Coal industry restructuring in Russia

freshly-mined-high-qualit-007

The coal industry has undergone a major restructuring since 1993, in two phases. The first saw large-scale closure of uneconomic mines, resulting in an increase in the sector’s competitiveness and labour productivity. The second, from which the sector is still struggling to emerge, concentrates on improving the productive fields and opening new ones. The success of this process is critical for the sector to meet the rapidly growing domestic demand that current planning foresees. The coal industry also strives to compete in international coal markets and competes internationally to raise capital. It is hampered by social burdens and a lack of finance, worsened by the generally unstable investment climate in Russia.

The main provisions of Russia’s Energy Strategy to 2020 are based on the increasing coal use in the heat and power sector to lower the dependence on gas in the fuel mix. The provisions project the share of coal in the fuel balance to increase from about 20% in 2000 to 21-23% in 2020, with a matching decrease in the shares of natural gas and oil to meet the increasing electricity and heat demand and increase energy efficiency.

To achieve this, coal production will need to rise by almost 75% by 2020, to 340-430 Mt a year. Despite the sector’s progress towards restructuring during the 1990s, several factors raise concerns about its ability to meet this challenge. Doubts are attached to the sector’s capacity to attract the needed investment, the competitiveness of coal as an input fuel versus natural gas and the environmental implications of the increased mining and use of coal.

Under the Soviet system, the Ministry of the Coal Industry of the USSR controlled regional production associations. It was succeeded in 1991 by the Ministry of Fuel and Energy (Ministry of Energy since 2000) and RosUgol, the state-owned coal company. The restructuring process created 14 regional coal production companies and 11 regional coal associations to act as regional holding companies, in addition to a few stand-alone private mines.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s