Mining magazine 2017 vol3 by Mining Oil and Gas Guide

MINING & RESOURCES REVIEW Coal Export to China threatened CSG Environmental Risks

MINING TRENDS 2017 Vol.3 FOCUS

Mining Trends for 2017

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contents MININGOILGASGUIDE EDITOR’S LETTER

will happen to 42 11 What the land down under?

What does 2017 have in store for Mining in Australia?

Crushing the Chinese Iron Ore Market

The slow death of Australia’s mining towns

Focus: 13 Europe Problems with Relying on others for Gas

A new country to explore – Mining in India

Export to China 14 Coal threatened

What resources can the moon bring us?

finally opens 15 Somalia its doors to the global oil industry

Sustainable Development and Minerals in Australia

16 Energy Outlook 2017

Top jobs for Mining, Oil and Gas in 2017

Company in FocusGlencore

Challenges in Africa: How will 2017 shape up?

When a terror group controls oil

Low Iron Ore Price Effects CSG Environmental Risks

Talks gives 20 Lima Australia a sour Experience

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Technologies in 10 New the Mining and Oil and Gas Industry

Will the Drayton mine live or die?

What does 2017 have in store for Mining in Australia?

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Mid-2014 shut the doors to the enormous mining boom in Australia and it was predicted that the next couple of years will see a huge drop in the mining sector. The economic outlook looked near bleak. Even though there was a significant worry about the fact that lifestyle would suffer, Australia pulled through just fine. What’s more, 2017 looks quite promising. Right from the beginning, we have been optimistic about how Australia would deal with the downfall after the mining boom but we had enough reason to. The basis of the optimism was built on all the right things after all. Through the glory days, we saw how the medium demand for iron ore, coal and liquefied natural gas enabled us to churn out adequately in order to meet these demands. Thanks to this period, iron ore and coal exports saw all-new record highs and that left us with more hope for the years to come.

Happy New Year for the Mining sector? 2017 in Australia is all about GAS. Stepping close to completion are some major gas projects like QGC’s liquefaction plant on Curtis Island. However, with the increase in gas production projects world over, the prices are destined to fall exactly like it did with iron ore and coal. Whether this leads to a positive impact on our Australian consumers, we are yet to see but it depends majorly on our domestic distributors rather than the global trade prices. There is talk that the domestic price of gas will triple by 2021. We wonder what happened to the promises of cheaper gas made not too long ago. What about coal? It has been a torrid 12 months but what does this New Year spell out for us? Coal prices declined steadily in the first

months of 2014 because of a combination of increased supply and lesser demand for imports from China. Australian prices for high- quality metallurgical coal was settled at USD 120 and that left many coal operations unprofitable. Thermal coal was even more disappointing. If the bleak chances to recover much lost ground speak for anything substantial, then the

promising bit is that 2017 may see an increase in profit and economical gains for the country. The BREE ( Bureau of Resource and Energy Economics) said that Australia exported 181 million tonnes of metallurgical coal last year and that is only expected to increase to 185 million tonnes in the new year.

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Dependency side-effects

The unemployment statistics

The Australian mining industry is heavily dependent on economic status of countries like China and India who are the biggest importers of Australian minerals. The economic downturn in these countries directly affects Australia’s mining industry, slowing down growth and expansion efforts. Most of the minerals mined in Australia are sent to China, constituting around two thirds of Australia’s total exports to the Asian giant. Almost half of Australia’s iron ore exports are to China while 54% of the coal mined in Australia is exported to eastern Asia. The Chinese economy has been on a continued deceleration for quite some time with its gross domestic product (GDP) growth sliding from 7.6 % in 2013 to 7.5% in the first quarter of 2014. Growth of the Chinese steel industry is expected to fall from 8% in 2013 to around 4% in 2014 marking a considerable decrease in imports. With such global conditions, the Australian mining sector is bound to be negatively impacted.

Unemployment rate in Australia has been severely affected by the stagnant mining industry. Statistics obtained from Australian Bureau of Statistics suggest that the unemployment rate has reached an all time low in the decade at 6%. The state-wise statistics released by the Bureau shows that states that have benefitted from the decade long mining boom are now hit by unemployment with a steady increase. Victoria, Queensland and Western Australia have registered growth in unemployment at 0.2%, 0.2% and 0.5% respectively.

Unpaid wages Many companies are struggling with debt and trade deficit with some being forced to keep its employees unpaid. One of the recent cases to come out was Vanadium producer Atlantic which failed to provide four week’s wages to its employees. The company has been struggling with debt and failed to pay any wages to its 200 workers. The decade long mining boom seems to have reached its peak and is fast spiraling downwards as dependency on importing nations and commodity prices has forced to mining corporations to downsize.

Australian Mining industry

Not So Cherry This may look like a cherry picture, but it is swiftly changing this year. The mineral output has been declining and this is even dragging the Australian economy down. In 2011, the mining industry contributed over 4.3% of the GDP; the highest among all the other industries. Over the past few months, though the mining output remains strong, production of mineral commodities has declined in the world, with the largest declines for bauxite, lead, nickel, zinc and zircon. Australia’s mining production has taken a hit. This is because of variety of reasons.

Lack of Investments There has been a steady decrease of investments in the mining sector. Though the 2000s have seen an amazing volume of money being pumped in, especially in the oil and gas sector, it is declining. Asian countries like China and India, African and South American countries are diverting global mining investments away from Australia. This is because of the low cost investment options these countries possess. Mining Taxation A major reason for global investors passing over Australia’s mining sector is because of taxations. There are quite a few mining taxes that are throwing the industry off gear - Mineral Resources Rent Tax (MRRT) This is easily the most controversial mining tax. Introduced in 2012, it is an additional tax applied to iron and coal mining. It is an economic rent to the natural resource deposit measure through receipts of production expense for labour, machinery, materials and royalty. MRRT largely depends on the market value of assets. Any MRRT tax losses are carried forward at the interest rate of 7%. This in turn works as a tax concession for mines working on well-endowed natural deposits and low risks, and a tax impost on the less-endowed deposits and high risks.

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For most small countries, a major issue is the lack of natural resources. Small countries have lesser chances of finding natural resources in their limited boundaries. However, Australia does not fall into this bracket. The country is a world’s leading producer of bauxite and alumina, the second largest producer of uranium, lead and zinc, the third largest producer of iron ore, nickel, manganese ores and gold and the fourth largest producer of black coal, silver and copper. An economic boom in developing countries like China and India has benefited Australia’s mining industry. These countries have pushed up the global demand of raw materials which Australia aims to fulfil. The relatively stable economy, steady political situation, adaptation of advanced technology and a growth of a skilled workforce has seen a beeline of investors willing to invest in the mining sector.

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RESERVED SPACING

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Lima Talks gives Australia a sour Experience The main agenda of the climate talks at Lima, Peru, was to lay the ground work for this year’s 2017 Paris climate talks. Ever since the first climate conference, Koto Protocol, it has been a common practice to sign agreements to cut carbon emissions and fossil fuel consumption to curb global warming. The last climate talk at Copenhagen in 2009 was largely a failure with world governments unable to come to a conclusion. However, with the Lima talks having a positive ending, there are high hopes that the Paris conference will have a fresh set of applicable sanctions.

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Australia’s Stand

As much as 28% of Australia’s export lies in energy in the form of coal and oil. Many observers noted that Australia took a tough stand during the Lima talks that isolated it. Furthermore, two weeks into the talks a climate report was released during the negotiation that ranked Australia as the worst performing industrial country on climate change. Australia acted as a latecomer to contributing to the Green Climate Fund. While most Western countries already decided their contribution in November, Australian Prime Minster called the fund “a socialism masquerading as environmentalism”. However, during the Lima talks he pledged to contribute $200 million. This is the highest any country plans to contribute. Observers have noted that this was Australia’s attempt to change’s its stance and show the world that it was interested in saving the environment. Emissions Pledges The biggest outcome of the Lima talks is the decision that every country has to come out with emission pledges for the Paris talks. These pledges may contain quantitative emission targets. Every country has to also explain how their pledge is fair regarding their own national and economic circumstance.

