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SA power problems threaten Olympic Dam growth: BHP

Business

The head of BHP Billiton’s Australian mining operations says the cost and instability of South Australia’s electricity supply could threaten plans to massively expand production at Olympic Dam in South Australia’s north.

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Mike Henry, who leads BHP’s Australian minerals business, has told Sky News that copper production at Olympic Dam could more than double by the middle of next decade, but lack of affordable and stable power could stymie the industrial giant’s ambitions.

“We’re currently producing around 200,000 tonnes per year,” he said.

“Last year was the first time we’ve done that in some time. Our expectation is that we’ll grow that to around 230,000 tonnes in the coming years, just through becoming more productive. We then believe that we’ve got options to grow it to 280 to 300,000 tonnes in the coming five or so years, potentially then increasing further to up to 500,000 tonnes by the middle of next decade.

“So there’s real opportunities here to continue to grow the Olympic Dam business but any smelting business requires stable, affordable energy. And of course some of what’s played out recently does give rise the question as to whether that energy reliability is there. And left unresolved that sort of thing would start to put at risk some of the investments we have planned for Olympic Dam.”

Olympic Dam was forced to shut production after South Australia’s statewide blackout in September. It was just one of a range of heavy industrial operations that lost production time and money after a storm brought down transmission lines in the state’s north.

The nation’s energy ministers responded to the blackout by asking Chief Scientist Alan Finkel to create a blueprint for increased energy security across the national market.

The review will develop a “national reform blueprint to maintain energy security and reliability in the NEM”, including coming up with policy, legislative and rule changes to maintain security, reliability and affordability in the system as it transitions to greater levels of renewable energy.

A preliminary report will be prepared by the COAG meeting in December, with a final report to be delivered in the new year.

A State Government spokesman insisted the government was “on the front foot in providing a stable and competitive environment for energy sector investment”.

“For example, to ensure power system security is managed over the longer term, the Government has submitted a package of rule change requests to the Australian Energy Market Commission,” he said.

“The Government is also using its own electricity needs to help improve power system security and wholesale market competition. It will be procuring 25% of the Government’s electricity needs from new dispatchable renewable energy providers and 75% from generation which increases wholesale electricity market competition and improves power system security.”

The spokesman also pointed out the Government’s $500,000 contribution to ElectraNet’s assessment of a new high capacity interconnector to South Australia.

“The Government also acknowledges that gas will be a transition fuel, which means South Australia and Australia need competitive gas supply. Last week a $24 million program was announced to incentivise greater gas extraction from a diversity of South Australian gas fields. Grants will be limited to the projects with the most substantiated prospects of adding to gas supplies from South Australia within the next 12 to 36 months.”

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