Adani Galilee Basin project on hold: threat or alibi?

In an interesting sequence of events, Adani has halted engineering work related to its proposed Carmichael mine in the Galilee Basin.

Last week, it appears, Adani sent out notices to our major engineering contractors, including WorleyParsons, Aecon, Aurecon and SMEC, to stop work. A team of up to 40 engineers at WorleyParsons’ Brisbane office, which was working with Aecon on the rail joint venture, was among those pulled off the project. No public announcement was made.

Yesterday, the Guardian revealed the stopwork, citing “sources”. Adani declined to comment

Today, Adani is claiming that the stopwork was due to delays in regulatory approvals, a claim denied by the Queensland government. It’s worth noting that the new Labor government quickly resolved the biggest outstanding issue for Adani’s rail line and port expansion, namely where to dump the dredging spoil from the port. The solution was neat – they offered land that had been reserved for an expansion proposed by BHP Billiton, who have abandoned the idea, as have most of the other big players.

So, there are two possible explanations. One is that Adani is pressuring governments to hurry up with the threat of bad publicity about putting the project on hold, lost jobs and so on. But if so, why not make a big splash with the announcement. The other, more plausible in my view, is that Adani is preparing to cut and run, and wants to be able to blame government interference rather than its own misjudgement of the market.

36 thoughts on “Adani Galilee Basin project on hold: threat or alibi?

  1. @Ikonoclast
    Ikon, there’s an interesting counterpoint to the IEA coal projections here. It’s probably also worth noting that for the last decade or so the IEA has been in a pattern of overestimating fossil fuel production/consumption and underestimating renewable energy, and having to repeatedly readjust its fossil fuel forecasts downwards and its renewables forecasts upwards.

    The US Energy Information Agency has also done something of a mea culpa, in a retrospective review of its annual energy outlook series published in March 2015, in which it acknowledged that it has consistently overestimated total energy consumption, total oil consumption, total coal consumption, and the energy intensity of the US economy, for the past decade or so.

    Not that that means we’re all saved or anything.

  2. Draft. Automod’ed. Trying again sans link…

    Ikon, there was an interesting counterpoint to the IEA coal projections published by RenewEconomy on 18 December 2014 (go to RenewEconomy dot com dot au and search for ‘china coal peak’). It’s probably also worth noting that for the last decade or so the IEA has been in a pattern of overestimating fossil fuel production/consumption and underestimating renewable energy, and having to repeatedly readjust its fossil fuel forecasts downwards and its renewables forecasts upwards.

    The US Energy Information Agency has also done something of a mea culpa, in a retrospective review of its annual energy outlook series published in March 2015, in which it acknowledged that it has consistently overestimated total energy consumption, total oil consumption, total coal consumption, and the energy intensity of the US economy, for the past decade or so.

    Not that that means we’re all saved or anything.

  3. 100 GW of solar for 1,252 million people is less per average than 4.17 GW for 24 million. You do the maths.

  4. @Tim Macknay

    Yes, it is so hard (for an amateur like me anyway) to get any reliable data on the big picture. One would like to think the IEA and US EIA were half reliable but some of their oil and coal forward estimates (to 2050) done back in about 2005 were patently ridiculous. At that stage they clearly still believed in infinite non-renewable resources. Their attitudes and numbers appear a little more realistic now but as you say they are still consistently on the high side.

    I have changed half my story. I do believe now that renewables can deliver the EROEI that we need and that a near 100% electrical powered economy is possible (not jet aircraft tho). What I haven’t seen enough evidence of is changing away from fossil fuels fast enough. The pace still seems much too slow considering the gravity of the situation the lack of wriggle room. It’s pretty certain that we will hit 450 ppm and it’s not certain that even that is safe.

  5. @Ikonoclast
    The pace is definitely too slow, no doubt about that. The recent developments Prof Q discussed in the ‘Optimistic view of Climate Change’ post appear to raise the prospect that the pace of change can be ratcheted up at far lower cost and difficulty than was previously thought, but whether or not that will actually be realised is of course a matter of conjecture.

  6. @Megan Numerous banks and financial institutions have declined to fund the project including Deutsche bank for what appears to be a mix of ecological concerns about the reef and economic concerns about the limited future of coal:

    France’s three biggest banks have ruled out funding the controversial multi-billion-dollar Galilee basin coal mine, rail and port development in Queensland.

    Eleven major international lenders have now publicly stated that they will not finance the $16.5 billion project, and at least one analyst says more delays could see the Indian company behind it ultimately scrap the development.

  7. I am still awaiting replies from the Commonwealth Bank regarding my letter of concern about the bank considering finding mines in the Galilee Basin, and from the Minister of the Environment regarding concerns about the development of coal mines in the Galilee Basin.

  8. http://www.brisbanetimes.com.au/business/mining-and-resources/adanis-carmichael-mine-is-unbankable-says-queensland-treasury-20150630-gi1l37.html

    “Only other meaningful Adani asset in Australia over which some form of security may be able to be granted is possibly the ‘value’ in the mining tenement itself.”

    On October 31, Mr Wishart wrote that the publicly available information on the Adani group was “not particularly transparent” and the company had failed to provide adequate information to “address sources of equity and debt”.

    That same day, he emailed Mr Gray and Mr Quinn to say neither DSDIP nor the Queensland Investment Corporation “has been able to provide anything substantive on Adani’s financial capacity or credit worthiness at this stage.”

    The revelations will also put pressure on the Abbott government, which has said Galilee Basin projects could eligible for taxpayer finance from a $5 billion northern Australia loan scheme – provided they demonstrate they would not be commercially viable without government assistance.

    Mr Seeney did not respond to a detailed list of questions from Fairfax Media on Tuesday.

    In a statement, he said: “There was no deal with Adani. There were negotiations and due diligence was underway as part of the negotiations for investment infrastructure. But it never got to the point of a deal.”

    An Adani spokeswoman said: “Adani developed and presented a strong and robust business case for these projects to the Queensland government.”

    Which seems to support my earlier suggestion of a “third possibility”. Whichever JQ was referring to out of ‘financing’ or the ‘commercial viability’ when referring to “misjudgment of the market”, the other “market” looks like probably being an issue too.

  9. More Adani news from Fairfax.

    Mystifyingly, the ALP loves this dog of a “project”:

    So here we have a deal which is no only an utter white elephant on a financial basis but which does not have consent from the traditional landowners in the Galilee Basin. They say the mine will destroy their land, yet the Labor government of Queensland came out this week in ardent support of it.

    We welcome the “sustainable development of the Galilee Basin”, was the line from Treasurer Curtis Pitt on Wednesday, notwithstanding revelations in Fairfax Media the day before that Queensland Treasury thought the project unbankable.

    There is zero chance of “sustainable development”. Adani’s own financial modelling assumes coal prices have to double for the project to make money.

    As one incredulous hedge fund source pondered this week: “Peabody does 36 million tonnes per annum and they’d take $2 billion any day of the week … what am I missing here? Money laundering?”

    The author points out that Adani could just buy Peabody’s operation and be miles ahead financially (at least relative to where it would be if Carmichael goes ahead).

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