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In 2007 the estimated value of Western Australia’s mineral and petroleum industry reached $53.1 billion.  This represented a seven per cent ($3.6 billion) increase compared to the previous year.  This result was achieved through strong overseas demand for mineral and petroleum commodities, increased output and strong commodity prices.  When analysing this outcome it needs to be considered in the context of an 11 per cent strengthening of the Australian dollar against the US dollar, adverse weather conditions in the first quarter of 2007 plus ongoing difficulties with equipment supplies and skills shortages.

Accounting for most of the increase in value was nickel, iron ore and petroleum.  These three sectors accounted for around 75 per cent of the total value of $53.1 billion for 2007.  Petroleum accounted for the highest portion of sales with 31 per cent of the total value while iron ore represented 30 per cent and nickel accounted for 13 per cent.

Several commodities actually recorded decreased levels of physical output, notably lead, coal, cobalt, gold and nickel.  However, very strong commodity prices translated to the value of both cobalt and nickel rising despite these production falls.

Petroleum is the largest resource sector by value and an increase in sales of
$1.2 billion saw it reach a record level of $16.7 billion.  This eight per cent rise in value was chiefly due to continued high world oil prices and a ten per cent increase in crude oil sales volume.

A total of 264 million tonnes of iron ore was sold in 2007, valued at $16.1 billion, an increase of five per cent and nine per cent respectively.  Iron ore is competing with petroleum to be the largest resource sector by value with the commodity accounting for 30 per cent of total minerals and petroleum sales in Western Australia in 2007.  With mine and port expansions, proposed new developments and anticipated continued strong demand, it is expected that this sector will continue its record breaking run well beyond 2008.

Nickel is the third largest commodity by value, earning approximately $7 billion in 2007.  This was an astonishing 19 per cent ($1.1 billion) increase compared to the previous year.  Sales quantities actually dropped eight per cent from 2006 to 160,457 tonnes, however, strong world prices for nickel ensured that overall value rose.

Next in order of value to the State is alumina.  It had a sales value of $4.7 billion in 2007, down marginally from the previous year by just over one per cent.  Alumina is followed closely by gold with a sales value of $4.1 billion, a decline of four per cent.

In 2007 the price of lead almost doubled.  Coupled with an increase in the output of copper and zinc, the Western Australian base metals sector performed strongly, increasing in value by ten per cent to $1.8 billion.

The base metals sector performed strongly with increased output for both zinc and copper.  Strong prices resulted in a ten per cent increase in the value of base metals in 2007 to reach a total of $1.8 billion.  Diamond sales also increased, recording a 
38 per cent rise in quantity sold to reach 23.54 million carats and salt sales of $306 million were also up by 27 per cent from 2006.

An average 11.3 per cent appreciation in the Australian dollar against the US dollar in 2007 had a significant influence on the overall mineral and petroleum result.  Rising commodity prices were to a large extent offset by the appreciation of the Australian dollar.  This resulted in changes in the value of commodities not being as substantial as predicted.  The table below reflects the price changes in 2007 compared to 2006, in both US dollar and Australian dollar terms.

It is expected the strong demand for Western Australia’s commodities by the State’s trading partners will continue beyond 2008 due to the prominence of China as a major export destination and its continuing economic prosperity.

Some additional indicators of Western Australia’s significance in the national resource industry are that the State accounts for:

Approximately 50 per cent of Australia’s total value of mineral and petroleum sales (based on DoIR and ABARE published data, ABARE Australian Commodities December Quarter 2007, page 592);  and
71 per cent of Australia’s oil and condensate production (based on published data by ABARE, Australian Mineral Statistics quarterly 2007 publications).

The importance of the State’s mining developments is reflected in the latest Australian Bureau of Statistics (ABS) investment figures for 2007.  This data shows that Western Australia’s share of national mining capital expenditure rose from 61 per cent ($12.68 billion) in 2006 to 62 per cent ($15.03 billion) in 2007, a 19 per cent increase for the previous year.  National mining capital expenditure only rose 16 per cent from the previous year, indicating 70 per cent of this increase was invested in Western Australia.

Western Australia topped all other States contributing a little under 37 per cent ($61.4 billion) towards the total Australian merchandise exports for 2007, an increase of 12 per cent on the previous year.  Queensland followed with 20 per cent, then New South Wales with 17 per cent and Victoria contributing about 12 per cent.

