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Coal

Summary

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Australia's total recoverable resources
of black and brown coal at end 2015 (PJ)

Coal has been crucial to the Australian economy and social fabric since colonisation. Coal was initially mined on a small scale in New South Wales in the early 1800s at Newcastle (then named Coal Valley). The 1900s saw opportunities for increased industrial development and wealth generation in the form of steamships, railways and steam mills and, increasingly since World War II, international export markets.

During the 1950s and 1960s coal was surpassed by petroleum as the world's most utilised fuel. The oil shocks of the 1970s, however, resulted in a worldwide resurgence of interest in coal as an energy source because of its relative abundance. The Port of Newcastle is now the biggest coal export facility in the world.

Black coal is a major export commodity for Australia and the 2015 export earnings from black coal were more than $37.5 billion dollars, with Japan and other Asian countries being prime destinations for Australian coal. The Australian coal industry employs almost 40 000 people directly (ABS, 2016a) and potentially many more in associated industries, chiefly in rural and regional areas.

Australia's coal resources are amongst the largest in the world. In 2015, in situ Economic Demonstrated Resources (EDR) of black and brown coal amounted to 83 324 Mt and 92 887 Mt, respectively. Recoverable resources, however, are a more useful assessment of coal endowment as these estimates include losses that occur during mining and processing.

As at December 2015, Australia's EDR of recoverable black coal were 68 310 Mt. Australia is ranked fifth in the world for recoverable black coal and, at 2015 production levels, Australia's EDR of accessible recoverable black coal could last approximately 110 years.

As at December 2015, Australia's EDR of recoverable brown coal were 76 508 Mt. Australia does not export brown coal but uses all production domestically, mostly for electricity generation. Australia is ranked second in the world in terms of recoverable brown coal and, at 2015 production levels, Australia has approximately 1095 years of (accessible) recoverable brown coal EDR.

Despite the growing popularity of alternative energy technologies, coal continues to be important for both domestic and global power generation: In Australia, black coal is produced in New South Wales, Queensland, Western Australia and Tasmania whereas Victoria produces brown coal.  Both types of coal are used for electricity production with coal accounting for 63% of Australia's electricity generation in 2014-15 (OCE, 2016a).

Globally, coal accounts for 41% of electricity generation (WCA, 2016) and, despite the a decline in the percentage share of coal in the global power mix, the World Coal Association projects that, in absolute terms, the amount of coal-fired power generation will grow as the total amount of power generation increases worldwide, particularly in developing regions. The Office of the Chief Economist (OCE, 2016b) notes that the high volume of mining investment over the last decade has translated into increased production capacity, enabling Australia to meet growing demand and support increased export earnings from coal.

Note: In this version of the Australian Energy Resources Assessment (AERA), Australia's coal resources are expressed as Economic Demonstrated Resources (EDR) and Inferred Resources. EDR combines Proved Reserves, Probable Reserves, Measured Resources and Indicated Resources as defined by the Joint Ore Reserves Committee (JORC) Code. Inferred Resources, as defined by the JORC Code, are a less accurate estimate of a resource. Reporting of subeconomic coal resources on the resource map, found in previous versions of AERA, has been discontinued, so that the focus is on industry standard resource classifications. As a result, some basins do not feature in this version of AERA because they do not have EDR or Inferred Resources – they only have subeconomic resources. As well, because the previous version did not publish data on Inferred Resources, there is no direct comparison with the previous map for this category.

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Identified resources

Black coal

Most of Australia’s black coal is located in in the Bowen and Sydney basins, located in Queensland and NSW respectively. Black coal resources are also found in the Surat, Clarence-Moreton and Galilee basins in Queensland and in the Gunnedah Basin in New South Wales. High-quality black coal (also called coking coal, metallurgical coal or metcoal) is mostly used for steel-making and other industrial processes. Lower-quality black coal (also called thermal coal or steaming coal) is used for electricity production.

In 2015, the estimate of Australia’s recoverable EDR of black coal was revised upwards to 68 310 Mt, an increase of 5687 Mt, or 9%, from the previous year. In 2015, large additions to EDR came from South Burnett (Moreton Resources Ltd), Hunter Valley Operations and Hail Creek (both Rio Tinto Ltd), and Red Hill (BHP Billiton Mitsubishi Alliance).

