Gas Week

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Queensland energy prices in Mount Isa 2 to 3 times higher than coastal regions connected to the NEM

Posted by gasweek on 25 September, 2007

Because North West Queensland was not connected to the National Electricity Market (NEM), energy prices in Mount Isa are routinely 2 to 3 times higher than coastal regions connected to the NEM, said the Queensland Resource Council.

$137m cost of energy in 2005-06: “Fuels to support electricity generation in the [North West Queensland] region are limited to a single gas supplier,” QRC said. “Alternatively, diesel is used on site. Neither option is cost effective. In 2005-06 almost $97 million was required to cover the cost of electricity in the North West. Another $40 million was spent on on-site facilities, for a total cost of $137 million. Highlighting the high price of energy in the North West, the electricity bill for the entire Bowen Basin coal mining region over the same period was $125 million. Central Queensland’s access to the NEM leads to much lower energy costs for the region.”

Availability issues create even greater concern: “Of greater concern than the price of energy in the North West is its availability. The region’s aging generation plant is close to capacity, which means poorer reliability. Expansions in capacity require substantial upfront investment by the region’s sole generator. The mismatch in investment time horizons between mining operations and power generation means that the effective price of this new generation capacity is very high with costs capitalised over seven to 10 years. The marginal cost of incremental growth is very high, limiting new project and brownfield expansion.”

National interest approach offers advantages: “The Queensland Government is examining options to improve energy supply in the region,” QRC said. Some options have the potential to upgrade energy infrastructure through Mount Isa and on to Darwin. Given that much of the prospective geology associated with the Mount Isa Inlier extends into the Northern Territory, such proposals could vastly expand the economic catchment serviced by Mount Isa. Such a national interest approach reflects the intent of COAG infrastructure audits mentioned previously. Despite receiving up to $40 million in subsidies from the Commonwealth, electricity prices in the Northern Territory are still around three to four times the prevailing price in the east coast National Electricity Market and are likely to rise again when gas is sourced from offshore fields.”

Greater electricity demand predicted: “Increases in uranium production are predicted to trigger more demand for electricity in the Northern Territory,” said QRC. “The high price of electricity is likely to result in miners increasing their cut off grades for resource extraction. Similarly, competitive energy costs would immediately increase the proven mineral reserves of the whole North West region. This would flow through to production increases as projects under feasibility become operational and more exploration activity follows. QRC recommends that the incoming federal government works with the Queensland and Northern Territory Governments to examine ways to realise the potential of the minerals province (centred on Mount Isa and perhaps extending through to Darwin), by examining how the availability of energy could be economically improved.”

Reference: QRC Full Members – August 2007 Alcan South Pacific Pty Ltd; Anglo American Exploration (Australia) Pty Ltd; Anglo Coal Australia Pty Ltd; Australian China Clays Limited; Barrick Gold Of Australia Ltd; BHP Billiton Cannington; BHP Billiton Mitsubishi Alliance; Birla Mt. Gordon Pty Ltd; Cape Alumina Pty Ltd; Cape Flattery Silica Mines Pty Ltd; Cement Australia; Citigold Corporation Limited; Consolidated Rutile Limited; Custom Mining Pty Ltd; CVRD Australia Pty Ltd; Diatreme Resources Limited; Downer EDI Mining Pty Ltd; Ensham Resources Pty Limited; Felix Resources Pty Ltd; Foxleigh Mining; Gladstone Pacific Nickel Limited; Golding Contractors; Incitec Pivot Limited; Jellinbah Resources Pty Ltd; Lady Annie Operations Pty Ltd; Lagoon Creek Resources Pty Ltd; Macarthur Coal Limited; Macmahon Holdings Pty Ltd; MACMIN Ltd; Mega Uranium Ltd; Metallica Minerals Ltd; Millmerran Power Management Pty Ltd; Mitsubishi Development Pty Ltd; Moggie Mining Ltd; Monadelphous Engineering Pty Ltd; Monto Minerals; New Hope Coal Australia Limited; Newmont Pajingo Pty Limited; North Queensland Metals Ltd; Northern Energy Corporation Ltd; Origin Energy Limited; Paladin Resources Limited; Peabody Pacific Pty Limited; QNI Pty Ltd; Queensland Energy Resources Limited; Queensland Gas Company; Rio Doce Australia Pty Ltd; Rio Tinto Aluminium Limited; Rio Tinto Coal Australia; Santos Coal Seam Gas; Scarborough Minerals Plc; Southern Uranium Limited; Stanwell Corporation Limited; Summit Resources Limited; Superior Coal Limited; Syntech Resources Pty Ltd; Tarong Energy Corporation Ltd; Thiess Pty Ltd; Universal Resources Limited; Wesfarmers Energy Limited; Xstrata Coal Australia Pty Ltd; Xstrata Copper; Xstrata Zinc; Zinifex Century Mine Limited.

Erisk Net, 23/9/2007

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