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Gas and coal investment still up despite green energy push

Thursday, January 19th, 2023

Investment in lithium and hydrogen projects might be on the up, but analysts are cautioning that this is not yet the start of a new green mining boom.

Investment in lithium and hydrogen projects might be on the up, but analysts are cautioning that this is not yet the start of a new green mining boom.

According to Commonwealth Bank mining and energy analyst Vivek Dhar, gas and coal projects are still attracting the majority of funding with a 54 per cent increase in the value of committed projects in the 12 months to October 2022.

These locked-in projects are also skewed heavily towards so-called “old” commodities, with 55 per cent tied up in oil and gas, nine per cent in coal and 12 per cent in iron ore.

“The evidence does not yet point to the start of a ‘green’ mining super-cycle whereby significant investment is taking place in the commodities needed in the energy transition,” Dhar said.

“Around 64 per cent of committed investment is in gas and coal projects in Australia.”

New or green commodities account for a small share and are dominated by lithium, where eight projects worth $4.6 billion make up a six per cent share.

“Australia will have a key role in supplying lithium to the global market in coming years,” Dhar said.

“Australia accounted for 50-55 per cent of global lithium output in 2021.”

Lithium exports play a significant role in maintaining Australia’s run of sole trade surpluses.

“Energy exports – coal and fuels, largely LNG – were weaker, down by a combined $1.6 billion, on lower prices,” Westpac economist Andrew Hanlan said.

“However, ‘other’ metal ores – dominated by lithium – rode to the rescue, more than doubling to a fresh high of $2.5 billion, up $1.3 billion.”

Dhar said the possibility of Australia coming close to replicating its previous mining boom rests heavily on the future of green hydrogen, produced via renewable energy.

Two dozen hydrogen projects worth $118.6 billion are classed as “feasible” by the Australian Department of Industry, Energy and Resources, while a further 22 hydrogen projects worth $147.4 billion have been publicly announced.

Dhar said there was also a chance that hydrogen could lead to some revival of heavy industry within Australia.

“The energy losses associated with moving hydrogen, particularly by ship, opens the door to more downstream processing being located locally,” he said.

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