Queensland Rail May Need to Double A$3.75 Billion Spending Plan

By Jesse Riseborough

July 28 (Bloomberg) -- Queensland Rail, Australia's largest coal transporter, said it may need to double a A$3.75 billion ($3.6 billion) spending plan for trains and new railroads to meet surging demand from mining companies.

``I would expect that some of those projects that we are talking about will more than double those kinds of numbers,'' Queensland Rail Chief Executive Officer Lance Hockridge said today in Brisbane, the Australian state's capital.

Queensland, home to the world's biggest coking coal supplier, is spending A$9 billion on new ports and railroads to double exports within 20 years, Premier Anna Bligh said this month. Queensland Rail's largest expansion plan is for the Goonyella network, which hauls coal from mines to ports on the state's north coast.

``The Goonyella/Abbott Point infrastructure project is likely alone to match'' the projected spending on expansion, Hockridge said in an interview.

State-owned Queensland Rail is improving networks and buying additional locomotives so that mining companies in the region including BHP Billiton Ltd., a partner in the world's largest producer of coking coal, and Xstrata Plc can expand output for the steelmaking material at a faster pace.

``It is clearly a very, very substantial capital investment, with very significant risks, and we would expect that that will lead to some interesting negotiations with the coal customers and we have started some private discussions,'' Hockridge said.


China, South Africa

Constraints in Australian ports and railroad networks combined with power shortages in China and South Africa have curbed global supplies, pushing both coking and thermal coal prices to records this year.

Mining companies in the state plan to spend A$11.5 billion on new projects over the next five years to gain from surging demand. Queensland port and rail expansions may boost total exports to 370 million metric tons of coal by 2030, Bligh said this month.

``Given the heat in the industry and given the level of interest, there is no reason to say that's not possible,'' Hockridge said. The potential expansion of Queensland Rail's Goonyella network, including the so-called Northern Missing Link, may add about 100 million tons of annual capacity, Hockridge said. A final development decision is expected by the end of the year, he said.

Bowen Basin

An expansion project to enlarge rail capacity for coal deliveries to Dalrymple Bay Coal Terminal Pty, the second- largest in Australia, is due to be completed by the end of next year, Hockridge said earlier at the Coaltrans Australia conference. The project will boost capacity on the line to the port to 130 million tons a year, he said.

Dalrymple Bay, which is undergoing a A$1.3 billion expansion, handles coal from 15 mines in the Bowen Basin region, source of about 40 percent of the world's coking coal exports.

Australia, the world's largest coal exporter, shipped about 253 million tons of coal in 2007, a figure that will rise to 326 million tons by 2011, Credit Suisse Group forecast in a June 23 report. Australian exports may be constrained to 300 million tons a year by 2014 on port and rail bottlenecks, Citigroup Inc.'s Alan Heap said last week.

Queensland Rail operates 500 coal services a week from 62 mines in two states and also runs Queensland's passenger train network.

To contact the reporter on this story: Jesse Riseborough in Brisbane at jriseborough@bloomberg.net