Ian Satchwell IM4DCAAPF Infrastructure Forum Wednesday 20 March Supporting sustainable resources development Outline Minerals and energy market and development overview More than just mining ID: 317746
Download Presentation The PPT/PDF document "Infrastructure and resource regions" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Slide1
Infrastructure and resource regions
Ian SatchwellIM4DC/AAPF Infrastructure Forum Wednesday 20 March
Supporting sustainable resources developmentSlide2
Outline
Minerals and energy market and development overviewMore than just miningPilbara case studyOverview Phases of developmentKey infrastructure issues though the phasesCurrent planning approachesSome lessons learnedLeading practice in infrastructure planning and developmentWorld Bank Economic Resource Corridor concept
2Slide3
Australia’s minerals and energy markets
are strong…
Major iron ore exporters
1500
1000
1250
3
Major thermal coal
exporters
Source: ABARES
55
per cent of worldwide LNG capacity
is under
construction is located in Australia. By 2015-16, Australia
’
s LNG exports are forecast to increase to 41 million
tonnes, an increase of 126 per cent from 2010-11.
In 2015-16, iron ore export earnings are projected to reach $68 billion
Australian LNG productionSlide4
4
The Pilbara
and Bowen (and Galilee) Basin Regions are
well located to supply Asia with
mineral
and energy products
Bowen Basin regionSlide5
Australia’s engineering and construction challenge – the largest investment wave since the 1800s gold rushes*
HOBART
Western Australia
Northern
Territory
South Australia
Queensland
New South Wales
Victoria
SYDNEY
CANBERRA
MELBOURNE
BRISBANE
ADELAIDE
DARWIN
BROOME
PERTH
Offshore petroleum basins
WA & NT projects
to 2016:
USD220
billion+
Queensland
projects to 2016:
USD100 billion+
South West Region
Alumina
, gold
Mid West Region
Iron
ore,
gold, uranium
, nickel
,
Pilbara Region
:
LNG
, iron ore, infrastructure
LNG, mining
Base metals
Bowen
and
Surat
Basins
Coal
, CSG,
LNG,
infrastructure
South Australia
projects to 2016
USD
10
billion+
5
*Reserve Bank, Australia
Copper,
uranium,
infrastructure
PORT HEDLAND
KARRATHASlide6
Western Australia case: investment will result in decades of increased production with lower
volatility
* At ten year average
prices
Historic and forecast production
value*
for WA’s key resources
Double 2011
value
$m
Source:
ACIL
Tasman analysis
6
Increased sustaining capital and servicesSlide7
Mining and
related sectors are bigger than most people think: changing the mindsetMETS output is growing at 15 to 20% a year4% of national output in 2002-03
8.4
% in
2011-12
METS
contribution to
GDP
6.7% in 2010-11 Est. 9.4% in 2012-13Many METS are knowledge- and technology-intensiveSource: Australian Treasury and Ed Shan / Minerals Council of Australia
7
A new way of thinking about value-addingSlide8
Mining and
related sectors in Australia are bigger than most people think: implications for infrastructureResource employment by industry 2011-12
Share
of total employment, financial year
Source:
Rayner
and Bishop, Reserve Bank of Australia February 2013
8
Gross Value Added –
r
esource
e
conomy 2011-12Share of nominal GVA, financial year Resource economy accounts for 18% of GVA: 11.5% directly from extraction and processing; 6.5% from other sectors providing inputsResource economy accounts for 10% of employment: 3.25% directly from extraction and processing; 6.75% from other sectors providing inputsSlide9
Trade & foreign investment
3
Service and technology sector growth
2
It’s not only about mining:
other growth drivers
Corporate
shift to Australia
1
Agriculture and food sector growth
4
9Slide10
Pilbara orientation
10Slide11
Pilbara Region dominates Western Australia’s Gross State Product
The Pilbara generates ~
80
%
of WA’s
minerals and energy
production value of $107 billion (2011)
The Pilbara has a Gross Regional Product larger than
some Australian states,
but most
flows elsewhere – including to Perth and as returns to capital.
11
Other industry sectors Value $Millions Manufacturing 350Agriculture 50Retail 400
Value of minerals and energy production from Pilbara (2011)Slide12
Phases in development of Pilbara Region
Iron ore deposits delineated; First mines, railways, ports and towns established under State Agreements and funded by major mining companies; Population <10,000
Further mines and mine towns established;
Project-specific State Agreements written for iron ore, solar salt;
Offshore
petroleum deposits
delineated; Govt. plans for diversified industry in Pilbara
Growth of iron ore production based on Japanese demand;
North West Shelf Venture Domgas & LNG projects commissioned; Manganese and gold mining startedNew mines established by all three major companies; Growth of iron ore
production and expansion of NWSV LNG project based on Japanese demand; BHP builds HBI plant; Govt. plans estate for petrochemical industry; Native Title Act passedRio Tinto acquires Robe; BHPB merges with Billiton - these majors increase iron ore production; BHP HBI plant closes; Expansion of NWSV LNG project; Pluto LNG project;Gorgon JV State Agreement for Barrow Island; Pilbara Cities policyGrowth of iron ore production based on Chinese demand; Entry of new iron ore producers;Gorgon LNG construction begins;Fly in / Fly Out workforces;
Population 45,000Wheatstone LNG project construction; Onslow to be a new LNG industry hub; Looking into the future:Iron ore 600 Mtpa (+150% on 2010);LNG 50 Mtpa (+200% on 2010); Population 60,000?
