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.
John Quiggin 
Will be interesting to see if the usual suspects want to claim that governments and environmentalists wrecked this magnificent nation-building project that would have been a wonderful success for humanity, or that the economics dictated the decision and all the environmental campaigning and argy-bargy had no effect.
India recently announced an official target of 100 gigawatts of solar by 2022. That’s enough to provide electricity greater than 10% of their current total production. They also have a target of 60 gigawatts of wind power by 2022 which will generate a roughly similar amount of electricity. While India is supposedly building 69 or so gigawatts of new coal capacity at the moment, I have no idea whether or not this figure represents plants for which concrete has already been poured or if it includes plants which have been approved but which may only ever exist on paper. But let’s say that India does complete 69 gigawatts of new coal capacity over the next few years and imports all the coal they consume from Australia. At about a million tones per gigawatt per year, that won’t even make up the shortfall in Chinese coal imports which may be down by as much as 120 million tonnes from last year. Also, India has declared they will end all coal imports and rely entirely on domestic supply. For some reason this never gets mentioned.
I haven’t been following this side of the Adani issue too closely, but is a third possibility: Nobody will provide the funding?
Megan, if no one will provide Adani with funding it means they are cutting and running because they misjudged the market.
According to the Commisioner Tony could largely be at fault
http://timesofindia.indiatimes.com/business/india-business/Adani-may-junk-16bn-Oz-project/articleshow/47808851.cms
@Ronald Brak
Does that necessarily follow?
For example, Adani might be able to make a go of it but nobody will finance it?
In my mind, calling off that kind of preliminary work (that stuff isn’t cheap) hints of no money.
Megan, let’s say I am convinced that I could be the world’s most successful model. But to break into the biz I need a portfolio of professionally shot photographs of me in a variety of sexy poses which will cost $5,000. So I go to my local bank manager, I ask friends and family if they will lend me money, and I talk to the Dutch mafia. However, because of their intense jealosy of my incredible good looks, none of them will lend me the money. This is a business failing on my part because I misjudged the market. Not the market for my handsome features, that obviously exists, but the money market that I need to make use of in order to make the world a better place by letting as many people see me as possible. It is a business failing on my part that I should have seen coming as I have had to deal with jealosy all my life. Since Adani is only a 6 or at best a 7 as far as looks are concerned, on a scale of 1 to 100, it is even more important for them to not misjudge the money market as they can’t get by on just their looks like I can.
One coal project on hold is the equivalent of anecdotal evidence. What is happening in total around the world? The total world numbers are the only numbers that count. (The atmosphere is very democratic and moves CO2 emissions everywhere.)
See this report; “As US Shutters Coal Plants China and Japan are Building them.
http://instituteforenergyresearch.org/analysis/as-u-s-shutters-coal-plants-china-and-japan-are-building-them/
So I say again, what are the world total numbers and where is this issue still heading? If JQ can show world total coal mine projects and world total coal power generation are now declining then he might have a case for optimism. One-off anecdotes about Qld (a small bit-player compared to the big boys) just don’t cut it.
@Ikonoclast
You’ve linked to a denialist thinktank, there.
https://en.wikipedia.org/wiki/Institute_for_Energy_Research
That’s about the only place you’re going to find a rosy outlook for coal. Try comparing the text on China to the headline – they don’t match.
So what JQ means (in the second possible explanation) is that Adani “misjudged the market” i.e. the “money market”.
> Today, Adani is claiming that the stopwork was due to delays in regulatory approvals
I was unaware you needed regulatory approvals to do planning and design work.
Ikonoclast
if it’s enough coal to provide power for 100 million households for 90 years, it’s hardly a small bit project
Agree. We will also see the common refrain that our regulatory approval processes are stopping the ‘lifting up of the Indian population out of poverty’.
Also – AECOM not Aecon.
As the fossil fuel market collapses I see one possible very nasty downside being a rush to market by middle income nations (India, Brazil) to pump out and sell as much of their coal/oil as possible before the price is gone – e.g. Petrobras now with deep sea oil. The citizens of the affected countries probably won’t benefit much (due to thin margins) but the rush could bypass regulations and cause an enormous amount of environmental damage during extraction. Particularly if the collapse happens just slowly enough that there is a reliable short term profit to be made, but fast enough that there is no time to waste…
According to the Guardian’s article on this today, Brazil’s energy is almost entirely renewable or hydro, with only about 7% fossil fuels; they export almost all they dig up, I guess, so this is a real economic bonanza for them but the collapse of fossil fuel markets will wreck that bonanza even though they themselves aren’t directly contributing much at all to global warming (well, putting aside the small issue of the amazon).
A more orderly approach would shut down coal miners in wealthier nations first, leaving the poorer nations to benefit from the tail end of the fossil fuel industry. But of course that’s not going to happen…
@faustusnotes
No oil company can “rush” to produce offshore oil, the projects take years and 100s of millions to develop. Especially not inefficient Petrobras, whose top management is kept busy helping federal prosecutors in their inquiries into a billion-dollar slush fund scandal.
@John Quiggin
It is indeed coal propaganda. (The text does match the headline BTW.) The key question is are their claims about increased coal use in China and Japan correct or not?
