Coal Report, 1
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DELIVERING RELIABLE AUSTRALIAN COAL EXPORTS TO THE WORLD COAL TRANSPORT INFRASTRUCTURE DELIVERING RELIABLE AUSTRALIAN COAL EXPORTS TO THE WORLD: COAL TRANSPORT INFRASTRUCTURE Senior Officials Group comprised of: Department of Industry, Tourism and Resources - Chair Department of Foreign Affairs and Trade Department of Transport and Regional Services Secretariat Coal Industry Section, Department of Industry, Tourism and Resources Acknowledgments – The Senior Officals Group gratefully acknowledges the support of the many stakeholders consulted in the preparation of this report: industry bodies - Minerals Council of Australia, Queensland Resources Council, New South Wales Minerals Council, Newcastle Coal Infrastructure Group; Australian coal producers - Anglo Coal Australia Pty Ltd, AMCI Australia Pty Ltd, Apollo Resources Pty Ltd/Idemitsu Kosan, BHPBilliton, Bloomfield Collieries Pty Ltd, Camberwell Coal Pty Ltd, Centennial Coal, Donaldson Coal, Excel Coal Ltd, Glennies Creek Coal, Gloucester Coal Ltd, Newpac, Resource Pacific Limited, Rio Tinto Coal Australia, Whitehaven Coal Mining Ltd, White Mining Ltd/Itochu, and Xstrata Coal; private infrastructure owners and operators - Dalrymple Bay Coal Terminals Pty Ltd, Prime Infrastructure, Port Waratah Coal Services Limited, Pacific National, Hunter Bulk Terminals, Hay Point Services, and the Hunter Valley Coal Chain Logistics Team; Consultants - Newcastle Coal Terminals Pty Ltd, TransCoal Pty Ltd, IEEJ, JAPAC; Coal customers – Nippon Steel Australia Pty Ltd, Japan Coal Development Australia Pty Ltd; Australian Government Departments and Agencies; New South Wales Government Departments; Queensland Government Departments; and Australian, NSW and Queensland Government-owned Corporations and Authorities. DELIVERING RELIABLE AUSTRALIAN COAL EXPORTS TO THE WORLD: COAL TRANSPORT INFRASTRUCTURE 2 Table of Contents 1. EXECUTIVE SUMMARY 4 KEY AREAS OF STRATEGY FOR CONSIDERATION 10 2. COAL MARKET OUTLOOK AND HUNTER VALLEY CASE 11 STUDY SUMMARY 11 2.1 IMPORTANCE OF THE AUSTRALIAN COAL INDUSTRY 11 2.2 GLOBAL DEMAND 13 2.3 OUTLOOK FOR COAL IMPORTS IN KEY COUNTRIES 14 2.4 BACKGROUND TO DEMAND AND SUPPLY CASE STUDY IN 15 THE HUNTER VALLEY 2.5 ABARE FINDINGS: HUNTER VALLEY SURVEY 16 3. AUSTRALIAN COAL SUPPLY CHAINS 21 SUMMARY 21 3.1 DESCRIPTION – COAL SUPPLY CHAIN 22 3.2 COAL CHAIN LOGISTICS TEAMS 22 4. CAPACITY ALLOCATION SYSTEMS 28 SUMMARY 28 4.1 OVERVIEW OF CAPACITY ALLOCATION SYSTEMS 28 4.2 HUNTER VALLEY COAL CHAIN DEVELOPMENTS AND THE 30 MEDIUM TERM CAPACITY BALANCING SYSTEM 4.3 CAPACITY DISTRIBUTION SYST EM (CDS) IN 2004 33 4.4 CAPACITY BALANCING SYSTEM (CBS) 2005-2007 35 4.5 DBCT QUEUE MANAGEMENT SYSTEM ( QMS) 36 5. FACILITIATION OF INFRASTRUCTURE INVESTMENT 38 SUMMARY 38 5.1 INVESTMENT DECISIONS 39 6. COMPETITION – THIRD PARTY ACCE SS 44 SUMMARY 44 6.1 COAL SUPPLY CHAIN ACCESS REGIMES 44 7. REGULATORY APPROVALS 53 SUMMARY 53 7.1 NEW SOUTH WALES 54 7.2 QUEENSLAND 56 8. INTERNATIONAL COMMUNICATION STRATEGY 59 APPENDICES 61 1. NEW SOUTH WALES AND QUEENSLAND COAL INDUSTRY 62 PROFILES 2. INTERNATIONAL COMMUNICATION ACTION PLAN 86 3. a. TERMS OF REFERENCE FOR SENIOR OFFICIALS 89 GROUP b. ABBREVIATIONS c. GLOSSARY 4. STAKEHOLDER CONSULTAT IONS 95 5. ABARE REPORT – INFRASTRUCTURE ISSUES IN THE HUNTER 97 VALLEY COAL SUPPLY CHAIN DELIVERING RELIABLE AUSTRALIAN COAL EXPORTS TO THE WORLD: COAL TRANSPORT INFRASTRUCTURE 3 List of Diagrams DIAGRAM 1: GLOBAL COAL TRADE OUTLOOK 13 DIAGRAM 2: OUTLOOK FOR WORLD THERMAL COAL IMPORTS – KEY 14 MARKETS DIAGRAM 3: OUTLOOK FOR WORLD METALLURGICAL COAL IMPORTS 15 – KEY MARKETS DIAGRAM 4: AUSTRALIA COAL EXPORT VOLUMES 15 DIAGRAM 5: CAPACITY DEVELOPM ENT SCENARIOS 18 DIAGRAM 6: IMPACT ON GROSS STATE PRODUCT SCENARIOS 19 DIAGRAM 7: COAL SUPPLY CHAIN AUSTRALIA 22 DIAGRAM 8: INVESTMENT PROJECTS 40 DIAGRAM 9: ACCESS FRAMEWORK WITHIN THE TRADE PRACTICES 46 ACT 1974 DIAGRAM 10: AUSTRALIA’S MAJOR COAL CU STOMERS IN 200 4 59 DIAGRAM 11: MAP OF NEW SOUTH WALES COALFIELDS 62 DIAGRAM 12: HUNTER VALLEY COAL MINES EXPORTING THROUGH 63 THE PORT OF NEWCASTLE DIAGRAM 13: HUNTER VALLEY RAIL CORRIDOR 66 DIAGRAM 14: PORT OF NEWCASTLE 69 DIAGRAM 15: PORT OF WOLLONG ONG – PORT KEMBLA 70 DIAGRAM 16: MAP OF QUEENSLAND COALFIELDS 72 DIAGRAM 17: BOWEN BASIN MINES, OWNERS, OPERATORS AND 73 EXPORT PORT DIAGRAM 18: MAJOR QUEENSLAND COAL RAIL SYSTEMS 76 DIAGRAM 19: PORT OF HAY POINT 80 DIAGRAM 20: PORT OF ABBOT POINT 81 DIAGRAM 21: PORT OF GLADSTONE 82 DIAGRAM 22: PORT OF BRISBANE 83 DELIVERING RELIABLE AUSTRALIAN COAL EXPORTS TO THE WORLD: COAL TRANSPORT INFRASTRUCTURE 4 1. Executive Summary Australia cannot afford poor and uncoordinated infrastructure decisions that impose high costs on the community, the economy and the environment. The existing