Back in August, President of Ukraine Viktor Yanukovych said that no coal mines will be closed without reason. He said this at celebrations on the occasion of Miner’s Day in Donetsk. According to him, the preservation of promising operating mines is a priority of state policy. Most recently he is reported to have called for an increase in annual coal production to 105 Mt. On Miners Day he stressed that the closure of unprofitable mines must happen in parallel with providing miners with new jobs and the preservation of the existing level of social protection. He also noted the importance of engaging private investment in the coal industry.“In the future it is necessary to improve public-private partnership involved in modernisation of coal enterprises,” he said. The President stressed the need for modernisation of the coal industry. “The ultimate goal of this process is to create a sector of new economic quality through the introduction of advanced production technology and management, modern safety standards,” Yanukovych said.

Yanukovych also said on Miner’s Day that the privatisation process, which was originally set to be completed in 2015, has been accelerated and now will be finished in late 2014. “Everything has to be done under the full control of labour collectives and the trade unions,” he said. “I’d like to emphasise that no coal mine can be closed unjustifiably. According to him, steps to increase the use of coal in the domestic market have been already taken. “In this way we create the market conditions for the development of the coal industry,” Yanukovych said. UPI reported recently that “Ukraine has designated 45 coal mines for privatisation under a law adopted last year meant to modernise the country’s chronically unprofitable coal sector.” The list includes mines held by the state-owned enterprises Makeevugol, Ordzhonikidzeugol, Luganskugol, Pervomayskugol, Donbassantratsit, Lvivvugillia and Volynugol, the business daily Kommersant-Ukraine reported.

In April 2012 a law was passed to allow the privatisation of the coal sector, opening up profitable state-owned facilities to private investors through licenses and leases or outright sales in an effort to save millions of dollars and boost production. UPI reported that the current national energy strategy, published last year, “calls for an increase in coal production of up to 115 Mt, to be achieved through the modernisation of the mines with the help of private capital.” UPI also reported that “70% of Ukraine’s coal mines are state-owned, with 80% of them unprofitable and requiring subsidies of up $160 million per year to keep them running. In all, the Ukrainian state mining sector lost $1 billion over the first seven months of 2013, up 34.2% from year-earlier figures,” Kommersant-Ukraine said.

Energy analysts have warned finding investors for the mines won’t be easy at a time when domestic coal demand is weak and production is falling. Ukraine’s coal extraction totals dropped 4.3%, or 1.27 Mt, in the January-April 2013 period, compared with the same time frame from last year, official figures indicated. Figures released just last week showed Ukrain’e coal production for the first ten months of 2013 to have fallen by 4.6%. Another complicating factor is the 2012 privatisation law requires any buyers to abide by guarantees of social protections for miners. But in order to find willing buyers for the operations, their working costs need to be brought down, the newspaper reported analyst Denis Sakwa of the Ukrainian investment bank Dragon Capital as saying. For example, at the state-owned Lisichanskuglya mine, which was put up for sale recently, “the cost of production of coal is [$85] per tonne, while at similar private mines it in the range of [$50-$60] per tonne,” he said.

However, implementation of clean coal technologies and technologies for carbon capture and storage lacks government support, representative of the Institute for Coal of the Russian Academy of Sciences Denis Zastrelov recently told a press conference. “Researches are not enough to start implementing projects in Ukraine. Mechanisms of state support are needed to get a commercial basis,” Zastrelov said. “Almost all of them are waiting for solving of regulatory and legal issues related to the promotion of projects for pumping carbon dioxide. Prices for quotas have dropped significantly on carbon market. Everything will depend on settlement of this issue at the international level, and whether the Kyoto Protocol will continue having effect. Then we can talk about possible ‘pilot’ projects in Ukraine,” he said.

Total coal resources are reported at 117,500 Mt, including 56,700 Mt of known reserves, of which 39,300 Mt is thermal coal. The recession’s drop in Ukrainian steel production reduced coking coal demand and the fall in energy consumption by most of the country’s industries lowered thermal coal demand. Currently about 45% of coal in Ukraine is produced by private players – including their 55% share in coking coal production.

Back in April, the BBC reported on illegal coal mining in the Ukraine and it quoted Mihailo Volynets Head of Ukraine’s Independent Miners’ Union saying that about 6.5 Mt more coal – 10% of Ukraine’s total output – is for sale than is officially mined.