Sergey Brilev: Hello to all our subscribers from the Global Energy Association and to a much broader audience throughout the world. Today our guest is Sergey Tsivilev, Governor of Kemerovo region, sometimes known, in simpler or perhaps more complicated terms, as Kuzbass, or at least in terms of coal.
Sergey Tsivilev: Hello!
Sergey Brilev: This is the end of the year. Let’s look at the results. It was, of course, not an easy year. But you know, we had a discussion like this yesterday with Deputy Prime Minister Alexander Novak, the man responsible for energy. And we were talking about the energy transition. He was full of praise for Russia’s energy balance and I think he was right. He said that 14 % of Russia’s electricity is still produced from coal. That’s a good thing, right?
Sergey Tsivilev: You know, electricity produced from coal is one of the cheapest ways to produce power. And then the effects are felt on the economy’s competitivity and on how much our citizens pay for their electricity. I believe that this is a very serious and sensitive aspect of our economy. We are talking, after all, about payments our citizens have to make. This is a sector we have to develop.
Sergey Brilev: Yes, and a week ago the Global Energy Association issued for the first time a report called “Ten key ideas in energy for the next 10 years.” And the very first article in the report was written by English engineer and chemist Rodney Allam – a Nobel prize and Global Energy prize laureate.
He wrote that we all love to dream about bright and lofty things but there are still two billion people in the world who have no guaranteed access to electricity. And if we are to take on the noble task of providing them with electricity, it cannot be done without traditional energy sources – and that includes coal.
But what his article was really about was carbon capture. It is clear how power generation from coal works but it also produces plenty of CO2. What can be done against this background? You know, everyone talks in paranoid terms about climate change, but environmental problems are now a very topical issue in Russia. People have started talking about it. Again.
Sergey Tsivilev: At modern coal-fired power stations, the cleaning systems operate in such a way that the emissions are practically the same as those with a gas-fired plant. The one thing on which I have to agree with you is that with a coal-fired system, more CO2 is released than with a gas system. The question is how to do away with CO2, but you have to look at the issue in terms of where you are located. Because CO2 in itself is needed for photosynthesis. It is a vital component of nature.
The Russian Federation is, In fact, a donor for many countries. If you consider things properly by counting how much CO2 our forests can absorb – and we are now seriously engaged in this – it turns out that Russia is a donor for other countries in terms of absorption of CO2. From that standpoint, developing coal-fired power generation and CO2 emissions do not damage our environment. All other emissions can be cleaned up.
Coal doesn’t just mean power generation. Coal is used for producing steel. And after enrichment, coking coal used in steelmaking also has waste products. Those waste products go into production at power stations – otherwise we would have to dispose of and store them. We have to develop further power consumption and if we produce cheap electricity then our economy will become considerably more competitive. But we are working out different ways at the same time to develop the coal industry. Like producing hydrogen from coal. That is also a very interesting idea.
Sergey Brilev: Yes, we’ll talk about that too. But Europeans are calling for production of completely clean hydrogen on the basis of electrolysis – with electricity to be supplied from renewable sources. Hydrogen based on gas, or even more so, based on coal, is dirty no matter what. What can you say about that?
Sergey Tsivilev: How much do you think producing hydrogen through electrolysis will cost?
Sergey Brilev: About 3 ½ to 4 times more expensive than your hydrogen. That is certainly true.
Sergey Tsivilev: There’s your answer.
Sergey Brilev: Let me come back to my pervious question about carbon capture. This is a noble undertaking, despite our many forests. But there is still plenty of CO2 in our atmosphere. The proposal is to send it underground. The Norwegians are already using exhausted oil strata for this at the bottom of the North Sea. Could disused mines be used for this in Kuzbass?
Sergey Tsivilev: We had discussions about projects to pump out CO2 in this manner, but at the moment there are no proposals that could be considered economically viable.
Sergey Brilev: So, cleanliness for the sake of cleanliness. And in the end, it will all be factored into electricity rates and they will still go up.
Sergey Tsivilev: Of course.
Sergey Brilev: Your position is complicated in that it is now quite fashionable to talk about such things in Europe. I’ve tried for some time to figure out why it is fashionable. But I will not criticise the idealism of those who are exploring it.
But there comes a time of reckoning with the money, even if it is packaged in a nice way. It looks something like this: You can provide serious subsidies to develop alternative energy and it remains unclear on whose shoulders the cost will fall. Or you end up with a carbon footprint. That means goods produced in Russia using hydrocarbons – coal and oil – will have additional taxes imposed on them.
And that is quite worrying for you. You’ve almost certainly already made the calculation with pen and paper or a calculator or maybe a super computer of the consequences for Kemerovo region or for Siberia as a whole. Should we be worried? Or is this a temporary thing?
