2. Surat Energy Resources Province Overview BASIN DOCUMENT.… · 2.1 Study Area The Surat Energy Resources Province ( Figure 2.1) is located in southern Queensland, stretching across

Creating Regional Economic Development by Value Adding to the Surat Energy Resources Province Scenarios, Findings and Strategy

FINAL REPORT 4 Job ID: 14203

2. Surat Energy Resources Province Overview

This section provides a summary of the Economic Overview Report (Volume III).

2.1 Study Area

The Surat Energy Resources Province (Figure 2.1) is located in southern Queensland, stretching across areas of the Darling Downs and South West Statistical Divisions. The

Surat Energy Resources Province contains substantial, but currently largely undeveloped thermal coal and coal seam gas with lesser, conventional petroleum resources. The region has significant potential to be developed into a large-scale energy and industrial province. The Surat Energy Resources Province Study Area, henceforth referred to as the Study Area, for the purposes of this section, is considered to encapsulate the following 17 LGAs:

• Bendemere; • Bungil; • Cambooya; • Chinchilla; • Clifton;

• Dalby; • Jondaryan; • Millmerran; • Murilla;

• Pittsworth; • Roma; • Rosalie; • Tara;

• Taroom; • Toowoomba; • Wambo; and • Warroo.

In geological terms, the Surat Energy Resources Province includes most of the Queensland portion of the Surat Basin, part of the Clarence-Moreton Basin and the southern Bowen Basin.

2.2 Socio-Economic Profile

2.2.1 Population

• Population growth in the Study Area has been positive and accelerating since 1996, with 2002 and 2003 the only years in the past ten to have recorded lower growth than the year previous.

• The Study Area’s population is projected to grow at around half the rate of Queensland’s through to 2026.

2.2.2 Demographics and Labour Force

• The Study Area has a comparatively lower proportion of persons aged 25 to 64 than the Queensland average, reflecting the relative attractiveness of major urban centres for young and middle aged adults in terms of both job opportunities and life style.

• The Study Area’s labour force is highly cyclical, likely due to the reliance on agricultural industries in the region. Participation is highly variable across the LGAs in

the Study Area.

• The unemployment rate in the Study Area has consistently been below the Queensland rate over the past few years.

• The Study Area has a higher proportion of managers & administrators and labourers & related workers than the Queensland average.

• The Study Area has a greater reliance on the industries of agriculture, education and health services than the Queensland average.

• Income levels in the Study Area are below that of the State, however, home loan and average rents in the region is also lower than the Queensland average.

• Property prices in the Study Area are below the Queensland average, but have been grown at a much faster rate in the past year.

• Residential building construction in the Study Area has outperformed Queensland in recent years, with stronger growth in approvals, value and value per approval.



Figure 2.1. Surat Energy Resources Province

Source: DME (2007)

2.2.3 Economic Structure

• The Study Area regional economy is estimated to have accounted for 4.6% of the

Queensland Gross State Product (GSP) at Factor Cost of $140.4 billion. • The Study Area’s economy is heavily reliant on the resources sector, with agriculture

and mining the two largest contributors to GRP.



Table 2.1: Structure of the Surat Energy Resources Province Study Area Regional Economy, 2004-05

Industry GRP ($M)

GRP (% of Total)

Rank GSP (% of Total)

Primary (resources-based)

Agriculture $870.3 13.3% 1 4.2%

Mining $647.6 9.9% 2 8.2%

Total Primary $1,517.9 23.2% 12.5%

Secondary (goods-based)

Construction $416.9 6.4% 7 7.8%

Manufacturing $435.2 6.7% 6 10.5%

Electricity, Gas & Water Services $185.4 2.8% 16 2.0%

Total Secondary $1,037.5 15.9% 20.3%

Tertiary (commerce-based)

Retail Trade $519.2 7.9% 3 4.6%

Transport & Storage Services $239.3 3.7% 12 4.9%

Wholesale Trade $292.3 4.5% 11 4.1%

Total Tertiary $1,050.8 16.1% 18.0%

Quaternary (information & finance-based)

Property & Business Services $392.6 6.0% 8 10.2%

Education $442.7 6.8% 5 4.4%

Government Administration & Defence $215.1 3.3% 13 4.0%

Finance & Insurance Services $317.4 4.9% 10 5.0%

Communications Services $195.4 3.0% 14 2.7%

Total Quaternary $1,563.2 23.9% 26.4%

Quinary (household-based)