A Task Force has been set up by the Australian government to come up with this pledge. With Europe, China and Unites States already out with their pledges, there is significant pressure on Australia. It is expected that the Task Force will take into account the pledges of other countries before giving in their recommendations. Disagreement Trade Minister Andrew Rob is what many would call as a skeptic of global warming. In a meeting with various business leaders, he has stated that Australia may go along with a new global deal if major trade competitors are not pulling their weight. Foreign Minister Julie Bishop has also stated, “How could one possibly commit to having fossil fuel free world by 2050 at best it is an aspiration. I am interested grounding our text in fact and reality. We would not sign up to targets that would damage our economy, would send jobs offshore and close down manufacturing. It is in no one’s interest for Australia to be damaged economically.” Expect Emission Caps So what does all of these mean for the Australian oil, gas and mining industry? It can be expected that Australia will fall in line with the rest of the world and come up with plans to limit carbon emission in the country.

Western countries are slowly reducing their dependency on oil. They have developed efficient, environmentally sustainable forms of power dependency. America’s power industry is strongly dependent on their hydro – power stations. Germany has a growing dependency on Wind Power. Oil demand in the Western hemisphere has been reduced to only transport and even that sector, development of hybrid cars has resulted in lower need of fuel. Countries in the Asian continent are still dependant on oil, while they are trying to exploit their own resources, they are also reaching out to foreign lands. A good example of this is the

number of countries entering into the African oil sector like Australia, China and India.

Technological Shift All of these points focus on a technological shift occurring globally. Developing countries like India and China want their independence of resources. These countries aspire to make their own trade gains. To do this, they need strong financially backed oil corporations that have expert professionals. British Gas (BG) CEO Andrew Gould has already pointed out that students in US and EU look at the oil industry as a growing fossil. Technological development in the oil field is slowly reducing as they shift focus to other sectors. On the other hand, as Middle

Eastern and Asian oil companies grow, they demand more skilled or trained employees. Many universities and colleges have sprouted up to help aspiring oil professionals get the training they need. Students from such countries are coming out with innovative, economical and sustainable ideas to exploit oil. Investors take note – the shift has begun.

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Oil Demand

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Weight loss made easy with Chi of Life Retreat

Five months later, Terri’s second live and dry blood analysis revealed that all her health issues had reversed and her health was completely transformed. Ten months on from the retreat, Terri is now down to 86kg (a total weight loss of 34kg in 10 months) and is a self-professed “exercise junkie” who is still losing weight. “During the retreat I couldn’t even walk across the road to the beach without stopping a number of times to catch my breath. I cried one day because I couldn’t even kneel down to the ground and get myself back up again. But now I have heaps more energy. I love myself again and I now always put myself first.

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Living the fly in, fly out mining industry lifestyle can be rewarding, but it can also be taxing on employees’ health. Away from the home routine, working long hours, with low energy levels and less time to focus on eating properly and exercising, mining employees in particular have found a new lease on life through Chi of Life Retreat. Based on Queensland’s Sunshine Coast, Chi of Life Retreat runs unique live-in programs to help people lose weight and, most importantly, achieve overall holistic wellness. Chi of Life Retreat owner Gwen Stewart says the approach is simple, yet completely different to many mainstream “cookie cutter” weight loss programs. “We work from the inside out,” Gwen explains. “We start with a live and dry blood analysis by a qualified pathologist to identify the areas that need support such as the adrenal, thyroid and lymphatic systems, oxygen levels, inflammation and digestion. “Our aim is to restore balance and give the body support where needed because when you strengthen and restore your foundation, the weight loss will just happen without going on crash diets. When you feel alive with energy and vitality, this positive feeling will be your motivator to live a life in good health and make better choices. I believe this is the first step to weight loss and that no professional should consult a client without knowing what’s going on inside that person’s body first.” As well as this complete system analysis, Chi of Life Retreat offers 6-, 13- and 20-day programs featuring organic meals (each participant’s personalised individual metabolic typing diet is based on the bio chemistry of their own body), up to five hours of training per day (think kayaking, stand-up paddling, surfing, bike riding, scenic hikes, bootcamp, boxing, pool activities, tennis, squash, yoga, Pilates), wellness and nutrition consultations, cooking classes, a mindset workshop, infrared sauna, Oxi chi machine session, magnesium baths and spiritual and energy healing. For Gwen, keeping each retreat limited to eight participants means a tailored, targeted, personalised approach for every individual. With practical advice, education and workable solutions, participants can go back into their ‘normal’ life with confidence. Chi of Life Retreat is proud to have transformed hundreds of lives. Take 54-year-old female Terri for example. Terri contacted Chi of Life Retreat in February 2014. At 120kg, she had a long-term history of dieting, trying many different diets that just didn’t work. She was well aware that her health was at great risk and needed urgent attention. She was always out of breath, had poor balance due to her weight and was investigating lap band surgery. Terri admits she never, ever liked herself and was, in fact, “disgusted” and “hated” herself before attending one of Gwen’s retreats in March 2014. “I went in thinking all I needed was weight loss,” Terri says. “But I quickly learned it was more important to focus on my overall wellness.” Gwen closely managed and supervised Terri’s retreat program. Terri’s initial blood analysis revealed poor oxygen levels causing low energy and fatigue, a congested lymphatic system, poor digestion, an acidic body and other health concerns. A complete wellness overhaul was required. Firstly, a workable wellness and fitness plan was created by Gwen for Terri. Terri was also not eating the right foods for her body so a metabolic nutritional plan was customised for her and her body immediately started burning fat. An exercise plan was also tailored to Terri’s fitness level. Along with vitamin infusions and other treatments to restore her health from the inside out, Terri lost 6.4kg during the 13-day retreat and 71cm from her body.

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Crushing the Chinese Iron Ore Market

Mid 2014 saw a continued slump in iron 35% of Australia’s overall exports come from its rich minerals. Since a couple ore prices and there were a few that were of centuries, the Aussie economic growth has depended greatly on this quite pleased. The market giants Rio Tinto, natural heritage. It has been as simple as that. The export rate increase has Vale and BHP Billiton are happy with this been directly proportionate to the rate of economic growth. This has been price slump because these lower cost mines helping Australia steer clear from recession for over 21 years! are crushing the Chinese higher cost rivals But what is the current status of this long lived mining boom today? Is it the straight out the door. end of over two decades of rapid growth for Australia’s economy or is there Australian analysts observed that the trio hope? have managed to keep the supply growth steady even as the demand curve for iron ore has been steadily decreasing. This also means that if this situation keeps up then the iron ore prices will also remain below the predicted cost levels this year i.e. possibly between U.S $94 and U.S $100 per tonne. It is clear that it isn’t the lack of demand that is keeping the slump steady but the fact that this Aussie trio are cashing in on it and keeping the supply going strong. The statistics recorded in August 2014 revealed that the annual Australian output is actually 150 million tonnes which was higher than the recording in the year 2011. What doesn’t work for the Chinese producers is that their iron ore is a grade lower than foreign imports and their production costs are higher. We are trying to predict what 2015 will have in store for the iron ore market based China Crushed on the widespread belief that once the Chinese miners This year, the Chinese output will further drop to 230 milare craven out completely, the prices will start climbing lion tonnes as per HSBC holdings report in October last back up to over $100 soon enough. year. Even though a large quantity of Chinese mines are The expanding glut not currently profitable and ideally should be shut, the After the emergence of the iron-ore glut last year, China’s Chinese continue to run them. economy was at its slowest pace in the last 20 years. Mr. Yang Zunqing, the deputy secretary of China Iron Because the Chinese steel production is not likely to grow and Steel Association was quoted saying that the iron fast enough to meet the supply, the surplus will reach ap- ore prices will continue to remain on the downward track proximately 300 million tonnes in the next two years. whereas the coal price may stabilize. He even added that The news is that Australian iron ore miners too will fall despite the dive in the raw material cost, China was still victim to this fate and the iron ore prices begin to reach struggling to break even in the steel industry. The prices higher levels which will cause them to struggle just to received have been the lowest ever since 2003! break-even.

