Economy

Coal

The New South Wales coal industry has grown from its convict origins into a highly productive industry that in 2007-08 contributed over $8 billion in export earnings to the economy.

The Awabakal nation, whose country is just south of Newcastle, had named the area around Lake Macquarie Nikkin-bah – place of coal. Aborigines had been known to use coal for cooking food in many parts of NSW.

William Bryant, a convict escaping to Timor, was the first European to find coal near Newcastle in 1791. Six years later Lieutenant John Shortland, while searching for more escaped convicts, discovered measures of ‘very good’ coal at the mouth of the Hunter River. The coal, exposed at low tide and easily worked, was shipped to Sydney for local sale and, in what is probably Australia’s first export, for shipment to Bengal, in India. In 1804, Governor King established a particularly harsh penal colony for recalcitrant convicts to mine the coal.

Initial uses were for domestic heating and for small steam and gas plants. By 1814 a surplus of coal eventually led to an export of 154 tons, also to Bengal, which was paid for with rum. Convict labour was eventually superseded by private companies such as the Australian Agricultural Company (1824). Up to 1828 about 50,000 tons was mined but with the introduction of private companies and mechanisation coal production increased to 368,000 tons in 1860, one million tons in 1872 and over 10 Mt (millions of tonnes) by 1920.

The NSW coal industry has now grown from its convict origins into a modern, highly productive, industry that in 2007-08 mined 177 Mt and contributed over $8b in export earnings to the NSW economy. The NSW and Queensland coal industries have developed to an extent where the combined output from both states has made Australia the largest and most efficient exporter of coal in the world. Coal extraction is one of NSW’s most significant industries. Not only does coal contribute to the economy, it also provides 90% of the State’s electricity.

The major coal resources are located in the Sydney-Gunnedah-Bowen Basin which extends from Ulladulla to Newcastle on the coast and north-westerly through Narrabri into Queensland. Minor coal resources are also located in the Gloucester and Oaklands Basins. The Sydney-Gunnedah Basin covers an area of 59,000 km2 on land and about 5,000 km2 offshore to the edge of the continental shelf. The Basin’s geology dates from the Triassic and Permian periods (200 to 300 million years ago) and the coal consists of many types ranging from low-volatile, hard coking coals to high quality thermal coals. There are five major coalfields within the basin: Hunter, Newcastle, Southern, Western and Gunnedah.

Hunter Coalfield

The Hunter coalfield is the largest coal producing area in NSW. A significant proportion of the coal is at comparatively shallow depths, making it accessible to large-scale, multi-seam open cut mining operations. The Hunter Coalfield contains significant reserves of export quality thermal coals and coking coals.

In 2007-08, raw coal production from the Hunter coalfield was 112 Mt, an increase of 2 Mt compared with the previous year. The region has been the fastest growing area of coal production in NSW over the past decade and a significant proportion of the growth can be attributed to the expansion of open cut coal mining in the Singleton-Muswellbrook area.

However, these regional centres, their surrounding settlements, and prime agricultural land associated with the Hunter River floodplain, including groundwater resources, will decrease the availability of undeveloped coal seams in the region.

Newcastle Coalfield

In 2007-08 raw coal production from the Newcastle coalfield reached 22 Mt. The coalfield is divided into four areas: the western area south-west of Cessnock; the northern area near Maitland; the central area, just west of Newcastle, near Teralba; and the southern area near Wyong. The main coal-producing regions are the Teralba and Wyong fields.

The Wyong area also contains the last significant quantity of undeveloped high-quality thermal coal in the Newcastle coalfield. Increasing urban settlement around Wyong will compromise efforts to extract this resource.

Southern Coalfield

The Southern coalfield is renowned for its premium quality hard coking coals. These coals occur mainly in the Bulli seam and are mined by underground methods at depths of over 400 m. The coalfield produced 13 Mt of raw coal in 2007-08 with half of the saleable output used in the domestic steel industry and the remainder sold as export coking and thermal coal. Minor tonnages were also used for the domestic cement industry.

The Southern coalfield’s remaining unallocated resources of prime coking coal are in the Bulli and Balgownie seams underlying the Camden-Campbelltown-Picton region. This area encompasses both the rapidly growing south-western margin of the Sydney metropolitan region and the flood-prone lands adjacent to the Nepean River. This will affect the future ability to mine these resources.

The Basin also contains oil, gas, coal seam methane and oil shale. Although there have been no discoveries, there are numerous oil and gas shows from both petroleum and coal exploration drilling.

Western Coalfield

The Western coalfield produces mainly thermal coal. In 2007-08, raw coal production was 26 Mt, an increase of 4 Mt on the previous year’s output. Around 40% of production was sold to power stations. A small amount was used for cement manufacture and the remainder was exported.

Most of the Western coalfield’s resources of high energy thermal coal occur in three economic seams within the lllawarra Coal Measures: the Katoomba, Lithgow and Ulan seams. The majority of these resources are extracted by underground mining methods. Additional open cut resources occur in the Lidsdale, Irondale and Ulan seams.

The southern sector of the Western coalfield, between Lithgow and Ben Bullen, supplies coal to the local power stations and the export thermal market. The Lithgow seam is most important followed by the Katoomba seam that is mined east of Lithgow.

The central sector of the Western coalfield contains the Rylstone seam which is one of two regions in the coalfield where there are substantial unallocated resources. The other region that is in the northern sector contains substantial unallocated and undeveloped coal resources. These thermal coal seams are likely to be suitable for both underground and open cut mining.

