Works aim to double coal trade

By PAM GRAHAM

Work is under way to double the nation's coal exports, but questions remain over how such an increase ports could handle.

About $26 million is being spent on new coal-handling facilities at the Port of Lyttelton, and Port Marlborough is stepping up investigations into developing Shakespeare Bay, near Picton, as a deepwater port for coal exports.

The lack of deepwater ports on the West Coast means coal is now transported across the Southern Alps to Lyttelton by rail, but producer Solid Energy and Tranz Rail have not been able to agree on terms that would allow the volume of coal to be increased.

State-owned Solid Energy exported 2.1 million tonnes of coal last year and wants to more than double that.

Production from the region will be further boosted if the proposed Pike River mine near Paparoa National Park is developed.

"The demand for coal is easily strong enough to support New Zealand exporting four, five or even six million tonnes a year," said Solid Energy chief executive Don Elder.

His company could export more than four million tonnes a year and Pike River, which is 75 per cent owned by New Zealand Oil and Gas, could export at least one million tonnes annually.

But Lyttelton can handle only about four million tonnes a year.

Port Marlborough chief executive Sean Bolt said it was further investigating the Shakespeare Bay idea but no contracts had been secured for the project which could cost from $14 million to $30 million.

Port of Tauranga said last month that a contract it had with Marlborough allowed it an equity participation in development plans.

Elder said if Shakespeare Bay was developed "you could see Pike River and ourselves sending anything from half a million to two million tonnes a year through that facility".

But "we're comfortable that Lyttelton can provide four million tonnes capacity a year", he added.

"If we could get an adequate performance guarantee with rail then we would be comfortable leaving our eggs in one basket.

"We realise that leaves no capacity for Pike River, so in the end the right answer is you are going to need the second port.

"It is more a question of when, rather than if."

Bolt said Port Marlborough had resource consents for facilities to handle coal, which could be barged from West Coast ports to the bay.

Solid Energy has talked to Toll Holdings, the Australian company bidding for Tranz Rail.

Tranz Rail has argued that it needs to make an adequate return on capital, while Solid Energy wants cheaper rates for higher volumes.

"With suitable upgrades on the rail there would be no constraint on the rail," Elder said.

"The constraint would always be the port."

Lyttelton had gone for a big upgrade to bolster its handling facilities and West Coast ports were planning to slowly improve their facilities for coal barging.

There is a limit on the size of ships that can call at Lyttelton but Elder said the port was deep enough to berth panamax-sized coal carriers - the largest size that can fit through the Panama Canal.

Solid Energy could also barge coal from the West Coast to Tauranga or Onehunga.