Sergey Tsviliev : Of course, it’s a matter of concern. We have to go forward with modernising the coal industry. It cannot stay in its current state and we have to aim at the Asia-Pacific market which is growing and uses coal. If we close down our entire coal industry there will be no bringing it back later under any circumstances. We already lived through that in the 1990s. And we know how it ended. And it will work out far more expensive to restart a mine that has been flooded. That means starting from scratch.
As long as there is demand for coal, as long as it is economically viable, the coal industry must be developed and modernised. And we believe this will be for a long, long time.
Sergey Brilev : What is production like this year? We met earlier this year when the influence of the pandemic was not yet so pronounced. And you were engaged with the Russian Railways on questions of handling capacity. I saw the agreement signed. What has happened since?
Sergey Tsivilev: We have signed an agreement for next year with the same conditions as the year before. The agreement we signed in February this year is being implemented in full. And it was just the agreement that was needed. We are grateful to (First Deputy Prime Minister) Andrei Belousov – he was there when we signed the accord. And it allowed the coal industry to be stabilised.
Sergey Brilev: I’ll even add a bit of romance to your account. The agreement was signed on the surface – but then we all went underground. Yours truly accompanied you and saw with his own eyes how things were down there. The Russian deputy prime minister and the head of the Russian Railways showed that they were doing the right thing.
Sergey Tsivilev: At the time, in the mine, he made what I thought was a very good speech. He looked at the conditions in which the miners were working and said; “We are indebted to Kuzbass.”
Sergey Brilev: Working conditions remain very difficult. I saw them before and after the modernisation. It is absolutely clear that you have to take your hat off for the work that gets done.
Sergey Tsivilev: That is, of course, true.
Sergey Brilev: What is your output this year?
Sergey Tsivilev: Output has declined. We have to get the numbers. The decrease is about 10-11 %.
Sergey Brilev: That’s about the same level as the contraction of the economy in countries where you export coal?
Sergey Tsivilev: We could have produced more, we could have shipped more. The price is pretty good at the moment, but prices in the East are much higher than those in the West. By sending shipments to the East we could have supported our coal industry, but for the moment our agreements are at the same level as they were before. And all the plans and methods were agreed and went into effect from last summer. We have stuck to that methodology for the second half of 2020 and it will apply in 2021. It has proved effective. This is all overseen by the energy ministry. What’s involved: first of all, preparing shipments in advance in a predictable manner. That means determining where coal shipments are to be made and setting it up so that for those shipping to the West – the loss-making sector – get an additional quota to ship to the East to compensate for those losses. That’s the general idea – I won’t go into the details.
This method enabled us to predict two months in advance and that’s very important. The mining industry knew where things were going. And we fulfilled our obligations, both East and West.
Sergey Brilev: Who in the West is continuing to buy Siberian coal?
Sergey Tsivilev: Europe is still buying. And we have opened up new markets. We are now shipping to Turkey and to Africa. And a terminal in Taman (in southern Russia on the Black Sea) started up and became busier. We have singled it out specifically – it’s the south-west, where we have seen very good growth, It’s a deep-water port and our industry is trying to use it for shipments to distant markets. For the moment, these are experiments, but demand for use of the terminal is on the rise.
Sergey Brilev: There is a globe right behind me. And you’ll find an interesting country on the globe. At first glance – and perhaps this will be of great surprise to some – it takes us far away from Siberia. It’s far, but I will talk about Colombia. Now Colombia is a very big producer of coal but its coal seams are becoming exhausted and that’s completely foreseeable. That is going to happen soon and Colombia will cease being a coal exporter. You will then be in a pretty good position because the West will come to life.
Australia could make up for this, but Australia is even further away in terms of logistics. An additional window may open soon when Colombia runs out.
Sergey Tsivilev: Coal mining has been through many crises. Life has proved that those industry leaders who do not shut down their production in a crisis and, instead, continue to move forward and develop, maintain their technology and keep their people – there comes a time when they are able to restore all their losses sustained in times of crisis — because the market is high. The situation here seems very like the usual sort of crisis – except it was deeper and considerably longer because there were major changes in the markets.
We know that the market for coal in Europe is collapsing. European governments have published rulings with deadlines about who is to reduce consumption of coal and when. We know all about this. And all our plans were drawn up specifically with those plans in mind. But coal use is now undergoing reductions much more quickly than had been planned in Europe, largely because of the pandemic and additional political pressure.
Our feeling is that the market has changed abruptly and for us the eastern sector is the main and determining factor. We are watching Europe. If the price permits – and I hope that there will be no further price falls in Europe – shipments of coal will continue. And we are by no means standing still. The coal industry is developing rapidly in Kuzbass. Our coal is characterised by low levels of sulfur and phosphorus – it is, essentially, premium coal. We are also undergoing rapid development of enriched coal – we have practically no export shipments of non-enriched coal. Export shipments feature coal with added value after enrichment. The remainder – low-calore coal is sent to our thermal power stations. It is the enriched and high-quality coal (an important feature for working further with this coal) that is moving and is still in great demand in Europe.