Health & Community Services $380.2 5.8% 9 6.0%

Accommodation, Cafés & Restaurants $142.1 2.2% 17 3.2%

Personal & Other Services $129.4 2.0% 18 2.0%

Cultural & Recreational Services $39.5 0.6% 19 1.0%

Total Quinary $691.2 10.6% 12.3%

Other

Ownership of Dwellings $484.3 7.4% 4 8.2%

General Government $190.3 2.9% 15 2.4%

Total Other $674.6 10.3% 10.6%

Total GRP at Factor Cost $6,535.2 100.0% 100.0%

Source: AECgroup, Australian Bureau of Statistics (2006a), Australian Bureau of Statistics (2006b), Australian Bureau of Statistics (2005), Australian Bureau of Statistics (2003), Office of the Government Statistician (2006), Office of the Government Statistician (1998).

2.3 Existing Infrastructure

• There are seven highways that intersect the Surat Energy Resources Province Study Area, three of which run primarily east-west and four bisecting the Study Area north-

south. • There are two main rail lines, one running east-west and one north-south, and six

branches that service the Surat Energy Resources Province. There is currently no rail link between Wandoan and Banana, preventing direct rail access between the Surat Energy Resources Province and the Port of Gladstone. However, the Surat Basin Rail Link, which has recently had a feasibility study approved, if constructed would

address this missing link. • The main airports in the Surat Energy Resources Province are situated in Toowoomba

City, Roma and Oakey, which can cater for light and medium sized aircraft, including private and charter flights. There are also eleven other airports located in the Surat Energy Resources Province capable of catering to light aircraft. Issues regarding the capacity of regional airports to handle larger craft, particularly in response to

demands from large construction crews, were identified. However, whilst improved



air transport infrastructure would assist in the transport of construction crews and generally increase the service levels in the region, these impediments are not considered to be a critical constraint to the development of the coal and CSG resources in the Surat Energy Resources Province.

• There are two major ports with potential for export of coal and other products

produced in the Surat Energy Resources Province – the Port of Brisbane and the Port of Gladstone. The Port of Gladstone (once capacity is increased with the Wiggins Island development) has considerably greater export capacity for coal products than the Port of Brisbane, but is currently inaccessible by rail, however, the aforementioned Surat Basin Rail Link project will address this issue once operational.

• The Government Owned Corporation Powerlink Queensland transports electricity from

generators to distribution networks, and also to large energy consumers such as aluminium smelters. Smaller scale, domestic consumers of electricity, such as households, small businesses, and quite often mining sites, are serviced by Energex (in south-east Queensland) and Ergon Energy (in rural and regional Queensland).

• In the southeastern Queensland region, there are transmission pipelines that directly

service large, industrial consumers and gas-fired generators, and provide gas for localised distribution networks.

2.4 Current Issues & Influencing Factors

There are several influencing factors and issues regarding the development of the Surat Energy Resources Province across the triple bottom line, including: • Economic: Transport infrastructure, competition from renewable energy, shortage of

skilled labour, limited available water resources and impacts to farm operations, as well as increased employment and income opportunities, business growth and

industry attraction. The applicability and effectiveness of using water produced as a by product of resource development for beneficial uses (industry, urban, environmental) will depend on the quality and associated treatment costs.

• Social: Shortage of accommodation, provision of social infrastructure and services (increased demand, once at a critical mass will see service and infrastructure provision increase), increased property prices/values/rates, water availability and the

opportunity for increased social interaction and individual wellbeing.

• Environmental: Protection of natural areas, lowering of the water table and saline water formation as well as the opportunities for the reuse of the water produced as part of the resource extraction/ development process (industry, urban, environmental uses).

2.5 Policy & Planning Context

The implications of key policies and programs that may impact on developing the energy resources sector in the Surat Energy Resources Province have been identified, including:

• National Competition Policy (NCP): Under NCP, reforms have opened up state markets to interstate trade of energy and competitive pricing. Access to transmission, distribution and retail of energy has also become more transparent and competitive creating a more efficient industry.

• Cleaner Energy Strategy: The Cleaner Energy Strategy set a target of 13% of all electricity sold in Queensland to come from gas fired generators. This has had the

effect of boosting exploration and development of coal seam gas operations in the Surat Energy Resources Province over the past few years. Although this target has now been met, it is expected that the volume of gas-fired electricity will grow with increased demand.

