And yet our idiot government has given the green light to a mining proposal on the West Coast of New Zealand. Wait for it, too, to be cancelled
Massive
Australia coal project dumped in face of China energy revolution
The
proposal to develop a 180 million tonne per annum coal export
facility at Dudgeon Point in Queensland has been cancelled
21
June, 2014
.
Dudgeon
Point is one of a number of multi-billion dollar Queensland coal
export terminal proposals that have been relinquished over the last
two years. This highlights the rapid deterioration in the global coal
industry prospects, with key turning points this last month by
China’s President Xi Jinping’s call for an “energy
revolution”[i] and President Obama’s “Clean Power
Plan”.[ii]
Corporates
like Brookfield Infrastructure Group, with a proven history of
maximising investor returns, are shelving unviable proposals and
moving on.
Dudgeon
Point is part of the Port of Hay Point, 25 km south of Mackay in
Queensland. The proponent, North Queensland Bulk Ports Corporation
Limited (“NQBP”) proposed a $10-12 billion port development
involving two coal export terminals, six rail loops and train
unloading facilities, plus a connection to Goonyella rail system.
With
the thermal coal price down 50% in 4 years to a new low of US$72/t in
June 2014, the market no longer needs the expanded infrastructure of
massive greenfield projects like Dudgeon Point. An excess state of
supply is being maintained due to long term take-or-pay contracts.
Economic slowdowns in China and India means that this is compounded
by weaker than expected demand.
The
lapse of Brookfield and Adani’s Dudgeon Point proposals follows a
series of coal export port expansion plans being abandoned over the
last two years. These include:
- In 2012 BHP indicated it would not proceed with its new coal export terminal plans at Abbot Point “T2”;
- In May 2013 Glencore announced they had scrapped plans to build a 35Mtpa coal export facility at Balaclava Island, 40km North of Gladstone;
- Lend Lease’s decision in Feb’2014 to withdraw from the AP-X project (a joint proposal with Aurizon); and
- In March 2014 Anglo American notified its intention to withdraw from the AP-X coal terminal development project at Abbot Point.
Despite
this, the Queensland ports sector continues to suffer from excess
capacity.
The
Adani Group owned Abbot Point “T1” is operating at less than 50%
utilisation, three years after Adani acquired this port lease from
NQBP.
The
greenfield Wiggins Island Coal Export Terminal (“WICET”) stage I
of 27Mtpa capacity has delayed its commissioning till first quarter
2015, a year behind schedule. The WICET Stage 2 expansion has been
put on hold post Glencore’s cancellation of the Wandoan Project in
September 2013.
Clearly
the world’s seaborne coal markets have entered a prolonged period
oversupply. The key debate now is if this is going to be a prolonged
cyclical downturn or in fact is the commencement of a structural
decline in the seaborne traded coal market.
Australia
remains at significant financial risk from the current government
policy to encourage investment in fossil fuel developments. These
long life mining and associated infrastructure projects are
increasingly at risk of becoming “stranded assets” as the world
transitions toward a lower carbon energy system.
Background
on Dudgeon Point
Back
in September 2011 the Initial Advice Statement that was released.
This was followed on 21 June 2012 when NQBP released the terms of
Reference for the proposed Environmental Impact Statement (“EIS”).
The Terms of Reference were valid for two years, but with the EIS not
progressed, the proposal would have officially lapsed on 21 June
2014.
While
the lead project proponent was NQBP, there were two underlying
proponents each looking to build a coal export terminal with a
combined export capacity of up to 180 million tonnes per annum (Mtpa)
of coal:
- Adani Mining Pty Ltd (Adani); and
- Dudgeon Point Project Management Pty Ltd (DPPM), a subsidiary of the Brookfield Infrastructure Group, owner and operator of the 85Mtpa Dalrymple Bay Coal Terminal (also at Hay Point).
The
port is within the Great Barrier Reef World Heritage Area adjacent to
the Great Barrier Reef Marine Park. This was problematic, given the
associated proposal for dredging of 13–15 million cubic metres.
In
June 2013 a year’s delay was announced for the Dudgeon Point
proposal. At that time NQBP stated: “New port facilities will only
be constructed if there is sufficient customer export demand to
justify the large expenditure required.”[iii]
Neither
Brookfield Infrastructure Group nor Adani Mining have progressed
their EIS in the two years since the Terms of Reference were set.
NQBP requested the Queensland Coordinator-General to cancel the
project declaration on 20 June 2014.[iv]
Tim Buckley
is the Director of Energy Finance Studies, Australasia for the
Institute for Energy Economics and Financial Analysis. He has 25
years of financial markets experience, including 17 years with
Citigroup culminating in his role as Managing Director and Head of
Australasian Equity Research.
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