PWCS short changes Aston

ASTON Resources is hoping to secure surplus capacity from other Port of Newcastle users to handle the ramp-up of coal exports from its Maules Creek mine after Port Waratah Coal Services offered less capacity than requested.

Lou Caruana

Aston is also critical of the capacity framework arrangements which regulate the process of capacity allocation at the Port of Newcastle, claiming they discriminate against new entrants, Aston chief executive officer Todd Hannigan said.

“This is a disappointing outcome for the New South Wales coal industry and demonstrates that, at the first critical test, the capacity framework arrangements have failed to deliver a balanced long-term solution,” he said.

“The capacity framework arrangements have allowed incumbent producers to lock up excess growth capacity at the Port of Newcastle, with the potential for the government to forego significant amounts in new royalties and other taxes from emerging coal producers.”

The incumbent producers are Xstrata and Rio Tinto, which will have most of the Port Waratah Coal Services (PWCS) capacity locked up.

PWCS allocated Aston approximately 1.7 million tonnes per annum in 2013 and 2014 and 10.5Mtpa from 2015 onwards. The ramp up in allocation will be provided through the delivery of PWCS Terminal Four.

Aston had been seeking an allocation of 2Mt in 2012, 5Mt in 2013 and 10.5Mt from 2014 onwards.

“Aston will continue to pursue a range of options to secure the necessary additional port capacity over and above this initial allocation,” Hannigan said.

“Aston remains confident that, with capacity at the Port of Newcastle expected to exceed 200Mtpa by 2014, there will be sufficient excess port capacity available in the short to medium-term to meet the company’s expected production ramp-up.

“Aston’s view remains that existing producers are unlikely to ramp up to fully utilise this increased capacity. This confidence in surplus capacity is supported by independent market analysts.”

Aston is aiming for 10.8 million tonnes per annum of production by 2014 from its $A480 million Maules Creek open cut coal mine. The mine is located in the Gunnedah Basin and sits about 16 kilometres from the nearest main rail line and 380km from Newcastle’s port.

With the recent growth at PWCS combined with the growth at NCIG Stages 1 and 2, total capacity at the Port of Newcastle should be 200Mtpa by 2014 – up from 113Mtpa in 2009.

“It is inconceivable that, despite the port capacity almost doubling over five years, there is no significant capacity available for new entrants until at least 2015 – effectively 2016, given that PWCS have indicated that they do not expect to achieve the targeted 2015 delivery date,” Hannigan said.

“Aston will be seeking enforcement of ‘use it or lose it’ provisions to ensure that incumbent producers cannot hoard capacity to the exclusion of new entrants.”

PWCS said it was moving closer to commencing its next phases of expansion in line with the Hunter Valley’s long-term export agreement, following growing demand from local coal producers.

PWCS’ 2010 call for nominations was met by coal producer demand for capacity of 153Mt by 2014.

The demand reinforces the need for PWCS to secure planning approvals so it can deliver Newcastle’s fourth coal loading terminal, known as T4.

Required planning approvals and a range of other factors such as layout and design options mean an exact time frame cannot be placed on the delivery of T4 as yet, PWCS said.

Preliminary T4 project information has been submitted to the NSW Department of Planning, a significant step in the NSW government’s major project assessment process.

Formal major project application documentation is expected to be submitted in coming days.

PWCS is also ramping up consultations with a range of NSW and Commonwealth agencies that will have a say in the T4 assessment phase.

“The coal industry is signalling very clearly that it needs more capacity and we are delivering that capacity in the most accurate and timely manner possible,” PWCS general manager Graham Davidson said.

“This will be done in a measured and structured manner in accordance with the Hunter Valley’s long-term contractual framework.

“Our focus is on working closely with the coal industry, government and local community stakeholders to maximise our chances of delivering capacity as required.”

Davidson said a core function of the long-term coal export agreement is providing as much certainty as possible for existing coal producers, while building additional capacity for newcomers under an orderly contractual framework.

“Every coal chain participant should be aware of the rules that have been set down after the exhaustive negotiations involving industry participants and the New South Wales government,” Davidson said.

“The process was also overseen and authorised by the ACCC.

“New and expanding producers wanting terminal access can notify us and the capacity will be built in the quickest time possible.

“This is a fair and common sense approach.”

PWCS is also performing feasibility work on a further expansion under existing planning approvals at Kooragang Island, known as Project 145.

Project 145 involves constructing an additional train dump station, wharf and conveyor extensions and increasing reclaim rates.

As the name indicates, the project would take PWCS nameplate capacity to 145Mt. Project 145 is planned for completion by the end of 2012.

In February this year PWCS began a separate $670 million expansion project which is on track to lift PWCS nameplate capacity from the current level of 113Mt to 133Mt by the end of 2011. This will enable PWCS to meet its contractual obligations.

PWCS has committed $1.6 billion in expansions over the past 12 years.