Coal, LNG and other fossil fuels
ARA, RB and NEWC
Stig-Inge Gustafsson
[email protected]
Department for Management and Engineering
Coal, LNG and other fossil fuels – p. 1/61
Coal
•
Nymex has 22 coal contracts
•
ICE has 23
•
Also many other exchanges have coal
contracts
•
Strange terminology. Many abbreviations
•
Very much to learn
•
Unfortunately a bit tedious lecture
Coal, LNG and other fossil fuels – p. 2/61
Coal
Coal is a type of ”rock”. You mine it
in the same way as an ore.
Coal, LNG and other fossil fuels – p. 3/61
Coal
Coal is a ”difficult” commodity
•
Several different types
•
Different heating values
•
Difficult ”bulky” and dirty transport
•
Transport by train and ships
•
No tradition in exchange trading
Coal, LNG and other fossil fuels – p. 4/61
Coal
•
Anthracite
•
Bituminous
•
Subbituminous
•
Lignite
Coal, LNG and other fossil fuels – p. 5/61
Coal and iron
•
Iron ore + charcoal + fire → iron
•
Charcoal expensive = Try using ”mineral” coal
instead
•
Mineral coal not pure. Poor iron → Get rid of
impurities
•
Impurities = volatile matter = coal tar and coal
gas
•
Dry destillation → coke = ”Clean” coal
Coal, LNG and other fossil fuels – p. 6/61
Coke
•
Moisture in the form of steam is not
considered as volatile matter even if the water
is transformed into vapour.
•
Coke gives you less smoke than coal. Better
in large towns.
Coal, LNG and other fossil fuels – p. 7/61
Anthracite
•
This is the best type of coal
• Calorific value = 26-33 MJ/kg ≈ 8 kWh/kg
• It is a mineral, i.e. like a stone
• High carbon content, more than 90%
• Low volatile matter
• Low moisture content < 15%
• From Appalachian mountains in U.S.A. and
from South Wales in U.K.
Coal, LNG and other fossil fuels – p. 8/61
Bituminous
•
This is the next best type of coal
• Calorific value = 24-35 MJ/kg ≈ 8 kWh/kg
• Contains a tar-like substance = bitumen.
Carbon content, 60 - 80%
• Used in steel making, coke
• Contains volatile matter, sulphur and
phosphor
• Low moisture content < 15%
• From Australia and U.S.A.
Coal, LNG and other fossil fuels – p. 9/61
Steam coal
•
A grade between anthracite and bituminous
coal.
•
Used for coal-fired locomotives
Coal, LNG and other fossil fuels – p. 10/61
Sub-Bituminous
•
This is the next, next, best type of coal
• Calorific value = 20-28 MJ/kg ≈ 7 kWh/kg
• Used for steam power generation
• Contains volatile matter, sulphur and
phosphor
• Moisture content about 20 to 30%
• Can ignite itself
• From U.S.A., Powder River basin
Coal, LNG and other fossil fuels – p. 11/61
Lignite
Lowest rank of coal
•
Calorific value = 10-20 MJ/kg ≈ 4 kWh/kg
•
High ash content
•
Used for steam power generation close to the
mines
•
Moisture up to 65%
Coal, LNG and other fossil fuels – p. 12/61
Lignite
•
Called ”brown coal”
•
From Texas, Eastern part of Germany et c.
•
Very large mines which ruin nature
•
Almost like peat
Coal, LNG and other fossil fuels – p. 13/61
Coal
•
Acid rain
•
Global
warming
•
Lung disease
•
Very cheap
•
Large reserves
Coal, LNG and other fossil fuels – p. 14/61
Coal
•
Coal is not considered as a scarce resource
•
Will suffice for 150 years
•
Coal can be found in U.S.A, Africa, Europe,
Australia, South America. Coal is even found
in Sweden.
•
Dug up from mines, i.e. you get large and
long holes in the Earth surface
Coal, LNG and other fossil fuels – p. 15/61
Coal
•
Lignite in ”Eastern Germany” is mined in
open air. This results in a very big hole.
•
Most people prefer not to live next to such a
hole
•
The Swedish company Vattenfall owns some
of these.
Coal, LNG and other fossil fuels – p. 16/61
Coal
In the Appalachian mountains, coal
mining has changed from traditional
mining to so called Mountaintop removal mining. The mountaintop is
blasted with dynamite and the former mountaintop is filled into the
valley below. A few thin layers
of coal are ”mined”. Wildlife and
forests are totally destroyed.
