Investment in coal assets
Which coal assets does Wesfarmers own?
The Wesfarmers Resources business owns and operates the Curragh coal mine in Queensland’s Bowen Basin. This mine primarily produces metallurgical coal for steel production and it also produces thermal coal for domestic power generation.
Wesfarmers Resources also holds a 40 per cent interest in the Bengalla mine in New South Wales, producing thermal coal for power generation in international markets. This year, 1.5 per cent of our revenue came from our Resources business.
The coal divestment debate
Wesfarmers recognises that climate change, industry trends and long-term customer trends mean we need to consider our exposure to the coal sector. The impact of climate change has introduced the question of ‘stranded assets’ to the wider fossil fuel sector. The advent of international emissions reduction legislation suggests that fossil fuel demand could be subject to regulatory or economic barriers.
Stranded assets discussions have focused on thermal coal (coal used in power generation) because metallurgical coal which is used in oxygen-based steelmaking has no current available substitute.
Why does Wesfarmers own coal assets?
Metallurgical coal is a necessary component in the steel-making process and the coal industry is a major contributor to the Australian economy. In many developing countries, coal is the only affordable and available bulk source of uninterrupted energy/electricity and is required for the economic growth needed to improve living standards.
Wesfarmers continues to support a carbon reduction mechanism that enables Australia to meet its international emission reduction targets. While we expect that the energy mix will change over time, all feasible scenarios show that it is highly likely that there will be a role and a need for coal as a source of energy and steel-making for some decades.
What can be done to make coal ‘cleaner’?
Continued use of coal and gas for power generation by mid-century is likely to be dependent upon cost-effective deployment of very low emissions technology, such as carbon capture and storage (CCS). Long-term policy certainty is a pre-requisite for decarbonisation to occur efficiently and affordably for consumers. Both renewable and lower-emission fossil fuel generation will be an integral part of the energy generation mix throughout the transition to a low emission global economy.
Wesfarmers Resources is a member of COAL21, which is an initiative of the Australian coal industry to support the pre-commercial demonstration of low emissions coal technologies, including carbon capture and storage. So far the COAL21 Fund has committed more than $300 million to demonstration projects for low emissions coal technology solutions.