The slow death of Australia’s mining towns first with a job loss of 315 jobs in July and again in the December with the loss of 150 jobs. The expected life of the mine is till 2018 which is just a few years away. However, because this change is gradual, Muswellbrook has been slowly adapting. Tourism has been picking up in the town driven forth by their wine and horse breeding sectors. Moranbah, Queensland This town began to feel the end of the coal boom in 2012. It has been experiencing job losses till today and it does not look like it will stop. In September 2014, BHP let go of 700 employees. The decline in the coal industry has had a domino effect for Moranbah. The housing market has collapsed and other local business are struggling to survive without their regular patrons. Conclusion The worst affected are smaller and older towns as the life of their mines run out. Mining companies are faced with tough decisions. While many companies prove socially responsible by providing support system for mining communities, it is obvious that more needs to be done. . Death of a mine and market forces are realities that effects everyone– the mining company, town and government. The government needs to take a more active role in helping such towns survive rather than stay at the sideline and expect private mining enterprises to manage everything. In fact, often there is more talk than actual policy changes to deal with realities BUSINESSMAG • ISSUE 2017

There is no denying that the Australian mining industry has been losing steam for some years and it is not what it once was. Mines are reaching the end of their life and production output is declining. While the slow demand from China has further impacted the industry, there are many mines like Drayton South and Moranbah mines that are struggling to survive as their life ends. The collateral damage of all these aspects effect mining towns. Towns that have grown slowly on the backs of a nearby mine that often employees almost every town citizen. Take a look at 3 mining towns that have been affected by either the sluggish growth in the mining industry or the death of their mine. Nhulunbuy, Gove Almost as much as 1/3rd of Grove’s population used to be employed at Rio Tinto’s alumina refinery. However, it finally shut its doors on December 2013. Rio Tinto would still employee over 300 workers in the nearby bauxite mine, while others would be employed for ‘fly in fly out’ jobs at the company’s mines in the Pilbara region. The biggest reason that pushed Rio Tinto to close the mine was the price crisis in the aluminum industry. Days before Rio Tinto gave the final announcement, the aluminum price hit a low of $US1,748 per ton in 2013. Rio Tinto set up the East Arnhem Region Community Development Fund to help the struggling community survive. However, because of lack of opportunities, Nhulunbuy’s population has slowly been migrating. Muswellbrook, New South Wales Muswellbrook is just over 200km away from Sydney. Started in 1907, Muswellbrook is the definition of what a mining town is. The town’s Mount Arthur mine has not been unscathed from the global economy. Since 2014, BHP has been cutting down the workforce;

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Company in Focus- Glencore reason. It is also though that the shutdown could have been designed to position Ivan Glasenberg, the chief at Glencore as a top marketing manager against his rival counterparts at Rio Tinto. Mr. Glasenberg has been known to repeatedly attack and invade the strategies used by rival company giant Rio Tinto and also the other iron ore giants and their price attempts. Last year, after a failed attempt at a merger with Rio, Glencore is preparing for another chance at pitching the offer that would have created a whopping $US190 billion company! However, due to laws this attempt will have to wait until April this year. This festive shutdown brought down Glencore’ production down by approximately 5 million tonnes; out of which a large chunk would have been sold into the market at a loss. It hard to tell the future of the situation of the company’s plans, the re-attempt at a merger with Rio Tinto and the possible outcome simply because with Glasenberg, mystery always precedes the plan. In any case, this is a company to keep your eye on.

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Glencore is the biggest coal producer in Australia and the world’s dominant coal exporter. Glencore has facilities world over and supplies metals, minerals, crude oil, natural gas, coal, oil products and even agricultural products to a global market of industries ranging from automotive, steel, power generation to food production! These guys practically dominate the entire supply chain. The scope of Glencore’s mining, refining and supplying are on such a large scale because they are tapped into all the major metals and minerals players in the market. And it doesn’t stop there. They are also connected to energy and agricultural players. Because of their excessive capital, they are able to fund idle operations globally. With such a great capital they can facilitate and operate the planned projects in India, Brazil and China! Glencore has started coal production in Australia again after a sudden shutdown across all its operations. However, this re-starting has been met with lower prices for coal than when it initially launched. Thermal coal was earlier fetching $US 63.30 a tonne when this player announced a three week shutdown last month. When the shutdown period was over, it was fetching only $us 61.20 a tonne. On the shutdown the Swiss company stated that they were merely pulling back productions to avoid having surplus tonnes and consequently an over supplied market for coal. Chairman of Glencore, Tony Hayward has also elaborated the reasons for the brainwave behind the shutdown by saying that it was an attempt to create some strain and tightness in the market because apparently it was required. The poor price coal was fetching was not good for the company and neither was it a blessing for Australia. However, there are speculations about that

Australia’s Mining focus in Africa According to a report by Australia’s Department of Foreign Affairs and Trade, Australian mining companies have more projects in Africa than anywhere else in the world. Currently, there are over 220 Australian mining and oil companies which have 595 in Africa. Big names like BHP Billiton and Rio Tinto are some of the many that are focusing on Africa. In 2010, Africa saw 48 companies enter the continent and new projects numbering 143 were started in a single year. Growing economies and political stability has given Australian companies a positive outlook of Africa. Investors consider the returns worth the risk. IMF estimates the continent will grow by 4.7%, above the global average of 4.3%.

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Upper Hand Over Others

Australian companies aren’t the only ones that are investing in the mining and oil sector of Africa. Developing countries like China and India are looking at Africa too. From 2011 to 2012, China’s mining investments in the country rose from $15 billion to $155 billion. Though China and India have the bucks to spend, they lack expertise. India itself is a resource rich country and is yet to exploit its resources properly. Australian companies have the money and technical expertise to back them up. They are equipped and experts at handling advanced mining technology. Australian mining companies have a better understanding of risk in starting a mining operation and hence are able to deliver better success rates.

Challenges Africa is still a long way from becoming an ideal place for businesses to grow. There are three main challenges faced by Australian companies – poor infrastructure,

corruption and nationalisation. - Poor Infrastructure results in facing plenty of problems in setting up a well functioning mine from transporting the equipment to getting qualified labour. - Corruption makes getting license and contracts much more difficult. - It was not long ago that Zimbabwean President Robert Mugabe seized control of the country’s foreignowned mining industry. There is always a small risk of nationalisation occurring.

Networking Australian companies have found that creating a strong business network is the best way to deal with the above challenges. There have been quite a few conferences on mining that have been dominated by Australia. - Africa Down Under This is huge business meeting of all top officials and business persons from all the African countries. It is hosted by Australia’s Paydirt and mining is an issue which takes up a considerable part of the conference. - African Mining Indaba This is an event which was recently hosted specifically to boost communication between African countries and the global mining industry. As always, Australia has a huge presence. All seven of Australia’s Ambassadors and High Commissioners attended the conference along with Australian mining leaders. - Australia-Africa Industry Mining Group (AMMIG) This is a support group which looks out for the interest of Australian mining companies in the content. They help the companies deal with the African community, economic realities and run a successful operation. AMMIG strategically works to make sure that African governments are especially receptive to Australian mining companies.

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Australian Mining industry For most small countries, a major issue is the lack of natural resources. Small countries have lesser chances of finding natural resources in their limited boundaries. However, Australia does not fall into this bracket. The country is a world’s leading producer of bauxite and alumina, the second largest producer of uranium, lead and zinc, the third largest producer of iron ore, nickel, manganese ores and gold and the fourth largest producer of black coal, silver and copper. An economic boom in developing countries like China and India has benefited Australia’s mining industry. These countries have pushed up the global demand of raw materials which Australia aims to fulfil. The relatively stable economy, steady political situation, adaptation of advanced technology and a growth of a skilled workforce has seen a beeline of investors willing to invest in the mining sector.

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Not So Cherry

This may look like a cherry picture, but it is swiftly changing this year. The mineral output has been declining and this is even dragging the Australian economy down. In 2011, the mining industry contributed over 4.3% of the GDP; the highest among all the other industries. Over the past few months, though the mining output remains strong, production of mineral commodities has declined

in the world, with the largest declines for bauxite, lead, nickel, zinc and zircon. Australia’s mining production has taken a hit. This is because of variety of reasons.

