POWDER RIVER BASIN'S COAL TO ENTER EXPORT MARKET

POWDER RIVER BASIN'S COAL TO ENTER EXPORT MARKET

The U.S. coal industry will reach a new milestone this week when the first coal ever exported from the giant Powder River Basin of Wyoming is shipped to the Far East.

It is remarkable that any export sale of Powder River coal was made. The coal's relatively low heating value, high water content (as much as 25 percent) and remote location have kept it strictly a domestic resource until now.And, making the deal especially sweet, it is going to a market that has been increasingly dominated by Australian coal mining companies over the past several years.

The shipment was sold by Mobil Oil Corp.'s coal subsidiary, Mobil Coal Producing Inc., to Taiwan Power Co., the state-run utility that will test it. The sale is a one-shot deal; no long-term contracts have been signed, but U.S. coal and railroad executives see this as a new marketing opportunity.

The 60,000-ton cargo is scheduled to sail from the west coast Canadian port of Roberts Bank on Friday, for Taiwan.

Mobil bid against nine other coal companies operating in the Powder River Basin to make the sale. Ironically, it wasn't the coal industry, but the Burlington Northern Railroad - a major coal hauler that moves much of the basin's coal - that got the deal rolling.

We've been engaged in a quiet but aggressive test for market opportunities on Powder River Basin coal. Taiwan is the first fruit, said Nick Moros, Burlington Northern's vice president for coal and taconite.

The Powder River Basin coal deposit in northeastern Wyoming and southeastern Montana is one of the richest in the United States. It yields 153.5 million tons a year, or 17 percent of the nation's production of 916 million tons. And the coal is clean with negligible amounts of polluting sulfur and ash.

Until recently, there was little, if any, serious thought to exporting Powder River coal. The Powder River coal largely stayed in the Texas and Midwestern utility markets because better quality coal could be had much closer to East and Gulf Coast seaports.

The Burlington Northern recognized an opportunity. South Korea, Taiwan, Japan and Hong Kong imported 50 million to 54 million tons of steam coal in 1985, Mr. Moros said. By the mid-1990s that is expected to double.

Japan's imports of coal for boiler fuel alone could go to 46 million tons by 1995 from 20 million tons in 1985, he noted.

As for Taiwan Power, the utility is seeking to diversity its sources of supply and tested two cargoes of Alaskan coal last summer. Australian coal exports are frequently delayed by strikes at the mines, on the railroads or at the docks.

But why would Taiwan be interested in coal with as much as one ton of water in every four tons?

Throughout the Pacific Rim, coal buyers have been looking at alternative suppliers, said George McGinn, president of Mobil Coal.

They have coal from Australia, coal from China on an intermittent basis, coal from South Africa. Each area has its own problems, Mr. McGinn said.

Coal industry executives said the blending of Wyoming coal with better quality Canadian coal was also being considered. The Roberts Bank coal terminal, operated by Westshore Terminals, is linked by rail to major Canadian coal mining areas.

Why was a Canadian port chosen when there are several coal terminals on the U.S. West Coast, principally in Los Angeles and Long Beach, Calif.?

Our approach, Mr. Moros said, is: 'There are 24 mines in the Powder River Basin. Here's the information on the specs, here are the different routes, here are the ports,' and we'd leave it to the customer to decide.

The BN has a direct line from the Powder River Basin to Roberts Bank and can offer a cheaper rate than to southern California where it has to connect with the Union Pacific Railroad.

Mr. Moros said the Wyoming coal can be landed in the Far East at a price competitive with Australian coal.

The railroad is said to have offered Mobil Coal a very attractive rate to

haul the coal about 1,500 miles from the mine in northeastern Wyoming to southern British Columbia, compared with 1,930 miles to southern California.

Neither Mobil nor the BN will discuss the transportation price, citing confidentiality, but a coal industry source said he believed it was a penny a ton a mile.