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1042 words

Another Adani alarm

30 November 2018

If this isn’t the latest in a series of false alarms, then Labor might finally be forced to disown the project

Right:

Will Labor act? Adani protesters confront Labor leader Bill Shorten and Labor candidate Ged Kearney during campaigning for the Batman by-election in March this year. David Crosling/AAP Image

Will Labor act? Adani protesters confront Labor leader Bill Shorten and Labor candidate Ged Kearney during campaigning for the Batman by-election in March this year. David Crosling/AAP Image


Yesterday’s announcement that Adani Mining would proceed with the Carmichael mine project without external funding was not entirely surprising. Adani has persevered with the project despite years of failure, and it was already obvious that Gautam Adani could do most of the financing out of his own resources. The accelerating flight of banksinsurance companies and pension funds away from coal means the company really had no other option.

The fact that Adani has been unable to find external funding is well known, as is the fact that a starting date has been announced several times in the last eighteen months. But the pattern stretches back years, and goes far beyond problems with finance.

For at least five years, Adani has been announcing the imminent, or actual, start of the project. Over this period, business partnerships have been announced, only to then break down. In Adani’s telling, these serial divorces were due to the fact that the other party was no longer needed.

Preliminary design and construction work was under way in 2013 with a consortium that included Parsons Brinckerhoff as project manager and a fifty-strong engineering team from Worley Parsons. The project was suspended in 2015, however, and virtually all of the workforce was sacked. Two years later, the American engineering firm AECOM replaced Worley Parsons, only to pull out in May 2018.

In July 2014, Adani signed a “binding agreement” with South Korean company POSCO to build a standard gauge rail line, with construction expected to start in 2015. That deal also came to nothing, as did proposals for POSCO to invest in the project and buy around five million tonnes of coal. Another Korean customer, LG, signed letters of intent to buy four million tonnes of coal, but pulled out in 2015.

In January 2015, the company announced the awarding of a $2 billion contract to Downer EDI, stating that construction was expected to begin later in the year. That deal was cancelled in December 2017. In May that year, with POSCO out of the picture, Adani had announced it would be buying $74 million worth of steel from Arrium, owner of the troubled Whyalla steelworks. It’s unclear whether that deal is dead, but obviously the cut-down project now being proposed won’t need nearly as much steel.

Adani hasn’t treated its own staff any differently. When its Townsville regional headquarters was opened in 2017, 500 jobs were promised. In reality, there were never more than 150, many of them transferred from the Brisbane office. In June the number was reduced to one hundred and more staff were told their contracts would not be renewed.


All of this raises big questions about the claim that construction will begin before Christmas (or, in some versions, just after the new year). As far as can be determined, Adani’s Carmichael operation has no construction contractors, no professional engineering team and a staff level that would see it officially classified as a medium enterprise in Australia (from fifteen to 200 employees, according to the Australian Bureau of Statistics) and a small business in many other countries.

There’s no sign that this is changing. In June 2017, Adani set up a jobs portal for its Regional Content Strategy. The portal was open to other employers, which was perhaps fortunate. Adani advertised a handful of jobs initially, but soon stopped. Despite yesterday’s announcement, a search of the site for Adani jobs produces nothing, just as it has done for months.

Yet Adani claims to be able to jump-start a $2 billion project with over 1500 workers in a matter of weeks. Casting further doubt on the announcement is the fact that the proposed project has been radically redesigned in the past few months, with a completely different route for the rail line and a new access arrangement with Aurizon, which operates the Goonyella-to-Abbot-Point line on which the coal will now travel.

The absurdity of the project is reinforced by the fall in the price of the low-quality coal to be produced from the Galilee Basin. Coal quality is measured in kilocalories per kilogram (kcal/kg), with higher values indicating more heat content and less ash. The standard is 6000 kcal/kg Newcastle coal, the price of which rose between 2016 and the recent closure of the Chinese import market for December. But the strong demand for high-quality coal has massively increased the discount for coal graded 5500 or below. The Australian Financial Review recently estimated that Adani would be lucky to get US$55/tonne for its coal, compared to a Newcastle price of US$100/tonne.

At that price, it’s unlikely that Adani could cover the costs of mining, railing and shipping coal, let alone earn a return on a $2 billion investment.

It’s highly likely, therefore, that this is yet another mirage designed to keep the project alive without committing any real funds. Perhaps Gautam Adani doesn’t want to write off the billions he has already wasted, or perhaps he just doesn’t like admitting defeat. Or perhaps he is hoping to establish enough “facts on the ground” to extract compensation from the Queensland and Australian governments if the project fails to get the new approvals that it needs.

Suppose, however, that Adani goes ahead with the project seriously, raising the disastrous prospect that the entire Galilee Basin will be opened to mining. Such a huge expansion in the global production of coal would virtually eliminate any prospect of holding global warming to 2°C, let alone the 1.5°C needed to minimise the harm from climate change.

At that point, the Labor Party will have to take a stand on the issue, something it has successfully avoided so far. Achieving the Paris goals will require a rapid move away from coal, implying the need for a moratorium on new coalmines as well as the orderly closure of existing mines.

It would be a brave step for Labor to lead the world in announcing such a moratorium. But the current opposition has shown surprising bravery on a number of issues, most notably tax policy, and has suffered no apparent electoral costs — rather the reverse. The majority of Australians want action on climate change and understand that the economic benefits Adani has long promised are illusory. Let’s hope that this economic and ecological disaster can still be stopped. •

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Back to work: Victorian premier Daniel Andrews (left) leaves the A’Beckett Street Metro Tunnel construction site in Melbourne’s CBD on Wednesday, five days after Labor’s landslide win. James Ross/AAP Image

Back to work: Victorian premier Daniel Andrews (left) leaves the A’Beckett Street Metro Tunnel construction site in Melbourne’s CBD on Wednesday, five days after Labor’s landslide win. James Ross/AAP Image