Resisting Climate Hysteria

[Wysiwyg]

So you support a Government operating in a supposedly free market economy to "invest" tax payer funds to help a foreign company develop a coal resource that is estimated to need a thermal coal price of $100-110 US to break even.

Yes I support the governments ROI. People employed, taxes and royalties paid. While working toward coal fired power stations being phased out, eventually.

Note that the increased production equates to 10% of the current seaborne market. It will ensure depressed prices for a very long time, which will increase the ToT income shock we're experiencing.

Supply and demand is constantly in flux. No future demand? Why construct?

It's not even about climate. It's the fact we have a Government wasting hundreds of millions of dollars, unless of course you believe coal is somehow going to near double in price over the next few years?

It isn't wasted when people are employed, taxes and royalties are paid. The end game is supply/demand and this proposal is counter present trend. Like demand for iron ore was sky high so -> massive mining infrastructure investment to meet demand -> now less demand and depressed prices.

 

[Wysiwyg]

It's not even about climate. It's the fact we have a Government wasting hundreds of millions of dollars, unless of course you believe coal is somehow going to near double in price over the next few years?

Who knows what will happen? Certainly not you or I! Here is a slice of Australian history regarding black coal, the Americans, Israel, OPEC and the AUD/USD. Shows some of the many market forces in play. Coal at $12.50 per tonne.

2.2.12 Export Prices for Australian Black Coal
Between 1960 and 1973, the average A$ FOB price per tonne that Australian coal producers
received for their black coal exports varied between $8.00 and $12.50 per tonne. This period is
now viewed with a fair degree of nostalgia by coal buyers as a time when energy prices in
general and Australian black coal price in particular were stable and at very low levels. The
low energy price environment was supported by a stable US$:A$ exchange rate, which was the
result of the Bretton Woods Accord that the United States and other major Western economies
signed in 1944.

The stable and low energy price environment started to unravel during October 1971, when the
United States unilaterally terminated its participation in the Bretton Woods Accord. As a result
of its unilateral action, the US$ depreciated significantly against the A$ between 1972 and
1974. Since Australia‘s black coal exports were priced in US$, this market reaction would
normally have resulted in Australia‘s black coal producers reducing their output and/or
exerting pressure on miners to accept very small adjustments in their annual wages.

However, in October 1973, Australia‘s coal producers were rescued from that possible
predicament by OPEC, which imposed an embargo on oil exports to the United States and a
number of other Western countries as punishment for their bias toward Israel during the 1973
Yom Kippur War. Along with the oil embargo, Saudi Arabia and other Arab state members
increased OPEC‘s posted oil price in October 1973 from $3.00 per barrel to 5.11 per barrel.
By 1975, the price of oil rose as high as $12 per barrel after which it traded between $12 and
$15 per barrel from 1975 through 1978. Then, in 1979, the shah of Iran fell, leading to the
Iranian Oil Crisis, which resulted in the price of oil increasing from $15.85 per barrel (April 5,
1979) to $39.50 per barrel in early 1980. From that point on, an oil glut emerged causing
nominal oil prices to slide to around $10 per barrel by 1986.

The impact of the oil price increases and decreases during the 1970s and 1980s was a
significant factor in driving the expansion of Australia‘s black coal exports. The increase in the
FOB A$ price for Australian black coal provided Australian coal producers with substantial
windfall profits through 1980. Between 1980 and 1986, the nominal US$ price for Australian
black coal decreased from $54.85 to $36.65 per tonne, a 33 percent decline. However, the
impact on the A$ price of this large drop in the US$ price was more than offset by the 40
percent depreciation in the A$ against the US$ over the same time period.

 

[basilio]

The temperature isn't any different from at least 40 years ago plus from our personal experience. Do you have any experience in Australia?

What ?? For real ?? The reason we have a national BOM is to record daily temperatures from hundreds of weather stations around Australia so that we have accurate, detailed weather records.

And you are trying to say that from your personal experience and weather records you can improve on that process ?