• Climate Change: Queensland’s Energy Policy has an aim to significantly reduce

greenhouse gas emissions, providing a boost for coal seam gas operations as gas-



fired electricity produces approximately half the amount of greenhouse emissions as coal fired electricity production. Promoting the development of forest plantations and research into new technologies to reduce carbon emissions may also assist in reducing the environmental impact of using conventional energy resources relative to

renewable energy. • Renewable Energy: There is an increasing focus from government to diversify

energy production. Renewable energy is a substitute energy source for conventional (finite resource) energy resources (coal, CSG, etc). Renewable energy production is currently less cost effective than many other production techniques. The Queensland Government’s support of research and development in emerging technologies for

renewable energy suggests renewable energy production may become more cost competitive in the future.

• Blueprint for the Bush: The Blueprint for the Bush sets out the Queensland

Government’s plan to invest in regional economic development in Queensland, with an emphasis to improving access for both industry and individuals to essential

infrastructure such as water, transport, energy and community facilities. This plan would be expected to provide a boost to investment in key infrastructure to facilitate energy production and distribution.

• Queensland Government Coal Taskforce: Led by Department of Infrastructure,

the Queensland Coal Taskforce will see a significant amount of funding committed to coal-related infrastructure over the next five years, in order to keep up with projected

demand for production and export of coal. This taskforce is currently master-planning coal-related infrastructure for the Bowen Basin, with master planning for the Surat Energy Resources Province to follow.

• Murray-Darling Basin: As an ecologically and economically important resource,

protection of the Murray-Darling Basin is a critical policy issue. Strategies and policies are in place to restrict developments that will exacerbate issues relating to rising

salinity and water accessibility and flow in the Murray-Darling Basin. As such, future mining operations will be required to ensure the development will not negatively impact on the sustainability of the Murray-Darling Basin. The Commonwealth Government has recently announced a plan to take over the management of the Murray-Darling Basin.

• Intergovernmental Agreement on the Environment: The IGAE is an agreement setting out how environmental policy and programs at all levels of government should be guided. Essentially, the IGAE recognises that sustainable economic development requires a commitment to environmental protection and the principles of ecologically sustainable development. As such, all proposed developments need to demonstrate they support these principles.

• Natural Resource Management: The National Action Plan for Salinity and Water Quality and Natural Heritage Trust programs are designed to protect environmental assets threatened by issues such as rising salinity and declining water quality and availability, including the Murray-Darling Basin. With this in mind, all proposed developments would need to demonstrate that they would not further exacerbate these issues.

• National Water Initiative: New developments in the Surat Energy Resources Province would need to demonstrate that any water requirements would not significantly impact on the equitable distribution and supply of water to the community, the quality of water supplies, or the sustainability of water supplies.

2.6 Resources

A summary of the available resources and the resources identified as having significant increases in value adding activity over the short to medium term are summarised below. • Coal: Coal production in the Surat Energy Resources Province has increased

significantly in the past five years, rising from less than one million tonnes in 2001 to



over eight million tonnes in 2005-06. Estimates indicate there are approximately 6.3 billion tonnes of raw coal (in situ) in the Surat Energy Resources Province.

• Oil: In contrast to coal production, oil production in the Surat Energy Resources

Province has declined in recent years, with the 21 ML of oil produced in 2004/05 approximately one quarter the production recorded in 1997/98. Initial reserves of oil in the Surat Energy Resources Province have been estimated at approximately 6,092 ML, with approximately 1,123 ML estimated to be remaining.

• Water (from oil wells): Water production from oil wells was relatively steady

between 1996/97 and 2003/04, with between 1,500 ML and 2,000 ML produced each

year. However, estimates of water production for 2004/05 are considerably lower, at just over 1,000 ML.

• Condensate: Production of condensate in the Surat Energy Resources Province has

declined markedly from the levels recorded in the early to mid 1990s, from approximately 40 ML in 1996/97 to around 10 to 20 ML per year. This has likely been

influenced by the near depletion of identified initial reserves, with approximately 35 ML of condensate estimated to be remaining after the 2004/05 financial year.

• LPG: LPG production in the Surat Energy Resources Province has declined at a similar

rate to condensate production, with production levels declining from around 80 ML in the mid 1990s to between 10 and 25 ML each year since 1999/00. Approximately half of the initial 2,600 ML (approximately 1.4 million tonnes) of LGP reserves in the Surat

Energy Resources Province remain. • Gas: In contrast to the downward trend in production experienced for other

conventional energy resources aside from coal, conventional natural gas production in the Surat Energy Resources Province has remained relatively steady over the past 10 years at approximately 15 to 20 PJ per annum.