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Oilfield Technology Expertise is Shifting to the East If there is anything we have learned in the last century, it is that humans are technology driven. Technological development has affected us faster than any other change, whether it is the wheel, printing press, internet or smartphones. The oil industry is slowly being considered as a fossil industry that will eventually die out. Many studies have noted that the oil reserves in the world are limited. The domination of Western Oil companies like Halliburton and British Petroleum in the world is beginning to fade away. Eastern countries like Korean National Oil Company, China National Petroleum Corporation (CNPC) and

GAIL India are rising in prominence.

Whereâ&#x20AC;&#x2122;s the Oil? The top three contributors to the worldâ&#x20AC;&#x2122;s global oil are Saudi Arabia, Venezuela and Iran. Two of these countries are located in Middle East. In Africa, there are already countries which are major oil producers such as Libya and Nigeria. It is only in the past decade, since 2000s, that political stability has come in many countries and oil exploration is being done there. Already Angola is rising up the ranks in world production of oil. The Rovuma delta gas discoveries of East Africa and the Congo fan oil discoveries of West

Africa promise to bring a lot of oil. Exploration in India is still going on and the Krishna Godavari gas of East India looks very promising. Russia is another country which has vast oil reserves which are still being utilised. On the other hand in the North American continent, oil is severely depleted. Alaska is one of the few States still producing oil. Canadaâ&#x20AC;&#x2122;s oil production has never returned to the strength of the 1970s. European Union is very dependent on Global oil; they get major reserves from African countries and Russia.

Technological Shift

All of these points focus on a technological shift occurring globally. Developing countries like India and China want their independence of resources. These countries aspire to make their own trade gains. To do this, they need strong financially backed oil corporations that have expert professionals. British Gas (BG) CEO Andrew Gould has already pointed out that stu-

dents in US and EU look at the oil industry as a growing fossil. Technological development in the oil field is slowly reducing as they shift focus to other sectors. On the other hand, as Middle Eastern and Asian oil companies grow, they demand more skilled or trained employees. Many universities and colleges have sprouted up to help aspiring oil professionals get the training they need. Students from such countries are coming out with innovative, economical and sustain-

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Oil Demand

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Most of the cars at the time were changed to a unibody design from body-on frame design. Increasingly, car manufacturers are designing car bodies using a ‘space frame’ design, which incorporates aluminium in the car’s structures. The space frame design involves complete redesign on cars to make them lighter. This means the process is more costly may take longer to execute. Lightweight cars are also made using mixed materials. For example, components made of steel can be made lighter by sandwiching materials and using laser welded blanks that lower the weight while maintaining the overall design of the car. Apart from design changes and replacement of heavy materials with lighter ones, further weight reduction can be achieved by reducing the size of subsystems that contribute to the vehicle’s weight. The vehicle’s weight determines the amount of energy it uses to move.

When the engine is ineffective, it leads to fuel wastage amounting to up to 70%. A lighter car consumes less fuel even when some parts are ineffective and this translates to less fuel wastage. With reduced weight, there is less pressure on vehicle’s parts and subsystems. The MIT report adds that resizing the vehicle’s subsystems accordingly translates to about 1.25 kg of savings for every initial mass change of 1kg.

Magnesiumislighterthan bothsteelandaluminium. However,itsperformance is lower and it costs morethantwiceashigh. Magnesiumisusedonparts thatrequirethinwalleddie castings.

“

compositematerialssuch asglassfibreandcarbon materialsareevenlighter atabout20%oftheweight ofmildsteelandthreetimes highertensilestrength.

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Redesigning the structural configuration of cars is the other strategy for manufacturing lightweight cars. This example is best demonstrated by the changes in the 80s that significantly reduced the average weight of cars.

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A new country to explore – Mining in India

Australian miners have been long awaiting some policy changes to enter into the Indian mining sector. We have explored Africa and Indonesia but the risk of entering India has always held us back from taking the plunge. But the untapped mines of India are tempting enough to keep the interest stable. Brit- Aussie Rio Tinto has already been engaging in diamond exploration in India and other mining companies have been seeking help from Indian mining operators. After Indian Prime Minister Narendra Modi’s visit to Australia recently, the interest in India has seemed to have peaked once again. Abbot and Modi have already met at the G20 summit in Brisbane, Australia in November and are keenly looking at licence issues so that they can move forward. With the additional Indian investments, we are expecting production to go up by about 30 per cent in 2017 in respect to the 6,976 tonne production in 2011. India has already made connections with Canada; however according to Canadian laws an Indian company can only take 49 percent of equity shares in a uranium mining company. They won’t face the same in Australia. Potential untapped mines in India India is resting on mineral reserves of over 80 billion tonnes but despite this whopping figure and geological advantages, the country has not been able to exploit these resources to their full potential. This is mainly due to the country’s infrastructural constraints and other social and regulatory issues. In order to deal with these hindrances that are resulting in financial blockage, it was suggested to focus on development of skill sets in the sector, adopt newer technologies and keep in place financing back-ups to prevent any financial blockage in case of delays. With such a large reserve of natural resources,

India needs to up their mining practices and reap good yield in this sector. Also, a strict enforcement of mining laws will serve as a good aid in this direction. Better enforcement of mining laws will help find a solution to years of unruly management and other factors that are obstacles in exploiting these resources. However, with the Chinese mining sector working hard to go a level further, India is facing some tough competition mainly because it is difficult for them to break even with Chinese production costs. Future of mining in India Of solely identified reserves India has the fourth largest coal reserves in the world and large reserves of titanium, bauxite, chromite, diamonds and limestone. There are, in limited measures, uranium, gold, copper, zinc reserves also. Also, India’s geographic location has made the country a perfect spot for the export of raw materials to Europe as well as the Asian markets. These are only amongst the top reasons to tap into India’s potential mining sector in the future years.

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Since the beginning of time, we have obviously always used and exploited the available materials on our planet as energy resources. However, when it is all depleted, Earth may have to look beyond for some answers. Space tourism is already kicking off so it is only a matter of time before we’ll be sending our miners to outer space. Our resources will be indefinite and possibly unlimited. There are already a number of private companies who have set out on the task of exploring this wild idea. However, not to make this sound like a fantastical dream but we have to come back down to earth and remind ourselves that even 40 years after Apollo missions, we still do not know just how much potential the Moon has for us to tap into. And getting that picture straight will require more strenuous exploration than ever attempted before. However, thanks to consistent study and data collected over the past few decades, we do have adequate if not enough information to probe into the possibility a little further and gauge the possible applications to suggestions. What are the potential ways we could harness lunar resources We could make use of the Moon’s resources to facilitate economic and well as scientific programs in the premises of the Earth and the Moon. Maybe smaller steps will lead to us going deeper into the galaxy. We could figure out the gravity (no pun intended) of the resources from the Moon and place them in areas that could enhance the global economy. It is already been founding that hiding in the craters of the moon lay ice deposits. In addition, there the lunar soil holds other volatile substances which of course are displaced by solar wind which includes carbon, helium, nitrogen and perhaps even hydroxide. The chance of wa-

ter being present is not alien to us, now. However, the only way the entire exploration will make sense is if the global economy will benefit from the projects. Our worlds civilization is already pre- dominantly dependant on Earth orbiting satellites and this dependency is only growing. Because of the gravitational pull of the moon vs. that of the Earth launching materials to these satellites would require less energy from the moon. What we’re trying to say that if one day an infrastructure is build on the moon, raw materials such as titanium, magnesium ,uranium etc. can easily be launched into the Earth’s orbit from the moon. After all it takes about 20 times less energy to launch mass into the Earth orbit from the moon than it does to launch the same mass from the Earth into the Earths own orbit. Let’s not get too carried away though, as appealing as the thought sounds. The Earth already does contain the same mix of chemical elements and in higher concentrations and we already have a functioning infrastructure to extract and refine these materials. An isotope of helium is one thing that we’re after because it is said to come in handy to fuel nuclear reactors here on Earth. However, no experiments are already conducted to prove its benefits in the same area. When we club together all findings, it is hard to identify even one resource that will be abundantly rich enough to sustain an entire mining industry. The stakes are high and the solutions are unknown. However, we do know that the moon does possess some treasures that could get us out of any economic crisis we may face.

