China's NEA to Forge New Coal Production Base

"Government closed small mines; increased large-scale production."

China will step up efforts on forming large-scale coal production bases, aiming at increasing the production capacity to 90% by the end of the 12th Five-Year Plan (2011-2015), according to the National Energy Administration (NEA).

Zhang Guobao, who recently stepped down as the director of the NEA, said the Xinjiang Uygur autonomous region, which has huge coal reserves, will become the 14th large-scale coal production base in the next five years.

It has coal reserves of up to 2,190 billion tons, accounting for 40% of the country's estimated overall reserve volume. The country's largest coal miners, Shenhua Group Corp Ltd, China Huaneng Group and China Huadian Corp, all have developed projects in the area.

The existing 13 large-scale coal production bases produced 2.8 billion tons in 2010, accounting for 87.5% of the country's production. The NEA said it will help to establish 20 coal companies over the next five years. Ten larger companies will have an annual production capacity of 100 million tons each and 10 smaller companies will have a capacity of 50 million tons each.

Analysts said the merger and acquisition of coal companies will be accelerated despite the limitations caused by differences of locations, industries and ownerships. The government will work on mineral rights integration in provinces including Shanxi, Shaanxi, Qinghai, Gansu, Guizhou and the autonomous regions including Inner Mongolia, and Xinjiang.

During the past five years, the local government reduced the number of mines to 1,053, of which 70% had a production capacity of approximately 900,000 tons a year. Small mines with a capacity of less than 300,000 tons a year have been closed. Five coal companies reached 100 million ton production capacity in the past five years, four of which are in Shanxi province.

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