The Adani Group on Thursday moved a step closer to beginning work on its Australian coal mine, with the Queensland state government approving the $16.5-billion Carmichael mine, subject to extensive environmental and social obligations.
Queensland’s Coordinator-General Barry Boroe, who approved the project, has set 190 conditions for Adani Mining, an Adani Enterprises arm, to meet during construction and operation of the mine. Although this is a significant development for billionaire Gautam Adani’s group, there is a long road ahead before it can start mining coal in Australia. The Coordinator-General’s report will now go to the Commonwealth Environment minister for a decision on issues pertaining to Australia’s Environmental Protection and Biodiversity Conservation Act. The company will also have to obtain development approvals under various laws along with a host of state and local government clearances.
Adani Mining will need to implement a range of environmental management plans for the mine, off-lease infrastructure and railway line, besides finalising a biodiversity offsets strategy.
“The state approval for the Carmichael mine and rail project has been released by the government of Queensland today and paves the way for subsequent approvals, including a mining lease, by the third quarter of 2015. This is in line with our plans to start coal exports by 2016-17,” a company statement said.
The Rs 50,000 crore Adani Group, had through its Australian subsidiary, Adani Mining, in 2010 proposed to develop a 60-million tonne coal mine in the North Galilee Basin in central Queensland. The coal will be carted on a privately owned railway line to ports at Abbot Point or Hay Point. The 44,700 hectare mine and the 189 km railway line will have an operating life of 90 years.
“We welcome the decision of the Queensland government and this allows us to move to the next stage of the project, ensuring that local and regional communities continue to be involved in development and share economic benefits,” Gautam Adani said. “We remain committed to delivering the multi-billion dollar project, which will directly employ thousands of people, ” he added.
In December 2012, Adani had announced that first batch of coal for export from the Carmichael mine in Australia was likely to roll out in early 2016, while the construction of infrastructure at the mine and connecting port and railway line was likely to commence by the end of 2013. Today's approval comes after a significant delay in approval by the Queensland state government. The environmental assessment of the project had commenced with the declaration of this project in November 2010.
While giving details of the approval deputy premier and minister for state development, infrastructure and planning, Queensland state government, Jeff Seeney said in a statement, "The Coordinator-General had set stringent and wide-ranging conditions to protect landholders, local flora, groundwater resources, surface water and air quality as well as controls on dust and noise. “The 600-page Coordinator-General’s report sets 190 conditions for proponent Adani to meet during the construction and operational phase of the project,” he added.
Seeney said the Carmichael Coal Mine and Rail project had the potential to create up to 2,500 construction and 3,900 operational jobs, providing a major boost to the local and state economy. “It is expected to generate over $500 million annually in direct and indirect benefits to Queensland’s economy during construction and $3 billion at full export capacity,” he further stated.
Dampener for Adani
A recent analysis by the US-based Institute for Energy Economics and Financial Analysis (IEEFA) has concluded that the Adani group's Carmichael coal mining project was likely to prove commercially unviable. The study has concluded that using imported coal from the Galilee Basin in Australia for Indian power generation was prohibitively expensive.
Based on financial modelling IEEFA has concluded, the cost of power generation using imported Galilee coal was double the current average wholesale cost of electricity in India. According to the report, both the Alpha (promoted by GVK Group) and Carmichael Galilee Coal Basin (Adani Group) proposals were running three-four years behind schedule, with neither financing in place nor construction commenced.
The report also noted that the rail, power, water and port facilities required to enable these mines to operate were non-existent at present. "The cost of building the required infrastructure means the combined capital and operating costs of the coal mines will be un-commercial," the analysis stated, adding that the coal from the mines was lower than Australian benchmark quality in terms of calorific value and relatively high in ash.
Commenting on the report Adani Group said in a statement, "The proposed Carmichael Coal Mine is a tier one asset with over 11 billion tonnes of established coal reserves. Our Mine plan can produce and deliver coal at the lowest quartile of the cost curve and establish Carmichael Coal Mine among the lowest cost producers of coal in the world. The Carmichael coal is quite superior in quality and we’ll deploy technologies which will help us further in improving its quality and producing coal that suits all the top end markets in Asia including India. It is also worth mentioning here that our rail and port infrastructure design/capex efficiency is superior and hence can deliver Carmichael coal at fairly competitive costs."