 

[sydboy007]

Yes I support the governments ROI. People employed, taxes and royalties paid. While working toward coal fired power stations being phased out, eventually.
Supply and demand is constantly in flux. No future demand? Why construct?

It isn't wasted when people are employed, taxes and royalties are paid. The end game is supply/demand and this proposal is counter present trend. Like demand for iron ore was sky high so -> massive mining infrastructure investment to meet demand -> now less demand and depressed prices.

Wow. So you think the QLD Govt is making the right decision to subsidise a massive new coal development, while other mines in AUstralia are likely to be forced to close due to this subsidy? I thought green power was supposed to stand on it's own feet. Shouldn't the fossil fuel industry do the same?

Note, India has said they want to stop importing coal within the next few years. How achievable that is I'm not sure, but the fact the Indian Govt will be looking to reduce their imports doesn't bode well for the sea borne coal trade. Certainly doesn't suggest the $100-110 break even cost will be met. China is starting to limit it's coal imports. The turning on of massive amounts of nuclear power over the next decade, along with a 2 pipe lines for gas imports from Russia doesn't seem to indicate further increases in demand from China will occur either. So where do you see the demand coming from to prop up a market already in oversupply, with Adani adding around an extra 10% to the market?

As for taxes and royalties paid, if the price of coal is further depressed, then all this development will do is to see tonnes shipped increased(?) at lower prices. How is that good for Australia? How is that good for taxation revenues? How is that good for productivity? It would be cheaper to buy some of the coal mines now operating at a loss than develop the Galilee basin.

 

[sydboy007]

Who knows what will happen? Certainly not you or I! Here is a slice of Australian history regarding black coal, the Americans, Israel, OPEC and the AUD/USD. Shows some of the many market forces in play. Coal at $12.50 per tonne.

So you quote coal prices from decades past, that are far below the break even cost for Adani of $100-100 US? Doesn't seem to make the economics stack up any better. Vale the QLD tax payers. Already in massive debt and their Govt is going to throw money at a project that wont make a return on their investment.

 

[noco]

So you quote coal prices from decades past, that are far below the break even cost for Adani of $100-100 US? Doesn't seem to make the economics stack up any better. Vale the QLD tax payers. Already in massive debt and their Govt is going to throw money at a project that wont make a return on their investment.

Whilst your rhetoric is a bit off thread, I thought it necessary to reply......you see, unlike the Labor Party, we have adult Governments who has the expertise to do some market research and is preparing for the future....The QLD and WA governments do there home work and obviously know that a year from now the price of coal and iron ore will rise and they will be well prepared to meet the market demand....If it had been the Labor Party, they would have sat on there hands and done nothing.

The Labor Party believed in a fellow named Tim Flannery, who told the three Eastern Labor states at the time a furphy in 2007 that there would not be enough rain to fill the dams, so the Labor Party, instead of doing some more research, believed this brain storm and spent billions of dollars on desal plants now in moth balls....now that was not very good thinking.

I was in sales and marketing for 28 years and we had to predict by various methods how our sales would be 12 months down the track...we would take appropriate action to insure we were on target and this is what the QLD and WA governments have done....Smart people!!!!!

 

[basilio]

The Adani coal mine in Queensland will be an environmental disaster. I'm not sure however if it will be a financial disaster for Adani.

Adani is India's premier power company. The coal it is mining will supply its own power stations. If the choice is between owning your own coal mine (with a ton of local infrastructure support) or having to pay another coal miner maybe this situation will be the most profitable. One could certainly see some interesting cost shifting in the process.

http://www.adanipower.com/

 

[noco]

The Adani coal mine in Queensland will be an environmental disaster. I'm not sure however if it will be a financial disaster for Adani.

