Projections have Queensland bursting at the seams

A STUDY by the Queensland Resources Council into the state’s ability to handle planned expansions in the resource sector has found a need for nearly 40,000 additional workers, with demand to peak in 2014.
Projections have Queensland bursting at the seams Projections have Queensland bursting at the seams Projections have Queensland bursting at the seams Projections have Queensland bursting at the seams Projections have Queensland bursting at the seams


Nicholas Brant

The QRC’s Queensland Resource Sector State Growth Outlook Study, compiled by Deloitte Access Economics, looked at expansions in the state until 2020 and found royalties in the sector could jump by 300% by 2020.

The study also concluded electricity and labour markets in the state would not be able to cope with the planned expansions given their lack of flexibility, despite upgrades in water and power infrastructure.

The report, which was the first of its kind, surveyed all QRC members and gathered details on 66 projects which have a combined capital expenditure in excess of $A142 billion through to 2020.

“Capital expenditure is forecast to rise substantially and output of key commodities such as coal could treble, significantly increasing royalties to the State Government,” the report said.

Construction costs and resource capital expenditure for ongoing projects in the state have cost nearly $18 billion in 2011, with coal and gas forecast to peak in early 2013 at nearly $30 billion.

QRC chief executive Michael Roche said the study was a vital guide for industry and the government in maximising benefits for the mineral and energy sectors expansion.

"The better informed governments and the community are about the opportunities and challenges associated with resource sector growth, the better equipped they will be to respond positively," Roche said.

"Another way of looking at the report is the inherent incentive value in plainly spelling out what major inputs our industries will need out to 2020."

“There is mounting evidence that supply side issues associated with labour, water and electricity supply have the potential to either slow sector growth or prevent it from reaching its full potential.

“The report finds that if all the identified projects proceed, the sector could require an additional 40,000 workers, another 5,000 megawatts of electricity and almost 200,000 megalitres of water.

“These are challenges that will need to be addressed as they emerge, albeit in reduced form if only half the projects on the drawing board proceed.”

The report said the water industry was the only one with the policy settings and planning capabilities to meet the rapid expansion.

It said Queensland water utility provider Sunwater had already identified three major projects that could be built if demand matched that projected in the survey.

The projects include a dam near Bowen Basin, one in Connors River, 235km northwest of Rockhampton, and raising Burdekin dam, including additional pipelines toward Galilee Basin.

“Of these Connors River Dam will be required first and is already well advanced in its planning processes,” the report said.

“The major issue will be to ensure that they are able to be built in a timely manner given the uncertainties over the water flows that will fill them and the requirement to build supporting pipelines.”

The electricity sector also has a range of plans to build the capacity to meet the projected growth in demand for electricity.

The report identified eight new projects to generate electricity including a gas-fired plant by TRU energy and a range of extensions to the transmission network planned by state electricity provider Powerlink.

“Unlike the water industry few if any of these generation projects are progressing toward the construction phase,” the report said.

“Investor uncertainty in the generation sector is delaying the financing of most projects and therefore the requirement to expand the transmission network.”

It said the uncertainty was driven by the expectation that gas prices will continue to increase when the LNG export facilities are built and when resource depletion occurs, as well as long term uncertainty over the price of carbon.

“Without the resolution of these uncertainties there is a risk that resource companies will need to resort to relatively high-cost inefficient supply options in order to provide the electricity required for their projected developments,” the report said.

The QRC looked at labourers qualified as technicians, trade workers, drivers and machinery operators.

The findings noted that companies were aware of the shortage risk and were trying to increase supply through recruiting overseas workers, offering higher wages to those in similar jobs elsewhere and changing the full-time/part-time ratio of the existing workforce.

These approaches have worked well in the past, but the QRC said the success was facilitated by a number of factors that would probably not occur again.

This includes lower unemployment and underemployment rates and a relatively substantial increase in the labour participation rate, while the cost of living in regional centres has increased.

“There is an imperative that actions are taken that deliver solutions that increase the labour force in the short rather than the medium term,” the report said.

“If this is not the case a lack of skilled labour is likely to be a major impediment to the expansion of the state’s resource sector.

Roche told worker deficit by 2014 under a full growth scenario had the clear potential to either delay or constrain some projects.

"There is no silver bullet solution, so the QRC is looking to all levels of government to work closely with industry in shaping an effective policy response," he said.

“If this expansion occurs as projected, the potential boost to Queensland and Australia is significant. Royalties alone are estimated to rise by almost 300% in real terms by 2020 and there will be considerable flow on benefits to other industries.

“Supply constraints in these markets could cause project delays or cancellations even if they are able to meet all other investment criteria.”

This story first appeared on ILN's sister publication

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