• Coal seam gas (CSG): Coal seam gas (CSG), in the Surat Energy Resources Province, has increased significantly since 1997/98, at an annual average growth of 59.1%. The total current reserves in the Surat Energy Resources Province are estimated by the Department of Mines and Energy to be 3,556 PJ. However, this is increasing every year as additional drilling is undertaken, and industry estimates suggest that total reserves will increase to between 10,000 and 15,000 PJ.

2.6.1 Resource Assessment

A summary of the key resources of the Surat Energy Resources Province is contained in the following table. This assessment highlights the key resources available for value adding opportunities in the medium to long term in the Surat Energy Resources Province as including:

• Coal; • Coal seam gas; and • Coal seam gas water (pending water quality and cost effectiveness of treatment).



Table 2.2. Commodity Prices, Remaining Reserves and Production Trends (Surat Energy Resources Province)

Commodity Remaining Resource Significant Development Opportunities?

Current Production

Trend

Current Price (June 2006)(a)

Future Price (2011)

Thermal Coal 6.3 billion tonnes Yes Increasing AU$69 per tonne AU$63 per tonne

Coal Seam Gas(b) Between 10,000PJ and 15,000PJ

Or 267,000Mm3 and 400,550Mm3

Yes Increasing Between approximately $2.00/GJ to $3.00/ GJ (c)

Not Available

Coal Seam Gas Water(d) 60,000ML/year Yes(e) Increasing Not Available Not Available

Oil 1,123 ML or 7.1 million barrels

Limited Steady but declining

AU$93 per barrel AU$57 per barrel

Condensate 35 ML No Declining Related to oil Related to oil

Natural Gas (Conventional Reserves)

285 PJ Limited Steady but declining

Between approximately $2.00/GJ to $3.00/ GJ (c)

Not Available

Liquid Natural Gas Factor of natural gas production

Limited Steady but declining

AU$380 per tonne AU$365 per tonne

Notes: Assumes AU/US exchange rate of $0.76. (a) Estimates rounded from spot prices taken in November 2006. The spot prices have been used as the price inputs for the model. (b) Estimates provided by industry participants. The development of 2P (proven and probable) reserves are driven by market opportunity and as such significantly underestimate the available resource. (c) These prices are for retail sale of natural gas in Queensland and vary depending on the location and volume purchased. (d) Water yield has been estimated to be range between 100ML/PJ and 1,000ML/PJ of CSG, depending on the structure of the coal. With a long term average of 200ML/PJ, this would equate to a water resource of approximately 2.5 million ML in total or 60,000ML per year assuming a steady state production of 300PJ/year. (e) Depending on quality of water and quality requirement of user. Measures: Barrel = 159 litres, ML= 1,000,000 litres, mmbtu = million British thermal units, Mm3 = Million cubic metres, PJ = Petajoule. Source: ABARE (2006a), ABARE (2006b), Department of Mines and Energy (Unpublished), Origin Energy (2006), World Bank (2006)



3. Opportunity Analysis

This section summarises the Opportunity Analysis report (Volume II) and highlights the identified value adding opportunities within the Surat Energy Resource Province in the short to medium term based on the resource assessment (Section 2.6). There is a range of longer term direct value adding and flow-on industry development opportunities that

could be potentially developed with increased technology, changed market conditions and resource development. The report has focussed on developments expected to occur over the short to medium term and examines their impact over time across the Surat Energy Resources Province.

3.1 Opportunity Assessment

The assessment of the potentially relevant development and value adding opportunities for the Surat Energy Resources Province are listed in the following table. The assessment considered the range of influencing factors and critical requirements required for each opportunity to proceed.

Table 3.1. Value Adding Opportunity Assessment

Highly Suitable Suitable Marginal Currently Unsuitable

• Coal mining

• Export of thermal coal

• Coal-fired power generation

• Coal seam gas extraction

• CSG-fired power generation

• Gas-to-liquids production • Ammonium nitrate plant

• Industry precincts

• Ethanol • Treatment of water for industrial/ urban uses

• Mine water use (CSG water)

• Lotfeeding (beef) Stock water

• Coal to liquids • Aquaculture • Power station cooling (using CSG water)

• Horticulture • Lotfeeding (Beef) Growing silage crops

• Cotton Irrigation

Source: AECgroup

A summary of the assessment including the key influencing factors and critical requirements influencing the opportunities suitability for development in the Surat Energy Resources province is contained in Table 3.2.



Table 3.2. Assessment of Value Adding Opportunities for Resources in the Surat Energy Resources Province

Value Adding Opportunity

Suitability Assessment

Influencing Factors Critical Requirements

Coal

Coal Mining Highly suitable

• Volume of coal available or development. • Current market for coal.