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What resources can the moon bring us?

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It is a no brainer that the global chase for a sustainable development and the future of the mining sector are quite inseparable. Through economic integration is birthed a responsible social way of working that enables environmentally sound operations. The mining industry has long since begun its commitment towards a sustained growth of our current generation that will impact our future ones. An effort towards re-shaping and sustaining plans is on full-swing in current times. The Mineral Council of Australia (MCA) has already formed an Environmental and Social Policy Committee to organize companies that are already part of the plan to integrate social, environmental and economic elements of the mineral industry. Only with this vision can the future of a operational sustainability plan materialize. Goals of the MCA The mission of this project by the MCA focuses on two goals. One is to enhance the value of the industry for stakeholders and the larger community through sustainable methods and the other is for the Australian mineral industry to show model commitment to the plan for sustainable development through creation of wealth, environmen-

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Sustainable Development and Minerals

tal responsibility and social development. Maintaining and earning a social right to operate and practice sustainable development principles is definitely the face of a modern mining revolution. Environmental Initiatives • Adoption of a nationally sound water accounting skeleton to enable transparency and consequently efficiency in water use. • Supporting of the continuing harmonisation of hazardous substance management to make sure that there s effective long term protection of the environment and community health. • Development of land use planning frameworks and alternate natural resource management ones to enable honest, determined sustainable decision making processes that are grounded in science. • To analyse and create plans for the successful co existence of agriculture mining and conservation. • To recognise investments from the industry in areas like land rehabilitation and to enhance the biodiversity results through better placements and sources. • An ongoing investment towards the scouting of global climate change solutions, groundbreaking technologies to assist the plan across all energy resources. A sustainable development plan can only be achieved if there is a collaboration , consistent plan that is stuck to thoroughly, with no exceptions and changing the framework only under the clause of failure or reversing any damage. In the years to come we will see a notable difference in the situation based on current findings and carefully crafted plans.

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Top jobs for Mining, Oil and Gas in 2017

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Even though it may seem that employment in the mining sector has slowed down, there are still so many high paying mining jobs available for skilled workers. Mining is a very labour intensive job and even though it requires you to work in dangerous locations, for long hours and stay away from your family often, the benefits can sometimes be remarkable. Here are some great paying mining, oil and gas jobs to consider in 2015. • Surveyor - Surveyors assist companies in measuring open mines. They help to update layout and plans by measuring the surface area of mines. • Operator/ Miner – There are tons of positions always in demand for this role. • Occupational Health and Safety OfficerBecause health and safety is of utmost priority in Australia, you can expect a fat pay-check If you score a job as a health and safety officer. • Resource Geologist- This job requires you to plan and implement resource development and also analyse major deposits for future operations.

• Project Director- This is one of the most important jobs to try for. You can earn more than $400,000 per year! This position requires you to come up with the overall plan, working and execution of projects. You will be required to lead the team and will have a

hand in all stages of the project. It is a highly demanding job but if you are a leader and a great planner, then the rewards are endless. • Geophysicist- If you have the qualifications backing you up, then opting to be a geophysicist at a mining site can score you about $200,000 a year. Geophysicists use gravity, electrical, magnetic and seismic methods to study the Earth’s gravity. • Metallurgist – The pay of this job increases with experience but even a fresher can earn up to $80,000 per year as a metallurgist. How to get a Mining Job in Australia Maybe knowing what jobs are out there currently may propel you in the right direction, but just how exactly are you going to get further? Let’s look at how you can score a Mining Job in Australia, given the current situations. Keep in mind that if you are an inexperienced traveller or the likes, then your chances are slim but if you have relevant qualifications, experience and a strong will, then even in a downturn in the sector, you have a chance of scoring a job. Try and network Establish contacts and network. Visit a mining town if you must to meet people and get a firsthand look of things. Mining includes a lot of benefits, especially in Australia. Free accommodation, cooked meals and weeks off, depending on your contract are only some of them.

No, this time we aren’t speaking of Australia but of the oil rig pads once they are shut down. It is no news that oil rigs world over are shutting down rapidly. Not too long ago on the 12th of December, the number of oil rigs in America fell by 27 which was the biggest weekly decline in 2 years. The week after that, the number fell again by 18 rigs! This situation is not just reserved for America, oil rigs everywhere are shutting down and there are a number of reasons why.

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What will happen to the land down under?

In Canada, a whopping 135 rigs shut down in the last week of December and then dropped further to 256! However, Canada’s production has always been more seasonal than America’s anyway. What happens when an oil rig shuts down? Can the land be used thereafter? An oil rig pad can impact the land around it temporarily or permanently. Depending on the impact or the lack of it, the land can be used in varied ways. Land uses after oil and gas production After the life an oil well is done and dusted, it is usually capped, the pumps are removed and they are covered with concrete to prevent any potential leakage. Many oil and natural gas wells are located rurally and so the most obvious use for the land would be grazing, crop production or some sort of wildlife habitat zone. Possible Impact When the land is used as a wildlife habitat that is when there is a major possibility of negative impact. Toxic wastes like scrap metal, solvents, petroleum chemicals, paint can contaminate the soil on the surface thus putting wildlife and people at the risk of toxicity. Because water is often used in the drilling process, mainly for natural gas, there is a chance that surface waters may become polluted. Restoration The restoration of the land and its reclamation includes the cleansing of all toxic materials and capping of all uncovered wells. It also includes planting vegetation on the site. Almost all modern agreements include a reclamation and restoration clause. Rig to Reef Programs Since many oil rigs are located off shore and not many land uses can come out of them, one of the major undertakings is that rigs are being converted to reefs. The scrap iron from the rig is used to build artificial reefs. The water is expected to be shallow and the aquatic life thriving there will only continue to thrive, creating a well functioning reef habitat.

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Domestically, Australia’s expenditure on mineral exploration has improved in recent months. The Australia Bureau of Statistics reports that the country spent $3953 million on exploration in the 2011-2012 financial year up from $2951 in the 2010-2011 financial year. This was an increase of about 34%.

Trends in Mineral Exploration and the Future The issue of skills shortage should be addressed to increase the number of professionals in exploration

From an international perspective however, Australia falls behind other competitors such as Canada. According to MEG (Metals Economic Group), the global share of Australia’s exploration expenditure fell more than 20% in the mid 1990s to about 12% in 2010. Although the expenditure has picked up recently, the real exploration activities are well lower than in the 1990s.

In recent years, exploration activities in Australia have been directed more towards bulk commodities such as coal and iron ore. Data from the Bureau of Statistics shows that the increase in exploration expenditure on individual commodities was highest for iron ore, which increased by 73% followed by coal at 61%.

Exploration trends have shifted away from gold and base minerals such as copper, cobalt, nickel, zinc and lead. This is reflected in the figures, which show a lower percentage increase. Expenditure on gold exploration increased by 18%.

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The actual mineral exploration activities are normally measured by the number of metres drilled. Currently, most of the minerals produced in Australia are from deposits that were discovered about 20 years ago. Additionally, more of the exploration expenditure goes to existing projects (brownfields), a shift from the previous focus on new projects (greenfields).

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Challenges in Africa: How will 2017 shape up?