Do you have data which shows WORLD coal production,WORLD coal projects and WORLD production of energy from coal are ALL DECLINING RAPIDLY RIGHT NOW? I think not. This is the data you would need to show to be a climate optimist with respect to coal use.
World coal use is still increasing but that the rate of increase is slowly reducing (for the time being anyway). That is, it is leveling off and at some time in the future coal use will start declining. It may be soon, it may be later. This is all well and good but it is far too little, far too late.
The IEA wrote in Dec 2014 in its report “Global coal demand to reach 9 billion tonnes per year by 2019” as follows;
“Global coal demand growth has been slowing in recent years, and the report sees that trend continuing. Coal demand will grow at an average rate of 2.1% per year through 2019, the report said. This compares to the 2013 report’s forecast of 2.3% for the five years through 2018 and the actual growth rate of 3.3% per year between 2010 and 2013.”
Oh wow, we have passed 400 ppm and the INCREASE in coal use is merely slowing! We have reached the point where we should be showing annual reductions in coal and oil use of something of the order of 10% per annum. Yet use is still increasing. The mere (eventual) leveling off is far too little, far too late.
But I am not sure what you or I or Tim Macknay or anyone else on this blog could have done about this so I don’t know why I am arguing TBH.
> The key question is are their claims about increased coal use in China and Japan correct or not?
Maybe they are, maybe they aren’t. They’re certainly misleading, though, and so you’ll be better-informed if you ignore them utterly and use other sources than if you investigate them to see exactly how skewed they are.
“Fibber’s forecasts are worthless”. Or, rather, of negative net value, given alternatives.
@Ikonoclast
Ikonoclast
Statistics on world coal production and trajectories have been assembled by sources more reliable than the IEA, whose models tend to start from the assumption that demand will continue to rise and production will be found somehow, somewhere, to meet demand.
Australia’s resident expert Steve Mohr http://www.uts.edu.au/staff/steve.mohr has published on the subject. Internationally, the Energy Watch Group’s publications are authoritative.
https://en.wikipedia.org/wiki/Peak_coal.
I wouldn’t be surprised if thermal coal production peaked in 2014. There is still engineering capacity to pull it out of the ground, but peak production is a resultant of both geology and economics (with a dose of politics). International financial factors are now playing a role in reducing demand and the easily accessible deposits of good-quality coal are being exhausted.
@Collin Street
I looked at and quoted the IEA statements on current coal use and projections to 2020 (which is not far away so projections have some value). If you know better data please enlighten me.
Ikonoclast, are you commenting on the right thread? This one is about Galilee Basin coal mining. Nothing about WORLD coal production or WORLD coal projects here. But if you look around on the internet you can find some interesting information on those topics. For example, Australia’s exports of coal to China are down 41% in May compared to last year. This means Australia could export more than 100 million tonnes less coal to China this year compared to last year. That’s enough to power about 100 gigawatts of coal capacity. China’s use of thermal coal for electricity generation fell 10% in the first 3 months of the year. And of course coal has fallen from $120 US a tonne in 2011 to $60 US a tonne now. If you are interested in world coal demand I’d suggest keeping an eye on the price. If it heads up you can be confident that demand for coal is increasing, and if it stays low or falls it probably indicates that total demand for coal is stagnant or falling.
@Ronald Brak Not sure price is a good guide as there appears to be a time lag between the means of production meeting the demand for consumption.
Rog, price is a good guide, it’s just not a perfect guide. Small changes in coal consumption definitely result in large changes in price, and changes in currency exchange rates, mining technology, oil prices, resource depletion, and environmental protection can all affect prices. But generally speaking, one can be confident that when the price of coal goes up demand is up, and when the price goes down demand for coal is down.
The other way to look at it is that consumption is influenced by price e.g. “..coal consumption has become more responsive to prices in recent years.”
“…coal use in China is indeed becoming increasingly sensitive to coal prices.”
Click to access ccep1506.pdf
> If you know better data please enlighten me.
I don’t. But that doesn’t make your data worth anything: data offered in bad faith is essentially worthless even if you have no better data available to you. You’re better off acting blind than relying on data provided by people you believe to be dishonest.
After all, bad-faith data is intended to mislead you and is shaped with that in mind. If the bad-faith data is the best you have, you can’t correct for that and the data is obviously worthless; if you do have better data… then you have better data and the bad-faith stuff can be ignored. There’s never a circumstance where “paying attention to liars” helps you, and there never will be.
Good news. Lets hope it never comes off.
Indeed, Rog. Think of it like water reaching its level.
@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.
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.
100 GW of solar for 1,252 million people is less per average than 4.17 GW for 24 million. You do the maths.
@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.
@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.
@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:
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.
http://www.brisbanetimes.com.au/business/mining-and-resources/adanis-carmichael-mine-is-unbankable-says-queensland-treasury-20150630-gi1l37.html
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.
In today’s SMH details of treasury officials advising govt(s) that the Adani project was unfeasible and unbankable. Yet it didn’t stop leaders talking up and committing tax payers money to the project.
http://www.smh.com.au/business/mining-and-resources/adanis-carmichael-mine-is-unbankable-says-queensland-treasury-20150630-gi1l37.html
More Adani news from Fairfax.
Mystifyingly, the ALP loves this dog of a “project”:
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).