Sergey Brilev: Let me say more. And with a crystal clear conscience too. Because I believe that, for the moment, we have no members of the Global Energy Association from the coal sector. I can praise you and no one can accuse me of bias. And no specific circumstances. But what I can say is that I have been in Kemerovo region about 10 times. I cannot tell you how many mines and coal seams I have seen. But in recent years what I have noticed – and you don’t have to be a specialist for this – are the coal enrichment plants. You used to have to cover your face when you went inside. The last time I visited one they made me put on white gloves. And I came out wearing the same white gloves.
But let’s not look into the future for the moment. Let me ask you my last questions about this year’s results. Please tell me how the pandemic affected the coal industry? Did many people fall ill? Were there staffing problems, people being thrown out?
Sergey Tsivilev: There were no real ill effects from the pandemic on the coal industry here. First of all, we never shut down the industry completely during this period. And secondly, everyone in the industry right from the start pledged to work together. Every plant set up its own system of access – checking on the health of its staff and their families. This was a process of constantly, regularly checking when people came in to work. And it was mandatory. If a staff member felt ill, if he had a fever or any signs of the SARS virus that were all made public – everyone knew what they were – he stayed at home and doctors made house calls. And all the measures allowed us to keep the situation with illness under control. Yes, the numbers of ill people rose slowly. And there was a specific peak. The so-called second wave. We got through the first wave quite nicely.
Sergey Brilev: Yes, you got through the first wave very well.
Sergey Tsivilev: We imposed strict border controls. But you can’t stay behind closed borders for long. You have to work. The second wave hurt us more. But in the current circumstances, we have had good results. The number of cases of ill people has fallen considerably. But the most concerning thing was to ensure that the health care system did not become overwhelmed and was not brought to a halt. So that it could provide medical help to all those who fell ill.
We always kept open COVID hospital beds and we always had 20 % available. At the time of the peak, we had up to 5,000 hospital beds. We are now scaling that down. We have fewer than 4,000 and the number keeps going down. And we see a decline in the number of people on ventilators.
Sergey Brilev: Tell me Sergei, what’s that interesting object on your lapel?
Sergey Tsivilev: This year was proclaimed the “Year of memory and glory” by the president. It’s a very important year – the anniversary of the victory. Kuzbass showed a great deal of strength and a great contribution to the victory in the Great Patriotic War (World War Two). Entire divisions went from Kuzbass to the front but at the same time Kuzbass was hard at work. It was working and supplied everything for the front for our victories. Some were in the battlefields. Others were hard at work for that very effort. There is a great deal of respect in Kuzbass for those who took part and then came home from the Great Patriotic War and put our region back on its feet.
And in memory of those people, every resident of Kuzbass went to his workplace along with members of his family who either took part in the war or worked at home for victory. I was with my grandfather.
You know, many people joined in and carried photographs of their family members with great pride or tried to find out more about what their family members did, put together documents, stories. Some people wore special pins, some placed pictures of their relatives on a table. Others hung pictures of their relatives on their cars. This was a great patriotic movement and people in Kuzbass truly liked it. We are very happy that everyone made an effort to remember family history.
Sergey Brilev: May I offer my best wisheson the 75th anniversary of victory. My best wishes to everyone! And my best wishes for a Happy New Year! Let’s hope that the pandemic will soon be behind us and that through Global Energy we can come up with something new next year. It seems to me that despite all my admiration for and familiarity with the coal industry it has been somewhat in the background. For instance, in terms of the agenda for the World Energy Council which is to hold its big conference in Russia. I can promise you that we will meet again soon – not only on the air but, once the pandemic is behind us, I will definitely come to see you.
Sergey Tsivilev: Another thing I must tell you about. We have a new and very interesting tradition which is quite important for Kuzbass and will be maintained now every year. In Novokuznetsk, a T-34 tank stood on a pedestal for 72 years – Novokuznetsk produced 50 % of all the armour used in the war. The parade that took place 75 years ago was opened on Moscow Square by a T-34 tank and a column of tanks led the parade. This year, we repaired that tank and it led the parade columns in Novokuznetsk.
There was no similar tank in Kemerovo. But we found a tank that was recovered in 2015 in a swamp near Pskov (in northwestern Russia). That tank has now been restored and was used in the parade in the city of Kemerovo. Both tanks are now on pedestals – one in Novokuznetsk, the other in Kemerovo. And from this year we are launching a tradition – these two tanks in our two main cities will be taken off their pedestals to lead the columns just as it was on 24th June 1945 at the victory parade. This shows the unity of labour along with the military accomplishment as embodied by the best medium-sized tank in World War Two.
Sergey Brilev: Thank you, Sergey.
Sergey Tsivilev: Thank you and good bye.