The oil prices downfall and the crazy growth in terrorism and inefficient stability are no doubt posing a direct threat to quite a few African countries in 2015. Not too long from now, the country is heading into an important election this February and we will begin to see what the year has for Nigeria’s political environment. With an economy that banks on oil for about 70% of its income, campaigning comes with a background of rapidly falling crude oil prices. Muhammadu Buhari from the north will run against Goodluck Jonathan who is from the oil-producing south side. Jonathan came into power due to the death of his predecessor however his win triggered riots in the north that lasted three days and slaughtered over 800 people! There is continued fear of more such riots in the southern cities of Lagos and Port Harcourt. In Jonathan’s home area which is the Niger Deltahere is a plea that he should be allowed for another four years of power as it is unfair to them that a national leader be driven out of the office after a meagre one term of power. This desire has even reached violent threats from a former militant leader. The man, Mujahid Asari- Dokubu was backed up by many in the region who are threatening to retard the oil industry altogether. Another group of former militants also threatened to cut off the

supply of petroleum products from the north, in the event of Jonathan’s eviction. Last October’s elections in Mozambique brought two-year revolt to an end. This insurgency affected coal and transport supplying in the province of Sofala. Howeverv, the country’s main opposition Renamo, rejected as incorrect results by showing that Frelimo, the ruling party had won. These elections were really important for the stability of the country as it gets prepared to reap wealth from large gas findings. As per many intelligence reports, there is a high chance of a military coup in the DRC, Democratic Republic of Congo early to mid this year. In case these suspicions prove to be true, it will launch the Great Lakes region into a new interstate war with Rwanda and Uganda, amongst others. On the brighter side, due to buoyancy in economic and stable political control, the Ethiopians will see another win for the current ruling part this year, most likely. There is talk that the situation involving violent risks will improve in 2015 for Zambia by February and Mali after the President Boubacar Keita works on plans to improve political stability. The risks of investing in Africa are great but just the same as there are risks of investing in the Middle East, Asia and Latin America. Political instability, shaky power supply, weak infrastructure and corruption continue to prevail blatantly. However, a patient ambitious investor will see great trade opportunities in a continent with such a fast growth and increasing population.

New Technologies in the Mining Each year brings new technology to the market. Some of them have potential to be adopted, while others have already been adopted by the industry. The mining and oil and gas industry is a definitely an industry that is frequently looking for new technology to adopt. No surprise, much of this technology is green technology that helps them curb the harmful effects of mining or drilling. So in the recent year’s what are the various new technologies that have been adopted by the mining and oil and gas industry? ChemSulphide technology ChemSulphide technology helps create a better treatment system for mines. It utilizes the concept of sulphide precipitation. Research into sulphide precipitation was started back in the 2000s, however, it is only now that companies have been able to adopt it for daily use at the mine. The basic of sulphide precipitation is to allow a metal to separate. For mining, a biological or chemical source of sulphide is added to its wastewater. This transfers the target metal from a liquid state into a solid one. It forms into a high grade metal sulphide that can be either sold or disposed off. This helps ensure mining wastewater does not have high metal content. ChemSulphide has been built by BioteQ and works on the basics of sulphide precipitation. ChemSulphide makes sulphide precipitation large scale and at an affordable costs. BioteQ has employes ChemSulphide technology at three mining plants. Raglan mine in sub-Canadian arctic owned by Glencore and Dexing mine in China utilize this. Micro-organisms in Oil Wells The Gulf of Mexico oil spilled caused by BP saw gallons of oil spill and spread across the sea. One of the methods use to clean

up the oil spills was micro-organisms. These micro-organisms break down the carbon elements in the oil. What remains of the oil is harmless and blends in with the sea. This restores balance to the environment. BP is currently studying, researching and experimenting ways at DuPont and the Energy Biosciences Institute to use these micro-organisms in their oil wells too. BP believes that these micro-organisms can be used to solve stuck oil in the wells. These micro-organisms will be inserted to lubricate rock surfaces, while others will be used to break down thick oil and make it more fluid. IsoBoost™ System IsoBoost System is created and designed by Energy Recovery. This is the same company that won the Southwest Oil & Gas Awards for New Technology Development of the Year in 2014. IsoBoost System uses an advanced turbocharger technology to greatly improve the ability of an energy plant. It takes the load off other pumps, decreases maintenance needed and improves productivity. It specifically boosts up energy efficiency by 80% in a gas plant’s level control valve. Carrier Gas Extraction Though it appeared in the market in 2013, this is a piece of technology that is yet to be adopted by large oil corporations. It uses atmospheric pressure and ambient temperature to extract fresh water from high salinity brines like salt water. Fresh water is necessary requirement for oil rigs that utilize fracking and they need 500,000 gallons per day. Carrier gas extraction is an effective, safe and environmental friendly way to get that water. These are technologies that will surely change the face of mining in the years to

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and Oil and Gas Industry

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Will the Drayton mine live or die?

The Proposal Considering that if the mine shuts down, 500 people will be without jobs, Anglo America, the affected community and the government has been working on a proposal to extend the life of the Drayton mine. In 2014, CEO of Anglo America, Seamus French stated, “Anglo American will develop a new project to provide employment and operational continuity for the Drayton workforce”. It is from there that this proposal has emerged. Rather than mining 97 million tonnes over 20 years, Angelo America will scale back its mining to 75 million tonnes. Included in the proposal was the expansion on the Drayton South mine that would keep the coal mine alive. The Rejection However, the proposal did not manage to go through. Expanding the Drayton South mine had significant environmental risk. Even though Anglo America mentioned that it is willing to utilize environmental man-

agement practices, the Planning Assessment Commission (PAC) did not accept it. The expansion would have bought the mine 2km away from horse studs’ (Darley and Coolmore) main operating area. PAC did not consider there was a sufficient buffer zone to protect Coolmore and Darley from the environmental impact of mining. 500 jobs hang in the Balance The livelihood of 500 families hangs in the balance. However, Angelo America has not given up and will probably submit a fourth proposal this year. The Effects Why is Drayton mine important for the rest of the mining industry? Right now it is setting the standard for how well or how difficult it is for a mining company to extend the life of their mine and provide support to their employees. With the third proposal rejected, it looks like Angelo America has many more hoops to jump through before it can get the go ahead to extend the life of its mine. Furthermore, it is obvious that the government is placing a large responsibility to Angelo America to somehow provide jobs for Drayton’s 500 employees even though it will run out of coal reserve. The government needs to come up with a better system in scenarios when a mine runs out of coal reserves – in the years ahead, there will only be more of them. The system needs to focus on helping the community and not preventing the mining company’s own plans from getting stuck in red tape and processes. For now, only time will tell if Drayton mine will survive or not.

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Located in the Hunter Valley area, Drayton mine started in 1983. Hunter Valley is one of the most coal rich areas in the country and the reason why Australia experienced a coal boom. Ever since it has been set up, Drayton mine has been employing people from the towns of Muswellbrook and Singleton. The mine is managed and operated by Anglo America. However, like any mine, Drayton has an expiry date. The mine is set to finish off its coal reserves by 2017. However, there is a proposal that is being worked out that may see the life of the mine run for longer. Yet, the current problem for Drayton and Anglo America is that everything still remains on paper.

Europe Focus: Problems with Relying on others for Gas Europe was reminded of the old Cold War days as West European countries imposed various trade sanctions to prevent Russia from interfering with Ukraine. However, Russia has denied doing any such thing and responded to Europe’s sanctions in a hard hitting manner – it cut off the gas supply to Europe in June last year. However, the official reason from Russia was that Ukraine has not paid its gas debt of $5.3 billion since 2013.

Europe left in the Cold Around 25% of gas the European Union receives is from Russia. 80% of this gas travels through Ukraine. When Russia cut off gas to Ukraine, the European Union also stopped receiving gas. Europe has built their economies on the dependency of Russian gas from the early 1980s; simply because it was a convenient option. Countries like France, Germany, Poland and Hungary are extremely reliant on this oil. Additionally, winter was around the corner and it would be an essential time when energy would be needed.

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October Gas Resolve The most immediate effect felt by Europe was that the gas price soared in the market. Europe also experienced a shortfall of gas supplies. With European Union’s economy and their consumers hurting, they stepped in and agreed to act as a guarantor for Ukraine to pay its gas debt. By October, gas flow was resumed back into Europe just before winters arrived. This gas cut was obviously a small event in the bigger scheme of things with Europe Union, Ukraine and Russia playing a political chess game.

energy capabilities. - Norway is a big exporter of oil to Europe and it is expected to increase its production. - There is hope that Poland will strike oil as exploration is under way. However, for Europe the problem with their reliance on Russian oil is also the contracts signed. These contracts obliged European countries to keep buying oil from Russia until the contracts ends, which may vary from 10 to 30 years. However, Lithuania is set to end her contract this year. With all this happening, it’s interesting to ask – What if this happened to Australia?