Coal, LNG and other fossil fuels – p. 17/61
Coal
•
Large CO2 emissions
•
The ”Schwarze Pumpe” project tries to
capture the emissions.
•
Carbon dioxide, Capture and Storage = CCS
•
Oxyfuel technique. Coal is burnt in pure
oxygen which gives us highly concentrated
CO2 which is made to a liquid and stored in
old gas and oil fields.
Coal, LNG and other fossil fuels – p. 18/61
CCS - Germany
•
CCS in old NG fields is now ”politically dead”?
•
Vattenfall Jänschwalde project
•
Federal states can disagree, veto.
Coal, LNG and other fossil fuels – p. 19/61
Coal
•
Almost all coal
comes to
Sweden on
ships
•
From
the
harbor it is
transported by
train, or lorry.
Coal, LNG and other fossil fuels – p. 20/61
Coal trade
•
Trade at ”normal exchanges”, such as
Nymex, ICE, EEX et cetera
•
Trade via GlobalCoal
Coal, LNG and other fossil fuels – p. 21/61
McCloskey
In order to trade coal as a commodity you need
some kind of a bench-mark. For coal this can be
TFS API where:
•
TFS = Tradition Financial Services
•
API = All Publications Index
•
This index is now used, and owned, by Argus
McCloskey and is trade marked. Now called
only API.
Coal, LNG and other fossil fuels – p. 22/61
API
API#2 is a monthly basket index for the ARA area, CIF,
ARA, NAR where CIF = Cost Insurance and Freight and
NAR = Net As Received = a heating value. Calculated as
MCIS NWE Steam Coal Marker Price + International Index
divided by 2. The other indices are calculated based on
other prices. MCIS = McCloskey Coal Information
Services. NWE = North West Europe
Coal, LNG and other fossil fuels – p. 23/61
Coal indices
Coal has a number of price indices names:
•
API2 Coal imported to northwest Europe.
Rotterdam.
•
API3 coal from Newcastle Australia
•
API4 Coal exported from Richards Bay in
South africa
•
API5 and API6 Coal exported from Australia
Coal, LNG and other fossil fuels – p. 24/61
Coal indices
•
API8 and API9 Coal from China
•
API C1 Australian coking coal
•
These names are ”owned” by Argus
McCloskey
The API indices are not types of coal, but instead weighted
prices on the spot market for different types. Coal futures
are priced according to these indices.
Coal, LNG and other fossil fuels – p. 25/61
Coal
If you want to trade –> start to find a contract:
•
As an example, we check www.theice.com
•
Go to Products, Other, Coal
•
Eight futures contracts are available. (And
some options)
•
IFEU = Ice Futures Europe ?
Coal, LNG and other fossil fuels – p. 26/61
Coal
•
Assume we live in Europe
•
ICE has a contract for Rotterdam coal, 1 lot =
1,000 tonnes
•
You must buy at least 5 lots
•
Cash settled according to API2 index
•
This index is used for finding ”real” prices for
ARA CIF
•
Very small volumes
Coal, LNG and other fossil fuels – p. 27/61
Coal
•
ARA = Amsterdam, Rotterdam and Antwerp
•
CIF, Incoterms for Cost Insurance and Freight
•
Look in Argus/McCloskey’s Coal Price Index
report
•
Trade seems to be very small in this contract
Coal, LNG and other fossil fuels – p. 28/61
Coal
•
For the moment, September 2009, there is no
coal contract on the Saxo Bank list.
•
You have to go elsewhere in order to trade
•
EEX in Germany has ARA and RB Coal
futures. Trade seems to be very small.
•
EEX = European Electricity Exchange
•
One contract is for 1,000 tonnes. API2 and
API4 are used
Coal, LNG and other fossil fuels – p. 29/61
Coal, QL
•
Coal futures are available at Nymex
•
Trades in 1,550 tonnes
•
Prices in U.S. $ per ton.
•
Heat content more than 12,000 Btu per pound
•
Maximum of 13.50 % ash, et cetera
Coal, LNG and other fossil fuels – p. 30/61
Coal, QL
Location of Delivery: Delivery Shall be made F.O.B. buyer’s
barge at seller’s delivery facility on the Ohio River between
Mileposts 306 and 317 or on the Big Sandy River with all
duties, entitlements, taxes, fees and other charges
imposed prior to delivery on or in respect to the product
paid by the seller. Delivery shall be made in accordance
with applicable Federal, State and local laws.