• Transport infrastructure. • Regional skills development. • Expansion and development of key community infrastructure and services to

manage increased population (construction and operation). • Government policy in relation to power generation from coal. • Water availability for mine development.

Export of Thermal Coal

Highly suitable

• Volume of coal available for development. • Current market for coal (high demand driving price).

• Transport infrastructure (road, rail and port) and charging for transport to port. • World environmental pressures. • Kyoto protocol.

Coal-Fired Power Generation

Highly suitable

• Adequate supply of coal for development. • Expected increased demand for base-load power

(Queensland and NSW). • Current market for coal (high demand driving price). • Movement toward water efficient technologies and

industrial sources of water. • Queensland Government Policy.

• Transmission infrastructure (to NSW and Queensland markets). • Skills development in the region. • Government policy in relation to power generation from coal. • Water availability for mine development. • Clean coal technology.

Coal-to-Liquids (CTL)

Marginal • Availability of coal which are close to the surface. • Government policy and public opinion regarding the

greenhouse impact of fossil fuels. • Lack of proven economic viability of CTL technology.

• Transport infrastructure (rail, road, and pipe) to transport equipment for construction (F-T processor), feedstock gas, and gas/liquid output.

• Skills development in the region. • Availability of natural resources such as water and coal. • Successful development of CTL technology.

Coal Seam Gas (CSG)

Extraction Highly suitable

• Competitiveness with existing energy supply resources (e.g. coal and other fuel gases).

• Government policy. • Requirements for the treatment and disposal of the water

produced during the extraction of CSG.

• Transport infrastructure (pipeline) to transport developed resource to market and air access to remote regions for development and operation of resources.

• Skills development in the region.

CSG Power Generation

Highly suitable

• CSG’s current acceptance by the market as a viable and manageable fuel for power generation.

• Expected increased demand for power throughout Queensland and NSW.

• Environmental benefits of gas-fired generation (50% less greenhouse gas emissions over coal–fired generation).

• Transmission infrastructure (to NSW and Queensland markets). • Skills development in the region. • Government policy in relation to power generation from competing sources (i.e.

coal-fired power generation).






Gas-to-Liquids (GTL)

Highly suitable

• Availability of coal seam gas. • Technological development that will increase economies of

scale of GTL. • Government policy and public opinion regarding the

greenhouse impact of fossil fuels. • Success of sector overseas.

• Transport infrastructure (rail, road, and pipeline) to transport equipment for construction (F-T processor), feedstock gas, and gas/liquids output.

• Skills development in the region. • Availability of natural resources such as gas and water.

Ammonium Nitrate Plant

Highly suitable

• Availability of input feedstock. • Ability to secure long-term contract to mitigate against

business risk. • Currently importing to meet demand. • Anticipated coal mining development in the Surat Energy

Resources Province. • Significant and sustained growth is expected in the mining

sector in the Surat Energy Resources Province over the next 5-30 years.

• Availability of key resources and inputs.

• Transport infrastructure (road, rail) to provide inputs to the processes. • Defined and appropriate site, with access to long-term supply of CSG, access to the

electricity grid and space for expansion for sister industries. • Transport infrastructure (roads). • Electricity supply. • Water.

Ethanol Plant Suitable • Supply of feedstock. • Government policy influencing demand. • Price of ethanol and petrol. • Competition from Brazil.

• Secure feedstock supply. • Secure water supply. • Government policy. • Transport infrastructure.

Industry Precincts Highly suitable

• Business attraction strategies. • Market factors.

• Applicable zoning and planning requirements

CSG Water

Treating for Urban & Industrial Uses

Suitable • Cost of electricity. • Continued drought. • Higher capacity and willingness to pay of urban and

industrial users. • Adequate existing technology.

• Reliability of supply. • Technology development. • Collation and centralisation infrastructure. • Cost effective treatment and transport infrastructure. • Suitable disposal and process for waste and left over water from treatment process.

Mine Water Use Suitable • Water is a critical input to coal mining operations. • Water quality required for coal mining processes varies. It

is anticipated that untreated CSG produced water would be of a suitable quality for many coal mine processes, in particular washing coal, depending on the level of sodium chloride (NaCl).

• Water supply is currently under significant pressure in the region.

• Proven, reliable supply of water. • Infrastructure to transport water from CSG fields to coal mining operations cost

effectively.






Aquaculture Marginal • Current aquaculture production of inland species remains very low, despite over a decade of commercial development.

• The technologies and business cases are still relatively unproven and the risk involved in production is very high.

• The market prices for the products are expected to continue to deteriorate.

