Adani’s coal project in Australia may take off as new govt comes to power

A surprise election victory for Australia’s pro-coal ruling Coalition is ratcheting up pressure on the Queensland state government to approve development in one of the biggest untapped reserves of the fossil fuel.

Adani Group’s Carmichael coal project is located in Australia’s huge Galilee Basin, which if fully developed, has the potential to more than double Australia’s thermal coal exports. But the project, first proposed in 2010, has been hampered by regulatory delays and difficulty in securing financing amid a passionate environmental protest movement.

The tide may now be turning. The opposition Labor Party, which fought on a platform advocating tougher action to combat climate change, fared poorly in Queensland, especially in mining communities in the north of the state. Meanwhile, the Labor state government has been accused by the Indian company of putting roadblocks in the way of the project and will itself face voters in 2020.

Adani has federal approval to move forward, but the state government has still to sign off on two of the company’s management plans that have been slowed over environmental concerns, with consent required before work on the project can start.

Labor may risk further erosion of support in areas which rely on the mining industry for jobs if it continues its perceived go-slow on the issue.

“Queenslanders have sent a very strong message this Saturday,” Adani Australia Chief Executive Officer Lucas Dow said in a video message on the company’s Twitter page. “It’s now time for the Queensland government to hear that message.”

Adani still faced significant hurdles in getting Carmichael off the ground, said consultancy Wood Mackenzie. Recent modeling by the group found that, including the cost of a rail link to connect the mine to the existing network, the project needs a benchmark thermal coal price of around $100/ton to break even. Spot prices for high-quality thermal coal out of Newcastle Port are currently just under $85/ton. “We think Adani will develop the mine, probably citing the broader benefits of Carmichael in Adani’s integrated mine-port-trading-power model,” said an analyst from Wood Mackenzie.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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