Coal, LNG and other fossil fuels – p. 31/61
Coal
•
Coal is also traded in Australia
•
Australian Securities Exchange, ASX
•
Thermal Coal FOB Newcastle
•
Very small trade as yet
•
Calorific value min 5,650 NCV
•
NCV = Net Calorific Value, probably in kcal/kg
Coal, LNG and other fossil fuels – p. 32/61
GlobalCoal
•
globalCOAL has a computer solution for coal
trading
•
Contracts according to SCOTA, Standard
COal Trading Agreement
•
A number of specifications, DES/ARA,
NEWC, RB1, RB2 INDO, BOL et c.
•
DES = Delivered Ex Ship, INDO = Indonesia,
BOL = Bolivia
Coal, LNG and other fossil fuels – p. 33/61
GlobalCoal
•
Not really an exchange
•
Connects coal buyers/sellers with eachother
•
Bilateral contracts, but standard types
•
You know the other party in the end
•
No clearing bank
Coal, LNG and other fossil fuels – p. 34/61
How much does coal cost?
•
DES ARA 67.87 in September 2009. ≈ 81
$/ton, November 2013. 6,000 kcal/kg
•
Price in U.S. dollar per metric ton. 1 kcal =
1.163 10−3 kWh, 6,000 kcal = 6.978 kWh
•
1 metric ton equals 6,978 kWh
•
81 U.S$ equals ≈ 542 SEK —> 0.08
SEK/kWh
Coal, LNG and other fossil fuels – p. 35/61
How much does coal cost?
•
Coal is a very cheap fuel if it is traded in the
world market!!
•
Coal is a hazard for our environment
•
Governments therefore put taxes on coal, and
CO2 , in order to make it more expensive.
•
In Sweden ≈ 2,600 SEK/tonne
•
Tax is five times more expensive than the
commodity itself
Coal, LNG and other fossil fuels – p. 36/61
NG and LNG
•
Natural gas, NG, is almost the same as
methane, CH4 .
•
Main findings in the Middle East, Quatar, but
also in the North Sea and Russia.
•
When the natural gas comes up from Earth it
is in the form of a gas.
Coal, LNG and other fossil fuels – p. 37/61
Natural gas, NG
•
Gives us acid rain
•
Gives us global warming
•
Transport in pipe-lines
•
Substations for keeping the pressure
•
Pipe-lines owned by a special company
Coal, LNG and other fossil fuels – p. 38/61
Natural gas
•
Methane gas + a number of others
•
Many times from oil wells
•
Can come from bio-degradation
•
Contains hydrogen sulphide = sour gas
Coal, LNG and other fossil fuels – p. 39/61
Natural gas
•
Lighter than air
•
Can explode in concentrations between 5 15 %
•
Contains about 10 kWh per ”normal” cubic
meter
Coal, LNG and other fossil fuels – p. 40/61
Sweden
Source: E.On web pages
Coal, LNG and other fossil fuels – p. 41/61
NG and LNG
•
Natural gas demand has lead to (at least
almost) war in East and Central Europe.
•
Russia wants to sell natural gas to rich
countries like Germany but Ukraine and
Belarus must be passed.
•
Nord Stream is a planned pipe line at the
bottom of the Baltic Sea.
Coal, LNG and other fossil fuels – p. 42/61
Nord stream
Source: Nord stream web pages
Coal, LNG and other fossil fuels – p. 43/61
Nord stream
Source: Nord stream web pages
Coal, LNG and other fossil fuels – p. 44/61
NG and LNG
•
The findings are sometimes very far from the
spot of consumption
•
It is difficult to build pipe lines from the Middle
East to Europe or U.S.A. We must find
another way.
Coal, LNG and other fossil fuels – p. 45/61
Liquefied Natural Gas, LNG
•
LNG is a liquid, = very cold gas -162 ◦ C
•
LNG is ”made” in LNG trains, i.e. one cooling
device after the other
•
Transport in large ships, LNG
•
Some LNG boils off = keeps the temperature
down
•
Highly insulated tanks under ”normal” pressure
Coal, LNG and other fossil fuels – p. 46/61
Natural gas, LNG
•
Must be kept under pressure if not very cold
•
Very expensive items for liquidification and regasification
Coal, LNG and other fossil fuels – p. 47/61
Fossil fuels and environment
Pollutant
Natural gas
Oil
Coal
117,000
164,000
208,000
Carbon monoxide
40
33
208
Nitrogen oxides
92
448
457
Sulphur dioxide
1
1,122
2,591
Particulates
7
84
2,744
0.0
0.007
0.016
Carbon dioxide
Mercury
Fossil fuel emissions levels in pounds per billion Btu
Coal, LNG and other fossil fuels – p. 48/61
Btu?
How much is one pound per billion Btu in ”normal” units?