Chinese demandEnergy emergesFounded on iron ore
12Slide13
Pilbara infrastructure investment
Early development 1960s – 1980 Three iron ore producers, two salt operationssteady growth, short term planning, based on Japanese demandall developments under State Agreements on project-by-project basisCompanies provided most infrastructure – rail, ports, water, power, housing, community infrastructureinfrastructure responsibilities defined by State Agreementsproduction infrastructure (rail, ports, power, water) planned, funded and built by companies, subject to government approval under Agreementsrail and ports seen as part of production chains - used only by owner
government provided roads, power distribution and water distribution, and education and health services
F
ocus of governments was on commitments by companies under
State Agreements
to future ‘value added’ processing
Founded on iron ore
13Slide14
Pilbara infrastructure investment
New opportunities for development 1980s – 2000Offshore natural gas emerges as game-changer in WA economyState funds Dampier – Perth natural gas 1500 Km pipelineState energy agency signs take-or-pay for domestic gas to underwrite NWSall developments under project-by-project State AgreementsLNG exports by NWS JV commence and grow threefoldNew, major gas fields discovered offshore from WAGovernment plans estate for petrochemicals and other gas processingBHP builds and closes iron ore processing (HBI) plant in $3 billion failureFly-in / fly-out
(FIFO) workforces used extensively to
minimise community infrastructure costs
Commonwealth passes Native Title Act
Energy emerges
14Slide15
Pilbara infrastructure investment
Development since 2000Multiple iron ore companies (including Chinese FDI), four LNG developments/operations, several other mining operationsrapid growth, multiple options, long term planningCompanies still provide production infrastructure – rail, ports, water, power, employee housingproduction infrastructure (rail, ports, power, water) used mostly by owner – rail and ports part of production chainsSharing of now-State-owned ports, litigation over sharing of rail‘Normalisation’ of
towns – several now support multiple company operations
G
overnments provide community infrastructure and develop towns
s
hortage of housing and community facilities and services (
eg
, education and health); high housing construction and rental costsChinese demand
15Slide16
Future Pilbara production
represents
a
quantum shift in
output – with big implications for infrastructure
Source: Draft Pilbara Planning and Infrastructure Framework 2011
16
Iron ore
Oil and gas (LNG)Slide17
Pilbara infrastructure
planning changesOverallframework for planning and all
infrastructure
cooperative
planning within agreed growth parameters
h
ypothecation of royalty revenues to fund infrastructure
Ports
move to multi-user ports to allow for investment diversityRail
future multi-user railways with independent operator
17Slide18
Pilbara Planning and Infrastructure Framework – consolidation of
towns; more resident workers; more local service industry
18Slide19
Transport infrastructure – integrated planning; prospect of a multi-user rail line
19Slide20
I
nfrastructure planning changes (2)Roadslong-term planning, increased government investment,
Land, housing and community infrastructure
l
ong-term planning; coordination between companies and government
Energy
g
overnment seeking to establish Pilbara electricity grid
Watercooperation between companies and government
20Slide21
Utility infrastructure – moving to integrated electricity system
21Slide22
Differences in Pilbara population projections – Pilbara Industry Community Council (2010) and WA Planning Commission (2011)
WAPC assumes further mining investment and economic transformation beyond 2015
PICC assumes construction will tail off from 2015
22Slide23
Karratha growth plan – ensuring infrastructure for service industry
23
Industrial estatesSlide24
Predicting the future is very difficult
a guiding overall vision is needed, with agility to respond to global forcesuncertainty (in part) can be managed though options approachEarly planning and coordination of infrastructure is essentialinfrastructure development must be timely to match output growthinfrastructure investment inextricably linked to commodity market risksmanaging risks and rewards essential for government and industry infrastructurecoordination is essential to minimise costs and to maximise utility and efficiency
p
artnerships between government – mining industry – infrastructure providers needed, but government needs to be careful about getting financially involved in mining
business
Efficient integrated production chains are vital for global competitiveness of resource development operations
Resource corridors
provide holistic approach and options for future
developmentWhat we have learned from Pilbara experience
24Slide25
Set strategic goals that communicate
the direction of national or regional development within a sustainability or triple bottom line frameworkAgree on scenarios for economic growth and structural change, demographic growth and change, regional development and potential major projects that would result in step-changes in infrastructure requirementsspecification of the nature of threats and remaining uncertainties – as these are key inputs into appropriate risk management planning as a central part of the strategyLeading practice in infrastructure planning and development (1)