An Australian Scenario Australia consumes three times more oil that it produces. This has pushed it to largely depend on imports. Over the last 4 years, its crude and light oil production has fallen by over 30%. And, its refined oil production has fallen by 12% over 3 years. Furthermore, in the event of a blockade or embargo, Australia has oil reserves that would last only 46 days (This has fallen from 57 days from 2013). This is not even close to the mandated stockpile of 90 days worth of net oil imports set by the International Energy Agency (IEA). (We have written on this in Europe Looking at Gas Sources our last year’s issue – Are we running dry?) This is not the first or last time that Russia Australia imports significant oil amount from has cut off gas. Europe, in the meantime, has Malaysia, UAE, Gabon, Nigeria, Vietnam and been on a quest to free themselves of their Russia. If any of these were to stop the flow of oil, it would significantly hurt the Austradependency on Russian gas. - Lithuania has added a floating lique- lian economy. Australia’s dependency on oil fied natural gas (LNG) import terminal to its imports and lack of sufficient oil stockpile is a serious issue that needs to be dealt with.

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Coal Export to China threatened

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China is the fourth biggest importer of coal from Australia. However, since the last few months there has been a worry, in the Australian coal market, that China may cut down its coal imports from Australia. This news just adds to the burden of the coal industry. For the last two years, the coal industry has been tackling with job losses, increased costs and rapidly eroding profitability. Over the past two years, 10,000 coal workers have lost their jobs. Such a move by China would hurt the coal industry.

Import Ban on Dirty Coal

Facing Competition

China has been formulating plans to restrict import of dirty coal. Coal that gives off high levels of sulphur or ash when burned is considered as dirty coal. China is facing an immense challenge in reining its environment problems. Cities like Beijing often suffer from massive smog pollution. A series of decisions made by the Chinese government points out that it is taking a serious stand against their growing environmental problems. When President Xi Jinping met President Obama in November, he pledged to have carbon dioxide emissions peak around 2030. Additionally, China has increased its investment into wind energy.

Australia is not the only import option for China. United States, Mongolia and Mozambique are proving to be tough competitors. Add to that, China has shown interest in investing coal plants in Pakistan.

How bad will it hurt?

There is a silver lining to all this. Australia’s export market may not be hit very hard by these new restrictions. Coal export to China only accounts for only approx. 10% of the total Australian coal export. The response from the government has shown a confidence in the industry’s ability to export high quality coal. Minerals Council executive director of coal Greg Evans stated, “There is nothing in the information Coal Market released to date to suggest that Australian The coal market is already struggling with a coal exporters will be disadvantaged and global coal price fall in the last few years. In we are confident that we can meet the pro2013 the coal price was $76 per tonne and posed specifications”. this year it is $47 per tonne. These falling China’s action is also a warning that Austraprices do not go well with the increased lia should diversify their export market and cost of production. not rely only on a chosen few countries. In China’s coal import restrictions will force the future, others too may decide to opt for coal mines to have their coal washed. Min- greener power options. ing companies will have to set up a coal washing facility. The added process of washing will increase the time and cost required for coal to be produced and made ready for the market. Bruce Jacques of IHS McCloskey Coal has pointed out that some coal producers might be able to reduce the level of ash by washing but other may not be willing to incur the additional cost.

The term Somalia pirates is not new to any person. The reason Somalia has been a popular spot for the emergence of pirates is that the country for the past two decades has been embroiled in a civil war. Since 2000s, Somalia had qualified as a failed state. However, with the help of the international community and United Nations, it managed to once again set up a stable government in 2012. Together the Prime Minister Omar Abdirashid Ali Sharmarke and President Hassan Sheikh Mohamud have created a fairly stable government. Oil Potential Somalia is not known for its oil potential. In fact, because of its own political and violent turmoil, there hasn’t been a search for oil in the country previously. However, there is hope that Somalia has a similar geology to Yemen. Yemen’s Gulf of Aden just lies across Somalia and has over 2.7 billion barrels of oil reserves. A report published by Heritage Institute for Policy Studies states that Somalia may have much as 110 oil reserves. Exploration Russian billionaire Alexander Djaparidze has funded Soma Oil and Gas, a UK oil enterprise focused on Somalia with the aim of finding oil. Soma oil and gas is currently running a seismic survey of the country. The survey costs an upward figure of $37 million. They are expected to submit their report by end of this year. According to Shell Vice President for Exploration in Sub-Saharan Africa Alastair Milne, “This Soma activity has demonstrated that seismic can be done in offshore Somalia, but it will take more detailed technical work before we can pinpoint that place to drill, and that will likely require investment well in excess of $100 million”. Security Threat Even though Somalia may have a stable government, the country still has some parts controlled

by terror groups. The most prominent one is AlShabaab, an Islamic terror group that is part of Al-Qaeda. This is the same group that claimed responsibility for Kenya’s Westgate mall’s terror attack. President Hassan Sheikh Mohamud has stated that the geographical control of Al-Shabaab is shrinking and they will be reduced to very remote areas. This is quite possible with strong military action that the Somalia government has taken with help of the International and African community. Al-Shabaab also frequently conducts terror attacks in government controlled areas (including Somalia’s capital) in the form of car bombs, suicide bombers and raids. Future Threats If oil is discovered in Somalia, there is a very real possibility that it will redraw the risk dynamics in the country. Islamic State of Iraq and Syria (ISIS) has proven that terror groups can capture oil facilities and sell oil on the black market to fund their terror activities. Additionally, drought has been an environmental concern that has plagued Somalia’s economy. Drought and famine is a history that keeps repeating itself. It has created one of the world’s largest malnutrition rates in the country. For a country that is plagued with civil war for the past two decades and still battling terror groups, it will take some time before the country can experience real stability. However, the government is already underway to craft an oil policy that allows foreign companies to drill in the country. Abdulkadir Abiikar Hussein, director of oil and gas exploration for Somalia’s Ministry of Petroleum and Mineral Resources has said that he fully expects the big companies to be drawn to explore his country’s resources as well considering the discoveries and exploration in nearby countries. Currently, Royal Dutch Shell

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Somalia finally opens its doors to the global oil industry

Energy Outlook 2017 The Australian energy market has been dominated by oil and gas. The coal industry has had its ups and downs in 2014. In fact, there has been more progress in discovering new oil fields and major oil projects near completion. Here’s what new and what’s happening the world of energy. Oil and Gas - Queensland Curtis LNG liquefaction plant at Curtis Island is set to be completed this year. Construction contractor, Bechtel, has stated the QCLNG plan will be filling tanks and shipping freshly liquefied gas from Surat basin. In an effort to spur workers into more productivity so that they meet the deadline, they’ve introduced lotteries. - On the Western side of Australia, the Gorgon project is closer to its competition. The delayed project should be completed by the end of this year. However, workers have voted down EBA proposal on rooster change that will delay the project.

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- A new gas field called Waitsia in Perth Basin has been discovered. It may contain gas amounts ranging from 65 billion cubic feet of gas (Bcf ) to 1170 Bcf. This discovery has been made by AWE Limited and could very much be the largest onshore conventional gas discovery since Dongara gas field in the 1960s.

- BP plans more exploration at Great Australian Bight in the search of oil. They have awarded a $138 million contract to the international helicopter company Bristow Group to set up an air base and create a new centre for offshore oil exploration. - Santos is making a plan of LNG investment in the Sural and Bowen Basins. This will expand the Queenland’s gas reserve and improve the company’s infrastructure.