• One Btu is the heat it takes to warm one pound of
water one degree Fahrenheit. Compare with one
”Calorie” which is the heat for warming one ”gram” of
water one degree Celsius, or Centigrade.
• One pound is 453.59237 grams
• There is not much heat in a Calorie but not so much in
a Btu either
Coal, LNG and other fossil fuels – p. 49/61
Fahrenheit and Celsius
9TC
5
•
TF =
•
The freezing point of water is 0 ◦ C. This is the
same as 32 ◦ F
•
The boiling point of water is 100 ◦ C. This
equals 212 ◦ F
+ 32
Coal, LNG and other fossil fuels – p. 50/61
Fahrenheit and Celsius
•
When we have 100 degrees Centigrade
between the two temperatures, we have 180
degrees Fahrenheit. A Fahrenheit degree is
only 0.556 Centigrade ditto.
•
453.59237 grams heated 0.556 Centigrade
therefore corresponds to 252 Calories.
453.6 × 0.556 = 252
Coal, LNG and other fossil fuels – p. 51/61
Calories to Joules
•
The heat contained in a substance is called
the heat capacity. In water this is ≈ 4.1855
Joules per gram and ◦ K.
•
Kelvin temperatures have the same
segmentation as Centigrade
•
In 252 Calories there are hence 1,055 Joules
Coal, LNG and other fossil fuels – p. 52/61
Calories to Joules
•
Joules are therefore much smaller than both
Calories and Btus
•
One Joule equals one Watt second, Ws. So
one Btu must therefore be 1.055 kWs which in
turn will be 0.00029 kWh.
Coal, LNG and other fossil fuels – p. 53/61
Pounds per Btu to kg/kWh
•
In one billion Btus there are 0.00029 ×109 or
292,985 kWh.
•
For natural gas we saw that there were CO2
emissions of 117,000 pounds per billion Btu.
This will become 0.18 kg/kWh. For coal it is
0.32 kg/kWh.
Coal, LNG and other fossil fuels – p. 54/61
Pounds per Btu to kg/kWh
•
If we burn coal in a power station in order to
get electricity we need three times as much
coal as we get electricity. One kWh electricity
therefore results in one kg carbon dioxide.
•
Natural gas can produce more electricity for
each input of heat.
About 50% can be
achieved. This results in about 0.4 kg CO2 for
each kWh electricity.
Coal, LNG and other fossil fuels – p. 55/61
NG and LNG
• For the moment it seems hard to find a LNG contract
but trade will probably start in the future.
• Natural gas, in gas form, has several such contracts.
10 at Nymex. Even more at ICE.
• The gas at Nymex is delivered at the Henry Hub in
Louisiana where many national pipe lines intersect.
• The gas is traded in units of 10,000 million Btu, or
mmBtu.
Coal, LNG and other fossil fuels – p. 56/61
NG and BTU:s
•
One Btu is a very small energy unit. 1 Btu =
1.055 kJ = 1,055 Ws.
•
One Btu therefore equals 2.93× 10−4 kWh.
•
The exchange shows the cost in U.S $ per
mmBtu
•
The cost for 1 mmBtu (= 293 kWh) is about
4.80 U.S.$ —-> 0.13 SEK/kWh
Coal, LNG and other fossil fuels – p. 57/61
NG Nymex futures
•
The gas is delivered at the Sabine Pipe Line,
Henry Hub in Louisiana.
•
The seller is responsible for the movement of
the gas through the hub.
•
The buyer from the hub.
•
The seller pays the hub fee.
Coal, LNG and other fossil fuels – p. 58/61
NG ICE futures
•
Price in Sterling per therm. 1 therm = 29.3
kWh
•
Cost about 34 pence per therm = 0.13
SEK/kWh
•
Gas is delivered to a ”virtual” hub, The
National Balancing point.
•
This point is everywhere in the UK. The price
is the same in the whole pipe line.
Coal, LNG and other fossil fuels – p. 59/61
LNG Europe
•
A new import facility will be built in Rotterdam
•
The cost is estimated to 800 million Euros
•
The gas comes to Rotterdam in ships
•
LNG is imported and NG is delivered or
exported in pipe lines
Coal, LNG and other fossil fuels – p. 60/61
Other fossil fuel contracts
•
Nymex has also contracts for heating oil and
for gasoline, RBOB
•
RBOB = Reformulated Blendstock for
Oxygenate Blending = ”raw” gasoline
•
There is also a contract for gasoil = Marine
diesel oil
•
Gasoil is a destilled product
Coal, LNG and other fossil fuels – p. 61/61