World Energy Outlook 2006

Consolidation of the mining industry has helped to lower production costs in
several countries in the last decade or so. We expect costs in most major
exporting countries to remain broadly flat in real terms over the projection
period. Rationalisation programmes and the adoption of modern technology
are expected to largely offset the higher costs associated with developing new
underground and surface mines that will also require new above-ground
infrastructure.
dollars per tonne
Figure 5.5: Indicative Supply Costs for Internationally Traded Steam Coal
50
40
30
20
10
0
0 100 200 300 400 500
Venezuela
Australia
Indonesia
Russia
billion tonnes
China
Poland
South Africa
United States
Colombia
Note: FOB cost, not including capital charges, based on a standardised heat content of 6 000 kcal/kg
(comparable to a typical South African coal exported from Richard’s Bay). The heat content of internationally
traded coals ranges from 5 200 kcal/kg to 7 000 kcal/kg.
Source: IEA Clean Coal Centre analysis based on Devon and Ewart (2005) and RWE (2005).
In some regions, mining accounts for up to half the cost of coal supply
(Figure 5.6). Mining costs vary depending on the type of mine extraction
method deployed, the accessibility of the coal seams, the degree of
preparation the coal needs prior to transporting and labour requirements.
Average mine costs range from $7 per tonne for opencast, high-calorific-value
coal in Venezuela to more than $10 in countries like Australia where
underground mining accounts for a more significant share of total production.
Underground coking-coal costs can sometimes exceed $40 per tonne, but
coking coal produced at this cost can still be competitive because of its high
134 World Energy Outlook 2006 - THE REFERENCE SCENARIO
© OECD/IEA, 2007