From
Best
Practice
in
Infrastructure Planning
and D
elivery, Working Paper for Northern Territory Infrastructure Strategy, ACIL Tasman September 2008Slide26
Apply rigorous whole-of-government and
whole-of-jurisdiction approaches to infrastructure planning, including:Coverage of all classes of infrastructureCommon approach to assessing all infrastructureCross-agency, top down and bottom up planningConsistent approach between levels of governmentInvolvement of the private sectorUse demand management approaches to avoid or delay expensive supply investmentLand is a fundamental class of infrastructure. Land use planning is also required to ensure efficient use of land and compatibility of uses
Leading practice in infrastructure planning and development (2)Slide27
A strategic approach to long-term infrastructure
management, maintenance and upgradingMinimum value thresholds are required to make the assessment process manageable, but need lower thresholds for regional infrastructure, and/or aggregation of multiple projects Priority on addressing legacy issues arising from past infrastructure under-investmentMechanisms to allow decision-making in the face of uncertainty, eg “real options" economic tools Leading practice jurisdictions have a consistent, integrated
approach to infrastructure planning, delivery and
management and provide
a suite of planning tools
under “
total asset management
”
Leading practice in infrastructure planning and development (3)Slide28
Infrastructure Australia http://www.infrastructureaustralia.gov.au
/ (see Publications)Strategic Infrastructure Plan for South Australia http://www.infrastructure.sa.gov.au/strategic_infrastructure_plan NSW State Infrastructure Strategy http://www.infrastructure.nsw.gov.au/state-infrastructure-strategy.aspx Pilbara Planning and Infrastructure Framework http://www.planning.wa.gov.au/672.asp Australian and state approaches to infrastructure planningSlide29
An
economic resource corridor is a sequence of investments and actions to leverage a large extractive industry development into broader economic growth and diversificationInvestments (public and private) are prioritised and integrated around shared infrastructure and programs, based on an economic and financial analysis of all possible investment optionsThe approach is flexible and unbundles otherwise very large investments into more manageable (scalable) units. In each successive step, capacity is built within community and small-to-medium enterprises to realise benefits from emerging opportunitiesThe integration of public and private plans, together with key environmental and social factors, has a clearly defined geographic footprint
Corridors
having economic diversity are designed to interconnect into a national pattern that will evolve organically across time with changing political and market dynamics
.
World
Bank Economic Resource
Corridor conceptSlide30
Maputo Development Corridor – projects completed
MAPUTO
Pande-Secunda
Gas line.
PPP Sasol completed
Coal-based Power Station
2 transmission lines to
Matola
completed
Liquid Fuels & Petro-chemicals: Sasol
Al smelter 500ktpa
BHPB completed
Joburg
-Maputo Highway
PPP- BOT completed
Port of
Matola
/Maputo
Upgrades, PPP
Joburg
to Maputo Railway line
:
Upgrade
GAUTENGSlide31
Maputo Development Corridor
ContextMaputo Development Corridor
Natural Resources
Power & Gas
Infrastructure
Rail,
road &
pipe link btw RSA & Mozambique; Maputo port, telecom & electricity upgraded
Private SectorPrivate sector investments ($5billion); Strong PPPBusiness Case / Anchor ProjectsSMME development (minimal); Strong industrial development (Duvha Power Station, Mozal Smelter, Sasol-
Pande gas pipeline)Policy and Regulatory EnvironmentPPP encouraged and facilitated by both governmentsPolitical SupportSupported by RSA & Mozambique (Heads of States & Transport Ministries)
Corridor AuthorityCompetent Project Managers appointed on both sidesStakeholder ParticipationStrong private sectors involvement; weak
CBOs and NGOs input LinkagesStrong industrial forward and side-stream linkages; Weak SMME supportCross Border ArrangementsUnrestricted flow of people & goods across border; No visa requirements
Skills and Technical CapacityCapacitated SOEs (Power Utilities, Finance Institutions and Transport Institutions)Slide32
Central Development CorridorSlide33
Bas – Congo Development CorridorSlide34
Inherent
economic and infrastructure potentialPolitical and bureaucratic commitment throughout the implementation processParticipation of all economic and infrastructure ministriesEffective institutional arrangementsAppointment of Project Manager/CoordinatorAdequate technical in-country project management capacity Engaging in a targeted interaction with the private sector
Early involvement of SOEs, private sector, NGOs, CBOs in DC is crucial for its
success
Attractiveness
of the packaged
infrastructure projects
D
eliberate action to create opportunities for SMEsDevelopment corridor success factorsSource: Hudson Mtegha, University of the Witwatersrand, February 2013Slide35Slide36