Adani is India's premier power company. The coal it is mining will supply its own power stations. If the choice is between owning your own coal mine (with a ton of local infrastructure support) or having to pay another coal miner maybe this situation will be the most profitable. One could certainly see some interesting cost shifting in the process.

http://www.adanipower.com/

The return to the Queensland state government is in the vicinity of $20 billion in royalties irrespective of what the price may be at the time.

http://www.adanimining.com/pdfs/MLA 70441/MLA_70441 Part_5.pdf

9
|
P a g e
d)
Total return to the State and Australia
Total return to the State and Australia resulting from
the
Carmichael Coal
Project
is significant.
The estimated benefits to
the State Government of Queensland:
1.
Royalty payments in excess of
$20 Billion
generated
2.
Rail payments
3.
Port payments
The estimated benefits to the Commonwealth Government of Australia:
1.
Income tax
2.
Any additional taxes such as Mineral Resources Rent Tax
and
amounts under the Clean Energy Act and associated legislation

 

[basilio]

Wow Noco. You should be in sales..

You pulled out the Adani story of how much they think the Queensland government will get if

1) They get the appropriate licenses and permission to mine
2) The government tips in some umpteen billion to help with Rail, Port and other infrastructure.

It is a sell job pure and simple. There are a number of substantial risks in this project which a prudent government should consider

1) What will be the other effects of the development ? For example how will the barrier Reef cope with the sludge, the ships etc. ? What would be the effects on the tourist industry if there was substantial damage to the reef and associated environment?

2) What will be the effect on local agriculture ? They will be drawing a huge amount of underground water for the project. What effect will this have on the local farms ? How will they respond when the project is up and running if in fact there are significant problems. (That is why you do extensive environmental impact plans.)

3) Will the project be viable in the longer term? There will be international pressure to reduce the use of coal. See what is happening with USA and China This will have an impact on Australia and India. Pretending it won't is crackers.

4) Will the Indian coal fired power station be viable in medium future and therefore the industry? Make no mistake there are a range of technologies being developed that will compete with coal fired power stations purely on an economic basis. That doesn't even include pollution issues and CO2 emissions. What happens to the investment if/when these technologies come on stream?

I'll offer one example of such a technology. DYESOL Aust and Tata Steel (from India) are developing building materials that incorporate high efficiency solar cells (not stuck on; they are in the steel) . They expect to be producing fully commercial product within 3-4 years

5) Whether you like it or not coal fired power stations are an unacceptable risk in terms of global warming. The race is to develop alternatives as quickly and economically as possible and retire old power stations as quickly as possible.

http://www.dyesol.com/posts/Dyesol-signs-letter-of-intent-tata-steel/

 

[sydboy007]

Whilst your rhetoric is a bit off thread, I thought it necessary to reply......you see, unlike the Labor Party, we have adult Governments who has the expertise to do some market research and is preparing for the future....The QLD and WA governments do there home work and obviously know that a year from now the price of coal and iron ore will rise and they will be well prepared to meet the market demand....If it had been the Labor Party, they would have sat on there hands and done nothing.

The Labor Party believed in a fellow named Tim Flannery, who told the three Eastern Labor states at the time a furphy in 2007 that there would not be enough rain to fill the dams, so the Labor Party, instead of doing some more research, believed this brain storm and spent billions of dollars on desal plants now in moth balls....now that was not very good thinking.

I was in sales and marketing for 28 years and we had to predict by various methods how our sales would be 12 months down the track...we would take appropriate action to insure we were on target and this is what the QLD and WA governments have done....Smart people!!!!!

If coal or iron ore are up 10% by this time next year I'll practically fall off my perch. I wont be surprised if prices are down up to another 20% this time next year.

The sea borne iron ore market is in surplus to the tune of FMGs production and then some.

You could shut down 60M tonnes of coal production in Australia and the seaborne thermal coal market would still have excess supply.

Care to say who's going to shut down production and / or where is the extra demand going to come from?

I'd have thought a free marketer like yourself would be against Governments picking winners and providing subsidies to a specific sector of the economy.

 

[drsmith]

China CO2 emissions to rise by one third before 2030 peak - study,

http://www.reuters.com/article/2014/11/14/china-carbon-idUSL3N0T41EY20141114

 

[So_Cynical]

China CO2 emissions to rise by one third before 2030 peak - study,

http://www.reuters.com/article/2014/11/14/china-carbon-idUSL3N0T41EY20141114

News flash: CO2 emissions to rise before they fall....amazing.