The Western Australian mining and petroleum sectors contributed a massive 86 per cent ($52.7 billion) toward the State’s merchandise exports in 2007 which highlights the importance of these sectors on both the Western Australian and national economies.

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Iron ore is now the largest individual mineral sector by value and accounts for 30 per cent of the value of the overall mineral and petroleum sector’s output for 2007.  On the back of strong demand from China and rising prices, iron ore reached a record sales value of $16.1 billion.  This was more than a nine per cent rise from 2006.  The quantity sold also broke records in 2007, increasing by more than five per cent to reach 264 million tonnes.

The Tapis oil price peaked in November at $US103.71/bbl and averaged $US78.19/bbl in 2007, up 12 per cent from 2006.  The increased output of crude oil resulted in a ten per cent rise in sales volume to reach 82.5 million barrels.  This increase combined with high oil prices caused the value of crude oil sales to increase by 12 per cent to $7.4 billion.  The value of condensate also rose ten per cent to $3.2 billion.  With most of the fields reflecting decreased output due to maturity, the Enfield and North Rankin fields accounted for the majority of the increase in production.

Nickel contributed almost $7 billion (an increase of 19 per cent over the previous year) to the total value of the State’s resources in 2007.  Sales quantities of nickel actually fell 8.4 per cent to 160,457 tonnes.  However a 39 per cent price rise in the price of nickel in Australian dollar terms resulted in an increase in the overall value of the sector.

Alumina’s steady performance continued through 2007 to claim fourth place.  A modest output increase of about three per cent resulted in a record 12.17 million tonnes being shipped.  An increase in the US dollar price for alumina was not enough to offset the effects of the strengthening Australian dollar and resulted in the value of alumina sales in 2007 falling marginally to $4.7 billion.

LNG sales volumes rose three per cent to achieve a record 12.4 million tonnes whilst the value of sales dropped by two per cent to $4.5 billion.  This resulted in LNG holding the position of fifth most valuable individual commodity in the State.

Gold output fell by seven per cent in 2007 to 4.9 million ounces (152,085 kg).  This sector remains in sixth place with a value of $4.1 billion, down a little over four per cent from 2006.  Whilst gold averaged US$697/oz for 2007, in January 2008 prices broke through the previous record of US$850/oz set in 1980.  Viewed as a safe-haven asset, gold has gone on to record an all-time high of US$1033.90/oz, set in March 2008.

Base metals achieved a record value of $1.8 billion in 2007, which was almost a ten per cent increase on the previous year.  This was due to strong increases in the production of copper and zinc.  The value of copper rose 11 per cent to just over $1 billion even though the price of copper fell by five per cent in Australian dollar terms.  This was due to the increased quantity of copper produced in 2007, rising 19 per cent to 119,292 tonnes.  The value of zinc also rose despite a fall in the US dollar price of almost two per cent.  The value of zinc increased by 13 per cent to $685 million due to a 30 per cent rise in quantity produced to 180,570 tonnes.  Due to a fall in production of 44 per cent to 42,019 tonnes, the value of lead fell 12 per cent to $116 million.  This was despite lead prices almost doubling in US dollar terms in 2007.

Domestic natural gas sales increased by ten per cent to 9.2 billion cubic meters.  The sales value of this gas rose by 21 per cent to $985 million in 2007.  LPG butane and propane also enjoyed an output increase of almost four per cent, returning a sales value of $687 million which is a 12 per cent increase on the previous year.

In line with the nickel industry’s lower output, cobalt sales volumes were down almost eight per cent.  However an increase of 73 per cent in the US dollar price of cobalt resulted in an increase of 54 per cent in sales value to reach $339 million.

The volume of salt sales rose by 27 per cent in 2007 to reach approximately 13.6 million tonnes.  The value of these salt sales increased commensurately by 27 per cent in 2007 to $306 million.

Diamond sales volumes increased just under 38 per cent to reach 23.5 million carats.

The total value of mineral sands fell by a little under 15 per cent to $756 million.

Coal output and sales revenue were both down by 20 per cent and 17 per cent respectively.  The value of coal produced in 2007 was $264 million.

The State’s resources in order of value for 2007 are:

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