• Competition from more favourably placed aquaculture industries, both in Australia and overseas, is expected to increase.

• The development of proven technology for the consistent production of the species in the region.

• Market access: The development of lower production cost ventures, that would enable the product to better compete in the wider chilled fish market.

• The availability of suitable water in existing storage ponds or channels that could be accessed at little cost.

Horticulture Currently Unsuitable

• Not withstanding current market shortfalls due to drought, the market for horticulture products is generally marginal.

• Climatic conditions in the Surat Energy Resources Province limit growing seasons, impacting on risk, crop choices and production potential.

• The distance from markets and cheap, casual labour, increases the logistical effort required for horticulture businesses in the Surat Energy Resources Province.

• Relatively high investments are required, however returns can be very difficult to accurately predict.

• Horticulture crops generally require relatively high water quality.

• CSG water produced in the Surat Energy Resources Province would require treatment before being of a suitable standard for irrigation, increasing costs of production.

• Proven, reliable supply of water. • Cost efficient and economical water treatment process and transport infrastructure. • The demonstration of a number of alternative crop choices that will adequately

perform in the Surat Energy Resources Province. • An improved labour market for seasonal horticulture workers in the Surat Energy

Resources Province.

Lotfeeding (Beef): Stock Water

Suitable • Lotfeeding is an established industry in the Surat region, with demonstrated technology and business case.

• The Surat Energy Resources Province is already a major beef producing area, with established sale facilities, and links between producers, processors and markets.

• The water required for watering livestock can be of much lower quality than many other consumptive uses.

• Any negative health impacts to livestock from ingesting CSG water with high fluoride content may be mitigated by rotating or combining with alternative water sources.

• Proven, reliable supply of adequate quality water. • The economical supply (treatment to suitable quality, if required, and transport) of

water for the watering of livestock. • The location of the feed lot in relation to the water source will be a critical factor in

the cost of supplying CSG water for watering of livestock.






Lotfeeding (Beef): Growing Irrigated Silage Crops

Currently Unsuitable

• Lotfeeding is an established industry in the Surat region, with demonstrated technology and business case.

• The Surat Energy Resources Province is already a major beef producing area, with established sale facilities, and links between producers, processors and markets.

• Silage crops for feedstock inputs generally have a high saline tolerance, however, current treatment technologies are expected to be cost prohibitive.

• Proven, reliable supply of water. • The economical supply (treatment to suitable quality and transport) of water for the

production of silage crops.

Cotton Irrigation Marginal • Irrigated cotton production requires very large capital investments, and hence relatively secure and long term water supplies to justify investment.

• Nearby established producers are currently water limited. • Cotton requires large quantities of high quality water with

low levels of salinity and sodicity. • CSG water produced in the Surat Energy Resources

Province would require treatment before being of a suitable standard for irrigation, increasing costs of production

• Cotton is a relatively high value crop with an improved opportunity to pay for treated water.

• Proven, reliable supply of high quality water. • The ability to economically supply (treatment to suitable quality and transport) a

consistent quantity of water of suitable water quality levels.

Power Station Cooling

Marginal • Water cooling towers require a very high quality water level, meaning that even high quality water sources generally need to be treated prior to use.

• The lower the quality of the water, the more costly (in general) it is to treat.

• Capacity to pay for water treatment if required.

• The close proximity of potential users to the CSG water source to minimise transportation costs.

• A relatively low additional cost for treating CSG water in comparison to alternative water sources.



Additional points of clarification considered in the opportunity assessment include: • The development of an ethanol industry appears to be a suitable development, but

relies heavily on government policy. The development of an ethanol industry is not

reliant on CSG as an input, and could potentially progress in the region without any resource development.

• The development of aquaculture, whilst technically feasible, is considered to be

marginal for broader industry investment, and is considered unlikely for development except as a potential cost offset for the management of CSG water.

• A coal-to-liquids industry may be potentially suitable for the region, but is yet to be proven to be economically viable on a commercial scale.

• Due to quality constraints, CSG water is considered unsuitable for the development of

horticulture or irrigated agriculture (cotton or silage for feedlots) industries without cost prohibitive treatment.



4. Development Scenarios

There are a significant number of variables contributing to the development of the scenarios examined in the report. The variables were developed in a staged approach and reviewed by the project management committee and experts within the Queensland Departments of State Development, Mines and Energy, Infrastructure and Natural

Resources and Water, as well as relevant industry stakeholders.