Up then down...who would of thought.

 

[sydboy007]

The return to the Queensland state government is in the vicinity of $20 billion in royalties irrespective of what the price may be at the time.

http://www.adanimining.com/pdfs/MLA 70441/MLA_70441 Part_5.pdf

[/B]

Don't you know that there's an open-ended royalty holiday already on offer to the first mover in the Galilee Basin.

Even the QLD Treasury has come out and stated "The cost to the Government of supporting the development of the mining industry are apparent and significant"

The WA Treasury said "Many state expenditures that support resource development [incur} a significant subsidy cost.."

Gina and Clive have both politely told Newman they're currently not interested in devloping their coal assets in the Galilee basin, even with the lure of subsidised rail.

Gina's off to invest in Dairy now, and as for Clive, I sometimes wonder even if he knows what he's going to do next.

So do you believe fossil fuels should receive such large licks of subsidies as opposed to renewable energy?

• Adani is in a weak financial position to execute such an ambitious project: with external equity market capitalization at only US$5.17bn against estimated net debt of $12bn, development costs for the Carmichael and Abbot Point T0 coal terminal projects are estimated at US$10bn.
• Adani has over-estimated coal quality while under-estimating costs and project complexities.
• At peak production of 60 million tonnes per annum, Adani’s Carmichael mine would be by far the largest coal mine in Australia in a remote inland region with no power, rail, water or workforce infrastructure. Prior to 2013, Adani’s only other experience in coal mining is a 2–4mtpa coal mine in Indonesia that has consistently performed below expectations.
• The project is plagued by delays that continue to squeeze the Adani Group’s cash flow, with the company conceding the 2014 timetable for commencement of production has been pushed out to 2016, but more likely 2017 with full production beyond 2022.

Then we also have the other helping hands of

• $1 billion loan from Bank of India
• personal dispensation for Adani from India’s drive toward coal self-sufficiency - change in Govt could see that rescinded
• favourable coal price terms from Indian power plants

 

[Calliope]

So do you believe fossil fuels should receive such large licks of subsidies as opposed to renewable energy?

Renewable energy? Do you mean like Germany?

WILSTER, Germany””In a sandy marsh on the outskirts of this medieval hamlet, Germany's next autobahn will soon take shape.

The Stromautobahn, as locals call it, won't carry Audis and BMW's BMW.XE +0.89% , but high-voltage electricity over hundreds of miles of aluminum and steel cables stretching from the North Sea to Germany's industrial corridor in the south.

The project is the linchpin of Germany's Energiewende, or energy revolution, a mammoth, trillion-euro plan to wean the country off nuclear and fossil fuels by midcentury and the top domestic priority of Chancellor Angela Merkel.

But many companies, economists and even Germany's neighbors worry that the enormous cost to replace a currently working system will undermine the country's industrial base and weigh on the entire European economy. Germany's second-quarter GDP decline of 0.6%, reported earlier this month, put a damper on overall euro-zone growth, leaving it flat for the quarter.

Average electricity prices for companies have jumped 60% over the past five years because of costs passed along as part of government subsidies of renewable energy producers. Prices are now more than double those in the U.S.

"German industry is going to gradually lose its competitiveness if this course isn't reversed soon," said Kurt Bock, chief executive of BASF SE, BAS.XE +2.14% the world's largest chemical maker.

http://online.wsj.com/articles/germanys-expensive-gamble-on-renewable-energy-1409106602

 

[Smurf1976]

China is starting to limit it's coal imports. The turning on of massive amounts of nuclear power over the next decade, along with a 2 pipe lines for gas imports from Russia doesn't seem to indicate further increases in demand from China will occur either.

China supposedly has about 115 billion tonnes of coal reserves, half of which is sub-bituminous and lignite. The split between sub-bituminous (lowest grade of black coal) and lignite (brown coal) seems hard to find, but I'll assume here it's 50/50.

