I was very pleased to see the announcement about the Abbot Point expansion going ahead yesterday, given the boost it will provide to Queensland’s ailing mining industry (see chart below), royalties revenue for the Government, and the Queensland economy. North Queensland, in particular, has been struggling in recent years, with the Townsville unemployment rate at 8.6%, for example. Hopefully many NQ residents will get jobs on the Abbot Point expansion project.
The likely boost to royalties will be very welcome in the Queensland Treasury. As I wrote in a post on Monday, our Government is much more reliant on volatile royalties revenue than ever before. The Government currently receives around $2 billion per year in coal royalties. Given the enormous size of the Galilee basin projects, the potential boost to royalties per annum must be in the order of many hundreds of millions of dollars. Media reports have suggested the Carmichael mine alone could produce 60 million tonnes of coal per year, which my back-of-the-envelope calculations suggest could earn the Government in the vicinity of $200-400 million per annum in royalties, depending on future coal prices. (For the royalties formula see the Office of State Revenue’s website.)
Of course, these benefits won’t come overnight. For example, construction work on the Carmichael project won’t start until later this year, and coal production won’t occur until 2017, according to a press release from Downer.