SCENARIOS-Where to now for Australia's Newcastle coal port?

PERTH, Sept 2 (Reuters) - A temporary system to cut coal ship queues off Australia's Newcastle port -- the world's busiest coal terminal -- was thrown into disarray after a coal producer group missed an Aug 31 deadline to agree on a long-term port-sharing proposal.

The last minute breakdown prompted Australia's competition regulator on Tuesday to withdraw anti-trust immunity for an interim pact allowing competing coal companies to share the port's limited loading capacity.

If an interim vessel queue management system in place is not reinstated soon, the backlog of ships waiting off the port could surge from the current near two-year high of 41 and spark a jump in demurrage costs. [ID:nSYD519196]

While coal supplies in the region are unlikely to be affected in the short term, freight rates could rise as severe port congestion would tie up vessels and tighten ship supplies.

Without an agreement to overhaul the port's current operations, producers will also face uncertainties over how much coal they can export starting from 2010, casting a pall on their mine expansion plans and sales targets.

Here are possible outcomes of the crisis:

NCIG GROUP REACHES AGREEMENT WITH PORT, GOVT

The Newcastle Coal Industry Group (NCIG), a consortium of coal producers led by BHP Billiton Ltd (BHP.AX)(BLT.AX), could sign off on the proposal if it could persuade the New South Wales government to make some amendments to the plan.

A resolution may be in the offing, with BHP saying on Wednesday it was in talks with the state government to resolve a number of "critical issues" and that it believed an industry-supported solution could be achieved. [ID:nSYD485338]

"We were nearly at the end of the negotiations when the Aug. 31 deadline came. We now just have to iron out some humps and bumps in the agreement," said a source familiar with the talks.

The three parties had already reached in-principle agreement in April on a draft proposal, but BHP said the proposal was significantly changed by the government in the lead-up to the weekend deadline for a final signing-off.

Among the changes was a requirement that the NCIG commit to a second stage expansion, for which it has neither completed a feasibility study nor secured bank financing.

If NCIG agrees to the proposal, the three parties can return to the Australia Competition and Consumer Commission (ACCC) to reinstate an interim queue management system.

NEW SOUTH WALES GOVT BRINGS IN SHORT TERM MEASURE

With the ACCC having warned all parties that it would not extend approval for an interim port-sharing agreement, the state government could step in and implement a short-term port rationing plan.

The New South Wales Minister of Infrastructure said on Tuesday it would kick off talks with port operator Port Waratah Coal Services regarding the need to introduce short term measures to help manage coal exports.

Such a move may give NCIG and the goverment more time to complete the negotiations, and will also prevent a blow-out in vessel queues, which are already hovering at above 40, and in waiting time for ships to load coal standing at around two weeks.

GOVT AND PORT TO MOVE AHEAD BILATERALLY

If a three-way deal could not be reached, the government could impose a short-term port-rationing solution through regulation and eventually cut a bilateral deal between the government-owned Newcastle Port Corporation and PWCS.

Such a bilateral deal would need approval from the ACCC, which is unlikely to reject such a proposal. The ACCC Chairman Graeme Samuel said on Tuesday he would consider approving a bilateral deal, since it could still deliver the bulk of the benefits. (Reporting by Fayen Wong; Editing by Clarence Fernandez)