Anyway, let's assume the figures are right. So they've got roughly 85 billion tonnes of black coal all up, and 25 billion tonnes of brown.

Now, production is predominantly black coal with not a lot of brown coal (in relative terms) being used. That's not surprising given the very poor economics of transporting brown coal due to its' lower energy density, and that a lot of China's coal is mined quite some distance from where it is used.

So, 85 billion tonnes of black coal in the ground, and roughly 3.8 billion tonnes of that being used each year.

No rocket science here. Environmental issues aside, it's just not sustainable in terms of resources and it's inevitable that China will see a peak and decline in coal production before too much longer. Exactly when is had to pinpoint down to the year, but if you've got 85 billion tonnes of black coal reserves, and have used 4.5% if that in the past 12 months alone, then pretty obviously there's a limit to how long that can continue.

And so here comes the gas. And nuclear. And hydro. But, at best, those might limit the future growth of coal consumption rather than outright reducing it.

If the numbers are anywhere near to being right then it seems certain that China is going to be importing rather a lot of coal in the years ahead, having already built coal-fired power stations and other facilities which, over their lifetime, will use far more coal than China has in the ground.

As for India, that's a very different situation. Reserves somewhere around 300 billion tonnes, production around 0.65 billion tonnes a year. That's not going to run out anytime soon, and there seems no physical reason why India couldn't massively expand coal extraction if they wanted to - and I dare say they could do it a lot cheaper than it would be to mine the stuff in outback Qld, rail it to port, ship it to India then unload it. I can't see how that makes sense when they've got huge reserves in India itself.

 

[noco]

As previously stated, the pledge between Obama and china was just window dressing.....it will never happen.

Both the USA and China talk about a direct action plan.

The Green/Labor left wing socialist must surely have egg all over their little faces......Most of them with only a half a brain between the lot them



http://www.theaustralian.com.au/opi...126264792?sv=dcde29b30b9081409e7dcdb9291c56ad

AT a historic joint press conference with Barack Obama in Beijing last week Chinese President Xi Jinping signalled that China would continue to increase CO2 emissions until 2030.

China is currently increasing emissions every year by the equivalent of Australia’s total emissions, and Xi’s statement means this will continue to be the case. The announcement was warmly welcomed by the world media.

Xi said that by 2030 fossil fuels would still represent 80 per cent of China’s energy usage. Renewables such as wind and power would produce just 3 per cent of output. Xi implied that it was important that Europe continue to take the lead in renewables as they seemed to be able to tolerate low levels of growth and high levels of unemployment.

Lame duck US President Obama signalled the US would not take any leadership role on climate change action.

Both Obama and Xi implied that any reduction in emissions beyond business as usual would be brought about by direct action measures. There was no mention of a carbon tax or emissions trading scheme at the press conference. They implied this was a European disease.

 

[sydboy007]

As previously stated, the pledge between Obama and china was just window dressing.....it will never happen.

Both the USA and China talk about a direct action plan.

The Green/Labor left wing socialist must surely have egg all over their little faces......Most of them with only a half a brain between the lot them

Obviously they didn't hear about China's cap and trade pilot

http://www.triplepundit.com/2014/03...ngs-chinas-pilot-emissions-cap-trade-systems/

In both California and China, the cap and trade program is just one element of a much more comprehensive effort to reduce pollution. For example, like California, China requires its utilities to help customers use energy more efficiently. Both also have ambitious targets to increase generation from renewable resources. And China has pledged to adopt more stringent fuel standards to slash air pollutants and is piloting efforts to reduce reliance on coal-fired electricity.

Seven different cities and regions across China including Beijing, Shanghai, Shenzhen, Tianjin, Chongqing, Guangdong and Hubei have pilot cap-and-trade programs in development. These cities and provinces represent a range of different industries, so each program will be tailored to local characteristics with different reduction targets. Today, the city of Shenzhen’s launch will limit carbon emissions from more than 630 industrial companies, with a target to reduce the city’s overall carbon consumption by 21 percent by 2015. Shenzhen will be joined over the next year by the six remaining programs and if all goes well, China aims to have a nationwide system in place by 2016.