4.1 Development Enablers

Critical enabling factors that are required to enable development in the Surat Energy Resources Province to occur include:

• Rail infrastructure for access to port:

o Wandoan to Banana (Surat Basin Rail: Formally DVR) (New Line); o Banana/ Moura to Gladstone (Upgrade); o Miles to Wandoan (Realignment); and o Toowoomba to Miles (Upgrade).

• Port infrastructure for export of thermal coal: o Wiggins Island Port (Development).

• Queensland-NSW electricity transmission inter-connector; and • Water for mine development;

o CSG water; and/or

o Infrastructure development.

4.2 Development Drivers

Development drivers that will dictate the level of investment, resource development and subsequently economic activity in the Surat Energy Resources Province include:

• Power demand:

o Qld; and o NSW.

• Global coal demand1;

• Industry demand for CSG:

o Qld; and o NSW.

• Development and timing of:

o Clean Coal Technology (CCT); o Ammonium nitrate plant; o Gas to liquids (GTL); o Ethanol plant; and o Treatment of CSG water for urban and industrial uses.

The future development scenarios examine a range of expectations (high, medium and low) regarding level and timing for the above enablers and drivers. The scenarios

outlined below examine the full range of outcomes that may be expected to occur, with the likely result to lie between the high and low scenarios2.

1 Global coal demand is not utilised as a driver in the model, but has been considered in the development and

staging of transport infrastructure (rail and port), which triggers the timing and level of development. 2 In practice, it is not expected that either the low scenario or the high scenario will be delivered through the

development of the Surat Energy Resources Province, as these scenarios represent a combination of either worst

case (low scenario) or best case (high scenario) development options. Rather, development of the Surat Energy

Resources Province is expected to result in a scenario that falls somewhere between these two outer limits.



4.3 Development Scenarios Examined

The following scenarios have been developed in conjunction with the Departments of State Development, Mines and Energy, Infrastructure and Natural Resources and Water, and based on consultation findings from industry representatives. The scenarios examine a high, medium and low scenario for each of the key variables (enablers or drivers) of the model. The medium scenario is reported, with the high and low scenarios to highlight the degree of potential variation.



Table 4.1. Development Scenarios

Scenarios Description

Low Medium High

Comments and Explanation

Rail Infrastructure

Wandoan to Banana (Surat Basin Rail: Formally DVR)

• New line • 1st coal export 2011/12 • Threshold of 10 Mt/annum



Banana / Moura to Gladstone • Upgrade line (2016/17) • Additional 7.5 Mt/annum

• Upgrade line (2016/17) • Additional 10 Mt/annum


Banana / Moura to Gladstone • Further upgrade to line (2021/2022)

• Additional 7.5 Mt/annum

• Further upgrade to line (2021/22)

• Additional 10 Mt/annum

• Further upgrade to line (2021/22)


Miles to Wandoan • Realignment of line (2026/27)

• Additional 7.5 Mt/annum

• Realignment of line (2021/22)


• Realignment of line (2021/22)


Toowoomba to Miles • Beyond the time scale of the study



Total Coal Export (2030) 32.5 Mt/annum 45 Mt/annum 60 Mt/annum

The export of significant volumes of coal from the Surat Energy Resources Province is currently not possible due to gaps in the rail network to access the Port of Gladstone and current capacity constraints at both Brisbane and Gladstone ports. The provision and expansion of rail access to the Port of Gladstone and the development of new port infrastructure (Wiggins Island) is necessary to facilitate significant export growth from the Surat Energy Resources Province. The low, medium and high scenarios examine the impacts of three different levels of infrastructure provision and subsequently export capacity expansion.

Port Infrastructure

Development of Wiggins Island goes ahead with capacity for Surat Energy Resources Province coal

• Operational by 2011/12 • Operational by 2011/12 • Operational by 2011/12 Development of port infrastructure at Wiggins Island, in conjunction with rail infrastructure with sufficient capacity linking the Surat Energy Resources Province to the port, is a critical enabler for development of the Surat Energy Resources Province. The three scenarios assume that port infrastructure is developed with sufficient capacity to export from the Surat Energy Resources Province and the port is in operation by 2011/12.

Water Infrastructure

Development of water infrastructure to facilitate mine development

• No additional water infrastructure developed

• Mines obtain water from existing sources and available CSG water

• Moderate water infrastructure development

• Mines can obtain 50% of their water requirement from new water sources

• Significant water infrastructure is developed

• Mines can obtain 100% of their water requirement from new water sources

Water availability is a critical enabler of the energy resources sector and may constrain coal mine development where additional water infrastructure is not made available to meet water requirements. The impact of this is examined in the low and medium scenarios with the high scenario not constrained by water availability.




