Asian countries line up for Aussie gas

China not the only coal in the fire as other Asian countries line up for gas

By Terry Ryder, 29th September 2011

When economists dumb things down for the media, I’m unsure whether they do it for us or for themselves. I suspect the latter, remembering that an economist is someone who likes to play with numbers but lacks the personality to be an accountant.

The dumbest of the dumbing-down behavior is the tendency to see everything in terms of China. This explains why a common question I get at seminars is: what if China stops buying our resources?

The answer is in two parts: (1) China won’t stop, although they may reduce; and (2) it’s not all about China.

The new gas industries around Australia are signing their advanced sales contracts, even before they build the processing plants, with South Korea, Japan, Indonesia, Malaysia and elsewhere.

There’s hundreds of billions of dollars in projects happening with markets other than China already signed up.

And, of course, there’s the looming presence of India. Over the past five years exports to India have tripled, taking India from our seventh-largest trading partner to fourth biggest – and rising.

While everyone has been obsessing over China, the big companies of India have been quieting staking their claims in our resources industries, particulary coal.

One of them, Adani Enterprises, is making a $10 billion play for Queensland coal based on vertical integration. The company says it wants to control everything the coal touches.

It has secured a $3 billion coal resource in the Galilee Basin, the emerging new resources province in Central Queensland.

It has spent $2 billion on a 99-year lease over an export facility at Abbot Point, near Bowen. It plans to build a second export facility near Mackay.

It will also be constructing rail links to both ports from the Galilee Basin, at a cost of about $3 billion.

Adani, which has seven power stations to fuel, will even own the bulk carriers which will ship the coal to India. It expects to start exports in 2015.

Another big Indian company, GVK Power and Infrastructure, is also planning to invest $10 billion in the Queensland coal industry.

It has agreed to pay Gina Rinehart, apparently Australia’s wealthiest woman, $1.26 billion for some of her mining assets.

It will take a major stake in three Queensland coal mines owned by Rinehart’s Hancock Prospecting, plus associated rail links and port facilities.

Again, the focus is the Galilee Basin, where GVK will take a 79 per cent share of the Alpha and Alpha West coal projects and 100 per cent of the Kevin’s Corner coal project.

It will take 100 per cent of the 495km rail link project connecting the coal mines to Abbot Point, where there is also an export port development with the capacity to handle 60 million tonnes per year.

Infrastructure developer GVK, which is involved in airports, roads and urban infrastructure, is seeking fuel for new power plants in India, which has become one of the world’s major customers for energy resources as its economy expands.

Coal from the projects is also likely to be sold to Japan, Korea, Taiwan, Vietnam and, oh yes, also to China.

These two giant Indian companies are putting multiple Queensland locations on the hotspotting radar screen:-

• Emerald, the key regional centre between the Galilee Basin and the established Bowen Basin;
• Bowen, which will be linked to the Galilee Basin by new rail lines and which will be targeted with billions of dollars in investment to expand the Abbot Point export facilities;
• Mackay, a key regional centre for the the Galilee and Bowen Basins - it has the Hay Point and Dalrymple Bay export facilities, which are undergoing major expansion; and
• Alpha, the tiny town west of Emerald where all the new coal-mining action will be focused.

Alpha, inevitably, will become a considerably larger town. The three mines being taken over by GVK will generate around 84 billion tonnes of coal per year, with the first phase of production scheduled to begin in 2014.

Other Indian investment in Australian resources includes the $830 million deal under which another infrastructure firm Lanco Infratech has acquired Griffin Coal which has major assets at Collie in Western Australia.

Lanco has said it will spend $1 billion expanding the Collie mines, increasing production from 5 million tonnes per year to 18 million by 2015.