Colombia needs $6.8B to hit coal ouput target

Colombian Energy Minister Carlos Rodado said on Tuesday the nation would need $6.8 billion in private investment over the next 10 years to hit its 2020 coal production goal of 160 million tonnes, double current output.

Colombia, the world’s No. 5 coal exporter, is enjoying an oil and mining boom thanks to a U.S.-backed security campaign launched by the former government to remove leftist rebels from their rural strongholds across the South American country.

The local unit of Birmingham, Alabama-based Drummond Co Inc [DRMND.UL] is among the miners planning to boost investment in the country, Rosado told journalists at a coal conference in the Colombian capital.

“Drummond has expansion plans, others have expansion plans,” Rodado said. “All of this is private investment.”

According to a presentation by Rodado, Colombia will need $6.8 billion in private investment from 2011 to 2020 to double output from the current 80 million tonnes target this year. The nation expects $800 million investment this year in coal.

Colombia’s largest coal exporter, Cerrejon, is trying to expand production some 25 percent to 40 million tonnes annually by 2014 while its second largest producer, Drummond, is eyeing expanding its El Descanso mine and port infrastructure.

Coal production is dominated by big thermal producers with their own port and rail facilities like Glencore, Drummond and Cerrejon, a joint venture owned by BHP Billiton, Anglo American and Xstrata.

Colombian thermal coal exports to Asia have increased this year, particularly to China, due to a demand slump from Europe, Colombia’s major market. The coal market closely monitors China’s huge external demand for the material.

Rodado estimated that Colombia has 24 billion tonnes of proven and potential coal reserves.

The energy minister – who also headed the ministry in the early 1980s – said that Colombia expected to see port capacity rise to 151 million tonnes a year in 2019 from 80.6 million tonnes annually currently – funded by private investment.

That number includes planned port expansions and the construction of a Prodeco’s Puerto Nuevo. Current port utilization is 86 percent, he said.

Colombian coal industry sources say that infrastructure issues are still hobbling the sector, especially for metallurgical coal.

(Jack Kimball / Reuters Africa)

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