 

[sydboy007]

Renewable energy? Do you mean like Germany?


http://online.wsj.com/articles/germanys-expensive-gamble-on-renewable-energy-1409106602

They stuffed up a bit like in Australia where they offered too generous incentives a the beginning. Over time the costs will reduce. No one mentions the massive export machine Germany has been able to create due to their large home market and first mover advantage.

Having said that, every report has shown the RET has helped to suppress power prices in Australia, so we're moving away from using non renewable energy sources at a new 0 cost to consumers. I'd call that a pretty successful policy outcome.

The call for increasing the use of nuclear power doesn't seem to care about the costs. The capital cost for two planned large reactors (totalling 3.2 gigawatts) at Hinkley Point in Somerset: a staggering $29 billion. Utilities can't find the capital, so the UK government is offering loan guarantees of $18 billion. The UK government has provided a 35-year guarantee for the plant to receive £92.50 per megawatt-hour, or about $165, adjusted upward annually with inflation - that's around 3-4 times the current average wholesale price in Australia.

The problem to date with nuclear power has been that it’s been nearly impossible to nail down just how much they actually cost. In western countries that have liberalised electricity markets, where prices and government subsidies tend to be reasonably transparent, there hasn’t been a nuclear plant built in decades. The one recent build in Finland, Olkiluoto, is hardly a glowing advertisement, with the budget blowing out to €8.5 billion ($12.31 billion), or almost three times the delivery price of €3 billion. The estimated cost for the EPR in France has ballooned from $5 billion to $12.8 billion. Thus we have a rule-of-thumb for estimating the true capital costs of nuclear power: double the initial estimate and add a few billion for good measure.

Seems these days it's only renewable energy that has to stand on it's own two feet. Fossil fuels and nuclear seem to be entitled to near limitless levels of Govt subsidy.

 

[macca]

I am guessing it will take a few years to plan and then 3 weeks to build a dozen nuclear power stations in China. Do they have uranium ? Not sure I would like China to be a nuclear expert, never know what they might make !

If it is OK with the Greens for China to switch from coal to nuclear, how come we are not allowed to build another couple of Snowy Mountains Hydros around the place. I would be quite happy to live next to a lake created by a dam used for Hydro but I don't want to live near a nuclear power station.

The South Island of NZ has lakes all over the place, tourists rave over them, every large lake is part of a Hydro scheme and it is all so sensible, practical and efficient.

 

[sydboy007]

I am guessing it will take a few years to plan and then 3 weeks to build a dozen nuclear power stations in China. Do they have uranium ? Not sure I would like China to be a nuclear expert, never know what they might make !

If it is OK with the Greens for China to switch from coal to nuclear, how come we are not allowed to build another couple of Snowy Mountains Hydros around the place. I would be quite happy to live next to a lake created by a dam used for Hydro but I don't want to live near a nuclear power station.

The South Island of NZ has lakes all over the place, tourists rave over them, every large lake is part of a Hydro scheme and it is all so sensible, practical and efficient.

After Fukushima the Chinese Govt slowed down construction of their reactors to ensure they were being built safely. While it's not improbably corners have been cut, the same could be said for a lot of the reactors in rich countries. Lets just hope they decide to deal with their nuclear waste a bit better than the current solution of leaving in in ponds of water for decades. Dealing with nuclear waste never seems to be factored into the cost of nuclear power.

In a country like Australia with near limitless potential for solar and wind power, do we really want to be spending $10B+ per nuclear reactor? That's a while lot of renewable energy production, along with the benefits of distributed power generation. The fact we don't have the skill sets to build or run the power plants would also be an added factor in the risks of nuclear here.

I'm not sure if there's many rivers suitable to be dammed left in Australia. Certainly none particularly close to where lots of energy is consumed. You might be able to provide some info on that?