Coal The coal industry has had a rough year. - The coal price has been on the decline with the price now at $47 per tonne. This is almost a 20% decrease. - The cut in coal prices has resulted in the industry restructuring the workforce. An estimated number of 2500 jobs were lost as mining companies downsized. Integra coal complex and Isaac Plains have experienced heavy job losses. - According to Bureau of Resources and Energy Economics (BREE), Australia exported 181 million tonnes of thermal coal in 2013-14 and it is expected to increase the coal export to 185 million tonnes in 2014-15. - China’s strong restrictions on dirty coal will affect the profitability of many mines. This comes with the news that China’s coal consumption has fallen by 23%. - Australia is going to face tough competition from growing coal exporters like Indonesia, Colombia and South Africa. The year ahead, as always, is filled with challenges of their own. The oil price may have been down during December, but they have started increasing again. The government needs to take the right actions to ensure that the coal industry picks back up, while the oil industry is able to maintain a sustained growth.

When a terror group controls oil ies not only disrupts Iraq’s oil producing capability, but even degrades the oil infrastructure set up in the country. In 2012, the International Energy Agency predicted a 500% increase in Iraq’s oil revenue by 2020. However, with ISIS creating havoc in the country and taking over oil fields, Iraq won’t be able to reach that prediction. Oil Smuggling ISIS has been building its oil networks since it sized its first oil field in Syria. The group has been able to sell oil through shadowy third person parties. Drum barrels loaded in trucks cross over from Syria into Turkey through the porous border. From there, the oil is sold on Turkey’s black market. It then finds its way to an oil refinery inside Turkey. These are businesses that do not care from whom the oil comes from since their sole aim is to earn money. Crack Down In the past few months, there have heavy military moves against ISIS by world governments in the form of air strikes and crack downs. Bombers have been taking out ISIS controlled oil fields and refineries. Simultaneously, Turkey has been cracking down on oil smugglers and traders within their own borders. The real fight against ISIS is on the ground. The Iraqi government struggles to retake the land it has lost. It is only when ISIS is eliminated from Iraq that oil production can resume. BUSINESSMAG • ISSUE 2017

Middle East may be rich in oil, but for the past half century, it has been one of the most violent and volatile regions on earth. ISIS or Islamic State of Iraq and Syria is the latest terror group to emerge in Middle East. This is a group that has taken over massive land in Syria and Iraq. This includes various oil fields. Iraq has the world 5th largest oil reserves in the world. Furthermore, ISIS is selling this oil on the black market and using funds from the sale to support their violent expansion through Middle East. What do they Control As of today, ISIS has occupied about 11 oil fields in Iraq and Syria. The group has been capturing oil fields in Syria since 2012 with the civil war well underway, while they began capturing oil fields since June 2014 in Iraq. More importantly, they managed to capture the largest oil field in Syria, Omar oil field that can produce 75,000 barrels a day. In Iraq, they control smaller oil fields including Ajeel and Himrin fields. Apart from oil fields, ISIS has also managed to capture several refineries. In Iraq, the group controls Gayara refinery in the Mosul area and in Syria, it holds two main refineries in the cities of Homs and Banias. Profit ISIS sells the oil for a discounted price of $30 - $60 per barrel. Their estimated total profits are $3 million a day. However, oil experts in Iraq point out that the oil fields controlled by ISIS produce crude oil of such poor quality that international companies did not even bid on them when the Iraqi government offered them up a few years ago. Impact on Iraq Economy Oil has been a major driver for Iraq. Taking control of these oil fields and even refiner-

Low Iron Ore Price Effects

BUSINESSMAG • ISSUE 2017

Australia is the second largest producers of iron ore in the world. This coupled with the estimation that Australia has the largest crude iron ore reserves in the world. It is also the largest exporter of iron ore in the world. Australia’s iron ore industry has been growing swiftly the past two years. However, in the last few months it has experienced a slump. This is because of the price drop felt throughout the global markets.

Price Drop In June 2014, the price of coal was $92. However, in 6 months time, it fell as low as $70; an almost 10% drop. This is the lowest price seen since 2009. This swift price drop significantly affected the profit margins of the iron ore mines. Even though Australia has greatly increased its export from 465 million tonnes in 2011 to 650 million tonnes in 2014, the price drop will hurt. It has resulted in an estimated $17 million fall in the value of iron ore export. Why has it fallen China is the largest importer of iron ore. That means decisions made by Chinese on their steel, iron or any other related industry will impact the global industry. The Chinese have imported 74.9m tonnes of iron ore which is a 9% drop from their previous import figures. This has happened because of: - a slowdown in the Chinese construction industry - the Chinese government limiting credit to poor performing steel mills that in turns affects their ability to buy iron ore The decrease in demand by China has created a greater supply in the market, hence a drop in prices. Company Confidence Iron ore companies have shown no worry with the drop of iron ore prices, or their share price. BHP has signaled that it has no intentions of slowing down its production. Vale Chief Executive Officer, Murilo Ferreira, has expressed confidence that iron ore prices will pull back up to $90 this year. Hurting Mines

However, it is the smaller iron ore mines that are hurting with the slump in iron ore prices. Atlas Irons and Mt Gibson Iron have begun to lay off workers. Atlas Iron has let go of 10% of its workforce as part of its cost reduction program. Plus, its shares fell to 14.5 cent – that is a 96% fall from the all time high price share of $4.37 in 2007 and the $4.34 in mid2011. Mt Gibson not only felt the heat through the iron ore price drop, but also an accidental flooding at their Koolan Island mine that forced it to close down. The company has experienced a share drop by 40%. Growing Supply The supply of iron ore is not going to fall any time soon. It looks like other top iron ore producers like Brazil and US are not going to lower their production amount. While back home, major mining companies have no plans to lower production. Australian market will have to ride the price slump until someone else increases the demand.

BUSINESSMAG â&#x20AC;¢ ISSUE 2017

CSG Environmental Risks

BUSINESSMAG • ISSUE 2017

It’s been almost two decades since Australia began encouraging coal seam gas (CSG) drilling. The extraction and use of coal seam gas in the energy industry is relatively new. Australia has emerged as one of the largest producers having the largest reserves of coal seam gas. Bowen Basin, Surat Basin and Sydney Basin have been found to be rich in it. Various studies have begun to gather data that enough of steps are not being taken to curb the environmental damage caused by gas extraction. Furthermore, the Australian government has finally taken notice of these studies.

Extraction Process The extraction process of CSG clearly disturbs the environment. CSG resides in the sedimentary layer of the ground along with the table water. A hole is drilled in the ground. Sand and chemicals are pumped it, while CSG and any water is pumped out. While CSG is sent to a compressor station, the water is sent to a stream or used as irrigation water. What Reports One report has been published by researchers from Southern Cross University highlighting various risks create by CSG extraction. The foremost point that the research found is that there is unexpectedly high levels of methane in the air near CSG wells at Queensland’s Darling Downs region. Another report regarding CSG drilling at Great Artesian Basin and Pilliga region has been published by soil scientist Robert Banks. Great Artesian Basin recharge area covers less than 10% of the 1.7 million sq km basin. The area where the basin is topped with more than 5 mm a year (the minimum need to keep the basin pressurised), is just a quarter of this. The report also states that NorthWest of the Pilliga region, just 0.2% of the basic provides research water in excess of 30mm a year. The significance of the recharge zone is not the immediate water supply, but the pressure needed to drive the water to the surface. The report by researchers from Southern Cross University was submitted to the government’s Department of Climate Change and Energy Efficiency, while the report by Robert Banks has been presented to the Great Artesian Basin Advisory Group.

Government Response The Government of Victoria has released an Earth Resources Statement that calls for strong regulation when it comes to CSG extraction. The New South Wales has established an Office of Coal Seam Gas that is tasked with the responsibility to regulate the environmental damage of CSG drilling. On October, 2014, the NSW Chief Scientist Mary O’Kane submitted a report and stated that the risk posed by CSG drilling can be addressed by limited extraction t regions where the geology and land use were appropriate. One thing that is very clear regarding this issue more studies and research needs to be done concerning the effects of CSG extraction on the environment. Currently the industry is moving faster than scientific research can gain data. Australian Chief Scientist Ian Chubb has already advised the Prime Minister’s Science Engineering and Innovation Council on the need for more research and data to take the right action. The government needs to make decision that are backed up more data that just a few reports. Indepth study of the environmental impact of CSG drilling and extraction would be welcomed by all.

BUSINESSMAG â&#x20AC;¢ ISSUE 2017