In 2015, large contributions to Inferred Resources included Bloodwood Creek (Carbon Energy Ltd), Clifford (Stanmore Coal Ltd), Hunter Valley Operations and Kazput (Northern Star Resources Ltd). Significant retrospective additions to the national database include Hyde Park (Resolve Coal Pty Ltd) and China Stone (Macmines AustAsia Pty Ltd), both situated in the Galilee Basin, Queensland.

During 2015, Kazput, Clifford, Mackenzie (Moreton Resources Ltd), Mimosa (Square Resources Pty Ltd) and Mount Robert (Rio Tinto Ltd) announced maiden resources and South Burnett reported a maiden reserve.

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Australia's operating black and brown coal mines

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Australia's black and brown coal inferred resources at end 2015 (PJ)

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World Black and Brown coal reserves (BP statistical review 2015)

Brown coal

Geoscience Australia’s brown coal data underwent a major review in collaboration with the Geological Survey of Victoria during 2015. This resulted in a substantial upwards revision of recoverable brown coal EDR to 76 508 Mt, an increase of 73% from 2014. Nearly all of Australia’s recoverable brown coal EDR is located in Victoria with more than 93% in the Latrobe Valley.

During 2015, brown coal production in Australia was estimated at 65.4 Mt, ranking Australia third in the world behind Germany and Russia. Australia is ranked second in the world in terms of recoverable brown coal, accounting for 24% of the world’s lignite reserves (BGR, 2015).

Brown coal mined in Australia is used almost exclusively for domestic electricity generation in Victoria, where it is burnt in adjacent power plants; although a small mine at Maddingley, 50 km northwest of Melbourne, produces agricultural products. In 2015, the Anglesea brown coal-fired power station on Victoria’s south coast closed, leaving the Loy Yang, Yallourn and Hazelwood power stations operating in the Latrobe Valley, with Hazelwood also scheduled to close in March 2017.

Prospective resources

Subeconomic and inferred coal resources

Subeconomic resources are mineral resources that are currently deemed unsuitable for economic extraction but could potentially be used in the future. Inferred Resources are those parts of a mineral deposit that are estimated at the lowest level of confidence; they are neither economic nor subeconomic as there is not enough information to make this determination.

As at 31 December 2015, Australia had substantial subeconomic and Inferred Resources of black and brown coal, which contribute considerably to Australia’s resource potential.

Total in situ resources of black coal in Australia (EDR plus Inferred plus subeconomic resources) are estimated at 190 153 Mt (cf., in situ EDR of 83 324 Mt). In terms of recoverable black coal, Australia’s total identified recoverable resources of black coal are estimated to be 151 901 Mt (cf., recoverable EDR of 68 310 Mt).

For brown coal, total in situ resources (all categories) are estimated to be approximately 496 269 Mt (cf., in situ EDR of 92 887 Mt). Total identified recoverable resources of brown coal are estimated at 436 648 Mt (cf., recoverable EDR of 76 508 Mt). Although the ultimate resource potential of Australia’s coal-bearing basins has not been fully assessed, it could be in excess of 1 trillion tonnes (1 000 000 Mt).

Coal exploration expenditure

Coal exploration expenditure in 2015 declined significantly as a result of low prices, falling 37% to $213 million, the lowest spend since 2005 (ABS, 2016b). Notwithstanding these difficulties, Australian coal producers have been partially cushioned over the past few years by the weakening Australian dollar offsetting the fall in the US$ international price.

World resources

Australia is the world's largest exporter of coal and the fourth largest producer (IEA, 2016), reflecting the large, low-cost reserves available and the country's proximity to Asian markets. Coal plays a dominant role in both Australia's and the world's energy mix.

Combining Geoscience Australia's estimates of Australia's coal resources with those published by the BGR (2015), Australia is ranked fifth in the world with an estimated 10% of the world's recoverable EDR of black coal behind the United States (32%), China (18%), India (12%) and Russia (10%). Australia has an estimated 24% of the world's recoverable EDR of brown coal behind Russia (29%) and ahead of Germany (11%) and the USA (10%).

More than 70 countries have economic resources of coal (black and brown) totalling approximately 985 000 Mt (BGR, 2015). Global production reached more than 7700 Mt in 2015 (IAE, 2016) and at this rate of production, the world's (currently economic) coal could be expected to last approximately 130 years. However, it is estimated that there is more than 22 000 000 Mt of total coal resources globally (BGR, 2015), which, at 2015 rates of production, would last more than 2800 years.

References