planning and decision-making framework is short-term, ad hoc and fragmented across transport modes and jurisdictional boundaries. The development and implementation of a national vision for critical land transport links is vital.1 Background Strong increases in world demand especially by China and India, have led to sharp increases in prices for coal and have placed pressure on Australian coal supply chains. Bottlenecks in Queensland and New South Wales coal supply chains are currently restricting, and adding to the cost of Australian coal exports. Australian, NSW and Queensland Governments, industry and infrastructure providers are developing strategies to improve efficiency. Australia's reputation as a reliable coal supplier is at stake. Strong growth in coal export volumes over recent years has eroded spare coal transport infrastructure capacity. The magnitude and duration of this growth was no predicted by coal producers, infrastructure providers or governments around the world. In 2004 it became evident that coal throughput demand was already exceeding the capacity of some coal chains, most notably in the Hunter Valley, and that throughput was quickly approaching capacity limits in other coal chains. The long shipping queues off Port of Hay Point, serving two coal loading terminals including Dalrymple Bay Coal Terminal, early in 2005 indicate that capacity has also been reached in some parts of the coal supply chain in Queensland. To address impediments to Australian coal chain infrastructure in Australia, the Hon Ian Macfarlane MP Minister for Industry, Tourism and Resources, announced in June 2004 that he would convene an Australian Government Senior Officials Group, chaired by his Department and to include the Departments of Foreign Affairs and Trade; and Transport and Regional Services to conduct an independent analysis of coal transport infrastructure and report on short and long term measures to address infrastructure issues related to the coal industry including improving coal supply chains. The Government has a direct and broad interest in seeing the development of sufficient capacity, more effective and efficient coal transport infrastructure to facilitate economic and export growth, innovation and increase Australia’s international competitiveness. This report, Delivering Reliable Australian Coal Exports to the World - Coal Transport Infrastructure, is a Senior Official's Group Report to the Australian Government and the Export and Infrastructure Taskforce as part of their broader deliberation of issues that are having an impact on the performance of Australia’s export infrastructure. This Report is presented with a view that further discussions are held with the Queensland and New South Wales State Governments, the Australian coal industry and infrastructure providers. The Report has been prepared in consultation with key stakeholders from the coal industry, transport infrastructure owners and operators, rail and port authorities and relevant Australian and Queensland and NSW Government officials. The Report draws on global coal market forecasts by the Australian Bureau of Agriculture and Resource Economics (ABARE) and includes a case study of the Hunter Valley coal supply chain through an ABARE census of Hunter Valley coal producers undertaken from September 2004 to March 2005. 1 Australian Government Auslink Land Transport White Paper 2004 DELIVERING RELIABLE AUSTRALIAN COAL EXPORTS TO THE WORLD: COAL TRANSPORT INFRASTRUCTURE 5 Constraints and factors impacting on major Australian coal supply chains as well as system-wide issues are discussed. The report and key areas of strategy focus on a 'whole of chain' response. No single component of the chain is solely responsible for constraints. Each strategy builds on the other and should be considered collectively to ensure reliable Australian Coal exports to the world and strategies for timely infrastructure investment to be considered. In particular, the risks of investing in new capacity too early are balanced against the costs of not having capacity available when it is needed to respond to surges in demand and very favourable trading conditions as currently being experienced by the Australian coal industry and which ultimately would help Australia’s export income and balance of payments. The consequences of not responding to these issues are substantial. ABARE estimates that if coal supply chain constraints in the Hunter Valley are not addressed the resulting losses in coal export revenue will amount to up to $7.9 billion in net present value terms in the ten years to 2015. This translates to losses of up to $8.6 billion in Gross State Product in New South Wales and 1934 coal industry jobs. Corresponding losses in Queensland have not been estimated, but are likely to be substantial.