Gunnedah Coalfield

Production in the Gunnedah coalfield has grown 16% from 3.7 Mt in 2006-07 to 4.3 Mt in 2007-08. The Gunnedah coalfield is divided into two sub-basins by the Boggabri Ridge. The eastern portion contains significant resources of high quality thermal coal, with some soft coking coal, while the western part of the coalfield includes both low and medium quality thermal coals.

Near the southern part of the Gunnedah Basin, a thermal coal resource at Werris Creek is mined for export markets.

Regional exploration has identified substantial underground coal resources in the area at depths of less than 300 m. Exploration over the Benelabri area west of Gunnedah and the Watermark area to the south-east expects to find over one billion tonnes of coal.

Gloucester and Oaklands Coalfields

The Gloucester basin is approximately 80 km north of Newcastle and contains a large number of coal seams of which five are considered to have economic potential. Approximately 3 Mt of coal was extracted in 2007-08.

The Oaklands basin, south-east of Jerilderie extends 120 km from Wangaratta to the Murrumbidgee River. Only one seam is considered to have economic potential, with recoverable reserves in excess of 400 Mt. This seam is made up of moderate to high quality black coal and is considered suitable for local power generation.

Resources and Reserves

A major factor in the economic development of NSW has been easy access to coal as an energy resource for the State’s main industrial centres. Continued development of these resources needs to take into account competing land uses and various environmental issues. NSW has recoverable coal reserves totalling over 12 billion tonnes that are contained within 60 operating mines and colliery holdings and more than 30 major development proposals.

In 2007-08 the NSW coal mines produced 177 Mt of raw coal that yielded 135 Mt of saleable coal. The saleable coal was worth $10b or 74% of the total value of the NSW mining sector. Exports of 100 Mt of thermal and coking (metallurgical) coal were valued at $8b, while domestic consumption of 37 Mt of coal by the power, steel and other industries totalled over $2b. The remaining saleable coal was placed into mining stocks.

The coal mining industry is major employer in NSW. At the end of June 2008 over 15,000 people were directly employed in the five major coalfield regions and the industry now has its highest level of employment in a decade.

Industry Trends

In 2007-08 NSW exported 100 Mt of coal, an increase of 10% over the previous year. Exports of high quality thermal coal reached 75 Mt while exports of metallurgical coal increased by 24% to 25 Mt. In the past ten years the increase in coal exports can be attributed to the demand for thermal coal and this trend is likely to continue for the foreseeable future. Domestic coal sales have increased gradually over the last five years and now stand at 37 Mt per year, with sales to power stations totalling 31 Mt.

Productivity in the NSW coal industry has increased by 25% in the past ten years. Productivity based on saleable tonnes per employee has increased from 6,900 tonnes per annum in 1996-97 to 9,430 tonnes per annum in 2007-08. Improved levels of productivity coupled with a continued rise in production from longwall and large scale open cut mines has NSW well positioned to supply an increased share of the growth in world energy requirements from black coal.

Exports

Coal exports in 2007-08 increased to 92 Mt from 90 Mt the previous year. This reflects, in particular, an improvement in coking (metallurgical) coal exports which increased by 2.5 Mt to 20.4 Mt. During the same period thermal coal exports remained steady at 72 Mt, possibly reflecting existing port constraints and the impact of the June 2007 floods on coal exports from the Hunter. In the past decade NSW coal exports have increased by 21%.

NSW exported coal to 26 countries during 2007-08. Asia continued to be the major market with the region buying approximately 82 Mt (90%) of exports. Japan has been the largest single export destination for the past 20 years and dominates both thermal (56%) and coking (52%) coal export markets. After declining for a number of years, NSW coal exports to Europe increased by 0.4 Mt in 2006-07 to 2.6 Mt. The UK, Germany and Italy imported 1.5 Mt, representing 58% of total coal exports to Europe. Coal exports to other countries such as Mexico continued to grow in 2006-07 and now stand at 5.6 Mt.

Clean Coal

Low emissions coal technologies (‘clean coal’) is the term used to describe technologies designed to enhance the efficiency and reduce the environmental impacts of coal extraction, preparation and use. Burning coal to produce electricity is recognised as a major contributor to greenhouse gas emissions. Coal contributes about 24% of global primary energy demand, second only to oil (35%) and is used to produce 39% of the world’s electricity. Coal is also the key requirement for two other building blocks of modern society – the production of steel and cement. NSW’s coal fired power stations account for about 60 Mt of carbon dioxide (CO2) emissions annually. While increasing the combustion efficiency of coal would help to reduce greenhouse gas emissions significant reductions in CO2 emissions from coal fired power stations can only be achieved by capturing carbon emissions before or after the coal is burnt, then safely storing it. This is known as carbon capture and storage (CCS) where CO2 is captured from power stations and stored, instead of being released into the atmosphere. When applied to a modern conventional power station, it has been estimated that CO2 emissions into the atmosphere can be reduced by more than 85%.

The most promising method of storing CO2 captured from coal-fired power stations is geosequestration. Captured CO2 is compressed to a liquid and then is pumped into geological formations such as deep saline formations, depleted oil and gas fields, unwinnable coal seams or deep ocean masses.

Potential large scale geosequestration storage sites have been recently been identified in deep subsurface aquifer systems in the Darling basin, and also in coal seams at depths of more than 750 m in the Gunnadah region and the Sydney Basin. These proposed geological stable sites are located away from high density urban areas, National Parks and also away from any present or future mining operations.

Industry and Investment NSW