Jobs and exports from existing coal regions will be decimated if the Galilee Basin is developed for coal mining, according to new research.Globally renowned resource analytics firm Wood Mackenzie, which conducted the research, is forecasting massive reductions in future coal output from the NSW Hunter Valley and significant falls in Queensland's Bowen and Surat basins.
The Federal and Queensland governments have been stressing the job gains and economic benefits if coal mining goes ahead in the Galilee Basin, making it the first new coal region to be exploited in 50 years. Both governments are prepared to back investment with subsidies.
However, the new research suggests that while the development of the Galilee Basin would expand coal exports overall, it would come at a severe cost to jobs and economies in other regions.
According to its findings:
- Ten new mining projects or mine expansions in the NSW Hunter Valley would be displaced by the Galilee Basin output and shelved or delayed
- Eight mining projects or expansions would be delayed or shelved in Queensland
- Hunter Valley thermal coal output would fall by some 86 million tonnes, or 37 per cent
- Bowen Basin output would decline by nearly a third, with 17 million fewer tonnes mined
- The Surat Basin in south-east Queensland, which is yet to be developed, would produce 37 per cent less coal than it otherwise would
It compares a "no Galilee Basin coal" scenario to the impact of 150 million tonnes of Galilee Basin coal production being put on the world market.
Embed: Newcastle: The Galilee expansion is forecast to lower coal output from the Hunter Valley by nearly 40 per cent in 2035.
Jonathan Van Rooyen, the general manager of investments at The Infrastructure Fund, said the impact for the Port of Newcastle "is pretty devastating".
"I'm an investor, not a politician, but it seems a perverse outcome when you are taking jobs in one part of the country and promoting them there and displacing them or destroying them in other parts of the country," he told the ABC.
"The addition of significant new coal supply from a new basin will inevitably displace coal production, and coal jobs, in existing coal basins in NSW and Southern Queensland.
"To the extent that the Adani mine lives up to its promise to be automated 'from pit to port' it is likely that substituting a million tonnes of coal production in the Galilee for a million tonnes of coal production from NSW will result in a net reduction in jobs."
New mines in Galilee Basin will probably be delayed
Embed: In the Surat Basin, coal production will be 13 Million tonnes a year (or 37 per cent) lower in 2035 if new coal is supplied from the Galilee Basin
Many environmentalists and financial analysts have downplayed the prospects of Adani's mine going ahead and the Galilee Basin being developed.
If Wood Mackenzie's base case forecast is on the money, they should think again.
"We forecast about 120 million tonnes to come from the Galilee Basin, possibly up to 150 million tonnes," Wood Mackenzie's head of mines and metals consulting Dominic Tisdell said.
"That will mean the main development for thermal coal will happen in the Galilee Basin and not as much in other areas such as the Surat, the Hunter Valley or Indonesia."In the Hunter Valley, we expect that most of the existing mines will operate for the terms of their natural lives — many of the mines are world class and will operate into the 2030s and beyond.
"What it will mean though is that new mines … will probably be delayed in preference to new developments in the Galilee Basin."
In Queensland's Bowen Basin, exploitation of metallurgical coal for steel-making will continue apace, but output of thermal coal would be 20 to 30 million tonnes lower than it would be without the Galilee Basin coming online.
But Mr Tisdell said Australia's coal exports would be better off "net about 50 million tonnes" with the Galilee Basin than without.
Embed: In the Bowen Basin, coal production is likely to be more than 30 per cent lower in 2035 if Galilee coal goes ahead
Government subsidies to new coal region a 'sovereign risk'The Infrastructure Fund, owned by Westpac's Hastings Fund Management, bought the Port of Newcastle in conjunction with China Merchants for $1.75 billion in 2014.
The hit to output from the Port of Newcastle would mean lower returns for people with superannuation monies invested in the asset.
"We are used to modelling economic and financial risks," Mr Van Rooyen said.
"But this is sovereign risk. The Government is preparing to give subsidies of up to a billion dollars to open up a new coal region at a time of flat world demand.
"Put simply, either the $1 billion loan to Adani will have a significant impact on coal production, and jobs — in the Hunter Valley, Bowen Basin and Surat Basin — or the business case for the Adani rail line is deeply flawed."
Financial hurdles facing some companies in Galilee BasinBut the Minister for Resources and Northern Australia, Matt Canavan, has previously pointed out that coal infrastructure has been subsidised by the Government in the past, including the rail line that supplies the Port of Newcastle, which was built by government and expanded with government money just a few years ago.
With enthusiastic Federal Government support, Adani has sought a loan of up to a billion dollars from the Government's Northern Australia Infrastructure Facility.
The Queensland Government has offered Adani unlimited water rights and it will not have to pay mining royalties during the initial years of production.
However, the financial hurdles facing companies with control of mining leases in the basin raise doubts about Wood Mackenzie's forecast scenario.
Adani, for example, is yet to get finance for its Carmichael mine and Clive Palmer, whose Waratah Coal owns leases in the Galilee Basin, has been beset by financial problems.
India's debt-ridden GVK group, which owns three tenements in a joint-venture with Gina Rinehart's Hancock, defaulted on debt repayments earlier this year and has faced the prospect of forced asset sales.