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Glencore says coal an investment opportunity despite CO2 worry

[BRUSSELS] Coal is an investment opportunity as global demand will grow and a halt in spending would halve seaborne supplies in 15 years' time, Glencore said on Monday, adding its own coal operations would be depleted by 2035 without new funds.

The Paris Agreement on climate change agreed in December triggered selling in companies heavily exposed to coal, the most carbon-intensive of the fossil fuels.

Glencore, in a sustainable-development presentation on Monday, said demand for coal was still expected to grow by some 7 per cent by 2030 to 6.03 billion tonnes of coal equivalent (btce) from 5.61 btce in 2013, driven by emerging economies and industrial demand.

Glencore's earnings from coal account for 23 per cent of its commodity portfolio, second only to copper at 25 per cent.

It acknowledged investment in low-emission coal technology was essential to reaching Paris emissions targets, but said the reality was that energy demand was rising.

Looking at seaborne coal, it said "supply decays rapidly without further investment" and would roughly halve in 15 years, while Glencore's coal operations would be largely depleted by 2035.

Along with other miners, Glencore has high levels of debt, which it has been seeking to reduce by selling assets.

However, Glencore's extensive trading operations set it apart as it can generate revenue from arbitrage and sales, especially in bulk commodities such as coal.

It said the development of technology such as carbon capture and storage (CCS) could eventually mean a 90 per cent cut in emissions from coal.

A statement on Glencore's website says it is supporting low-emissions coal technology, without giving financial details.

It also says it is working to improve energy efficiency and to increase use of renewable power at its operations.

So far, CCS has struggled to take off because of upfront costs as well as public mistrust.

Some environment campaigners are also hostile to CCS because they see it as an excuse to carry on burning fossil fuels. Others, such as Bellona, say it is vital and firms such as Glencore should invest much more heavily in it.

BHP Billiton last week announced a US$7.4 million donation to Peking University to develop technology to capture carbon emissions from the iron and steel industries.

REUTERS