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Institute for Energy Economics and Financial Analysis Australasia energy finance studies director Tim Buckley said assumptions about ongoing demand for low grade thermal coal from India were inaccurate.
“The financial justification for Galilee Basin coal is based on flawed economic assumptions, including a reliance on the increasingly uncertain prospect of India being able to continue to finance and economically justify building imported coal-fired power stations,” he reportedly told The Australian.
“Australia risks funding major new thermal coal projects on what I consider is a flawed assumption on ever increasing Indian import coal demand.”
With a total forecast investment of $28.4 billion, the Galilee is expected to be capable of supplying more than 120 million tonnes per annum – even as high as 200Mtpa – of thermal coal into the market for the next few decades, possibly up to 40 years.
There are three major coal developments and infrastructure systems planned for the Galilee Basin.
A joint venture between Indian company GVK and Gina Rinehart’s Prospecting is developing the Kevin’s Corner and Alpha thermal coal mines.
Adani Mining plans to export first coal to India from its $10 billion, 10 billion tonne Carmichael mine, rail and port project in the north Galilee Basin in 2016.
Meanwhile, federal government MP and mining magnate Clive Palmer is planning to develop the Waratah mine.
Buckley said coal market prices and conditions had changed markedly since these projects were first initiated.
“The thermal coal price is half of what it was when GVK acquired its interest in the Galilee,” he reportedly said.
“If the price of coal has halved then the economics of those projects has dramatically deteriorated.
“A lot of people were talking about coal being in a cyclical downturn, I would argue it is in a structural downturn.
“The report found that imported coal would need to be priced at double the wholesale price of India’s electricity, which categorically discredits the nonsense arguments that it might alleviate India’s energy poverty.”
