North Australia Digest – 29/11/2012

by 29 November 2012

The Australian

Australia’s rising costs in coal production, driven by the carbon and mining taxes and state royalty hikes have been a major boost for coal producers in the United States, according to American coal giant Alpha Natural Resources.  The group’s vice-president of investor relations, Todd Allen told a conference in the US that Australia, long thought to be at the low end of production costs for metallurgical coal – used in steelmaking – had experienced significant cost inflation that far outstripped that of the US and Canada.

Speaking at a Perth lunch yesterday, WA Premier Colin Barnett sent out a blunt warning to Shell and Woodside Petroleum, saying he will insist the massive Browse gas project be developed onshore at James Price Point – rather than using cheaper floating LNG technology – even if the $40 billion plan proves to be uneconomic. The Premier said if Woodside CEO Peter Coleman told him the James Price Point option was unviable and Woodside wanted to develop Browse using FLNG he would “remind” him that US energy giant Chevron had built two onshore gas plants in Western Australia.

Geoff Elliott also reports on unfolding tensions between WA premier Collin Barnett and Ann Pickard, the chair of Shell in Australia. The stoush has left Woodside CEO Peter Coleman in the middle, and he is playing straight bat on the issue of Floating LNG technology, “as far as Shell is concerned they have an alternative technology (for development of the fields)” and Woodside is “supportive of the FLNG concept globally”. He adds: “We believe in remote and marginal locations. FLNG has its place, but it is an early technology.”

A report by Tony Milner, a professor at Australian National University, has criticised the government’s Asian white paper for saying “surprisingly little” about Australia’s relationship with ASEAN. The release of the report comes as John Howard warns Beijing has become “confused” about Australia’s China position under the Labor government.

Australia’s pipeline of resources projects has risen to record highs for all the wrong reasons. According to figures released yesterday by the Bureau of Resource and Energy Economics the number of projects under construction has slipped and projects given the go ahead in the past six months have halved from the previous six months, but cost blowouts have still boosted the value of projects under construction by $8 billion to a record $268.4 billion in the six months to the end of October.

A UBS study of the iron ore industry has found that the construction of a new rail line through the Pilbara could drive down iron ore prices and force out of business the very mines it looks to unlock. A research note released yesterday UBS analyst Glyn Lawcock said the new production unlocked by a rail line, coupled with the ongoing expansion efforts of incumbent producers Rio Tinto, BHP and Fortescue, could force down iron ore prices.

The Australian Financial Review

Despite $268 bn worth of resources projects being in the pipeline, $383 bn in uncommitted projects could be at risk, according to Steve Knot, Australian Mines and Metals Association chief executive. The comments came in reaction to figures released by the Bureau of Resource and Energy Economics yesterday. Mr Knott warned that uncommitted projects “could possibly be lost to overseas competitors unless Australia’s productivity woes and uncompetitive cost structure is addressed.”

Asia’s growing demand for energy and reliance on imports leaves Australia in a great position, according to Mark Eggleton. Despite high costs, our LNG export potential has few peers – of 14 LNG plants under construction or firmly committed to around the world, eight are in Australia. According to a spokesperson for the Australian Petroleum Production and Exploration Association (APPEA), “LNG projects could underpin the Australian economy for many decades to come. But they are complex, extremely costly and require a long-term perspective.

The West Australian

The battle between uranium miners and anti-nuclear protesters has escalated in recent weeks with WA Greens senator Scott Ludlam calling on supporters to “help hold back the nuclear floodgates.” A call to arms that was answered by protesters who stormed uranium miner Toro Energy’s West Perth office yesterday morning.

The Courier Mail

Mining is the most powerful economic and social force in Queensland, generating one in every four dollars and contributing one in every five jobs, according to data from the Queensland Resources Council.

Rio Tinto has announced plans to cut billions of dollars of spending due to a volatile market and high costs.  “We are taking further tough action to roll back the unsustainable cost increases of the past few years and are maintaining a relentless focus on improving productivity,” chief executive Tom Albanese said in a statement.

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