Low Medium High


Electricity Infrastructure and Demand

Additional MW demanded within NSW (capacity of the Qld/NSW inter-connector (IC))

• Compression of inter-connector

• 30% increase in transfer • NSW demand projected to

increase at 1.7% / annum

• Duplication of inter-connector

• Increased access and confidence to NSW market

• 50% increase in transfer • NSW demand projected to


• DC link to NSW • 1,500 MW both ways • Operated at 90% of

capacity • NSW demand projected to


Additional MW demanded within Queensland

• 25% of Queensland increased demand met by Surat Energy Resources Province

• Queensland demand projected to increase at 3.5% / annum





The low, medium and high scenarios examine the impacts of three different increases in transfer capacity to NSW as well as different proportions of growth in Queensland demand that is met by the Surat Energy Resources Province. Demand from NSW is influenced by the transfer capacity of the Qld/NSW inter-connector, three upgrade options are examined in the scenarios (compression, duplication or conversion to a DC link). Once significant volumes of the CSG reserve are developed, the security of supply will influence the attractiveness of investment in gas-fired power generation using CSG as a feedstock. This will be a significant influence in the nature of future electricity generation (CSG versus traditional coal versus clean coal technology).

Clean Coal Technology (coal-fired power generation)

• Not available

• Yes, effective and efficient technology available by 2020

• Yes, effective and efficient technology available by 2015

Due largely to environmental issues regarding the use of coal for power generation, the current Government policy does not support the development of coal-fired power generation unless there is a clear and demonstrated need. Clean coal technology (CCT) is expected to address the majority of these environmental concerns. Factors such as greater security of coal versus CSG into the future are anticipated to make the development of coal-fired power generation using CCT an attractive investment alternative to CSG-fired power stations in the longer term. The medium and high scenarios examine the impacts of CCT being approved for development in either 2015 (high) or 2020 (medium).




Low Medium High


Other Value Adding Opportunities

CSG demanded by industry • 2-3% increase / annum from existing industry

• Additional 10 PJ demanded in 2008 associated with moderate capture of southern markets

• Increasing at 2-3% / annum

• Additional 15 PJ demanded in 2008 associated with capture of southern markets

• Increasing at 2-3% / annum

Industry demand for natural gas is a critical driver to development of the energy resources sector. Demand by industry in the eastern Queensland natural gas market is projected to increase at a rate of between 2-3% / annum. The three scenarios examine the potential impact of differing levels of capture of the southern market. Each scenario assumes that necessary transmission infrastructure is developed linking additional CSG fields to existing pipeline infrastructure.

Gas-to-liquids plant • No • Yes (in 2020) • Yes (in 2015) Development of a gas-to-liquids plant will increase demand for CSG. The scenarios examine the impact of the timing of the development of a gas-to-liquids plant.

Ammonium nitrate plant • No • Yes • Plant 1 in 2010 • Plant 2 in 2024

• Yes • Plant 1 in 2010 • Plant 2 in 2020

Development of an ammonium nitrate industry will increase demand for CSG. The scenarios examine the impact of the timing of the development of ammonium nitrate plants.

Ethanol plant • No • Yes (in 2010) • Yes (in 2010) Development of an ethanol plant is not a critical driver to development of the energy resources sector, and is largely dependent on Government policy.

Treatment of water for urban use

• No • Yes • Yes The treatment of CSG water for urban use is not a driver to development, but has been identified as a potential value adding opportunity.




Low Medium High


Coal mine water use • Yes • Yes • Yes Water availability is a critical enabler for coal mine development, with coal mines requiring large quantities of water for a range of coal mining processes. CSG water has been identified as potentially being suitable for processes, such as coal washing, pending quality constraints, particularly sodium chloride (NaCl). Where additional water infrastructure is not made available to meet water requirements of coal mines, the use of CSG water is expected to play a more important role in the facilitation of coal mine development.

Livestock watering • No • Yes • Yes The use of CSG water for livestock watering is not a driver to development, but has been identified as a potential value adding opportunity. The scenarios examine the impact of using CSG water for livestock watering.

Power station cooling • Yes • Yes • Yes The use of CSG water for power station cooling is not a driver to development, but is expected to occur in individual circumstances where water is of sufficient quality.

Note: The inputs and drivers for individual value add opportunities are examined in Volume II – Opportunity Analysis.

Documents

2. Surat Energy Resources Province Overview BASIN DOCUMENT.… · 2.1 Study Area The Surat Energy Resources Province ( Figure 2.1) is located in southern Queensland, stretching across