Australian $10 bln coal-port expansion put on ice due to weak demand

MELBOURNE, June 20 Fri Jun 20, 2014 3:26am EDT

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MELBOURNE, June 20 (Reuters) - A proposed $10 billion Australian coal port expansion, one of two port expansions planned near the Great Barrier Reef, was shelved by its sponsors on Friday who pointed to a lack of demand for the extra capacity.

The Dudgeon Point coal terminal project, designed to handle 180 million tonnes a year, was withdrawn on Friday ahead of a deadline for submitting all the studies for its application for environmental approval.

The decision came in the wake of a slide in coal prices to five-year lows that has forced miners, led by BHP Billiton Ltd and Glencore, to cancel coal projects, shut mines and sack thousands of workers.

The two-terminal project was backed by India's Adani Enterprises Ltd and a subsidiary of Brookfield Infrastructure and led by ports operator North Queensland Bulk Ports Corp (NQBP).

"Those interested in port development must demonstrate demand and current and short-term forecast market demand for coal does not support an expansion to the capacity proposed in the Dudgeon Point Coal Terminals Project," NQBP Chief Executive Brad Fish said in a statement.

NQBP is also involved in plans to expand another coal port, Abbot Point, in Queensland, which faces a legal challenge by green groups and marine tourist operators concerned about potential harm to the Great Barrier Reef.

They fear the Abbot Point project, which involves dredging and dumping 3 million cubic metres of sand about 25 kilometres (15 miles) away from the reef, could harm corals and a range of marine life on the reef.

The Dudgeon Point project would have involved dredging about five times the amount of sand.

The Australian and Queensland governments are under pressure from United Nations agency UNESCO's World Heritage Committee to take more action to protect the Great Barrier Reef otherwise it may be put on a list of sites in danger next year.

Bowing to those concerns, Fish said NQBP would do a broad port planning review and revise the scope of the Dudgeon Point project at the port of Hay Point, but gave no timeframe for completing that work.

"Recent strategic assessments of the Great Barrier Reef will be considered as part of the port planning," NQBP said.

Adani spokesman Craig Dowling said Adani remained interested in building a terminal at Dudgeon Point, but said Adani plans to use Abbot Point for its A$16.5 billion Carmichael coal and rail project.

"We have not changed our view, but we are happy to go along with the new master plan," Dowling said. ($1 = 1.0639 Australian Dollars) (Reporting by Sonali Paul; Editing by Muralikumar Anantharaman)

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