is to increase the focus on transforming coal into electricity. Electricity is the fuel of the future and Colombia, in particular, is on track to be the potentially greatest source of electricity in Latin America. I hope that we take advantage of these clouds on the horizon and seize the opportunity to rethink our energy policy!