M2 concession period extends into era of steep oil decline

What has been overlooked in Alan Jone’s 2GB campaign on the dumped BITRE report 117


is that concession periods of toll-ways extend far into the era of steep oil declines shown in that very report. Here is the example of Sydney’s M2 which is being widened right now. If the Federal government had informed in 2009 – as was their duty of care – State governments, banks and other investors about peak oil, this widening would not have happened and rail solutions would have been sought instead.


This graph shows the M2 concession period up to 2046 in relation to future oil supplies as estimated in the BITRE 117 report, with an (optimistic) tipping point in 2017.

While many may not be too much concerned with what happens 3 decades down the track, the problems with toll-ways are actually around the corner and not just after 2017:

  1. The M2 widening has been financed by new debt, bringing Transurban’s borrowings to $ 4.2 bn. The global financial crisis in 2008/2009 – which was triggered by peak oil – was obviously not a warning signal enough to deter investors sinking more money in oil dependent infrastructure
  2. There is a high danger of armed conflict in the Middle East Gulf as a result of the global peaking of crude oil production and, most importantly, peak oil in Iran itself. This peaking event was well known since 2006.

Let’s have a look how expected traffic growth on the M2 compares with the oil peak

No peak there, but perpetual growth

 Latest traffic data (AADT = 92,500 in Dec 2011 quarter) confirm an expected drop in traffic due to construction activities http://www.transurban.com/1067066.pdf but the big question is whether traffic can grow to 120,000 by 2016, or around 26%.  Have planners factored in a continuing oil price of $120 for Tapis?

(1) Transurban’s debt and the financial crisis

There are now new ASIC rules as to the disclosure of risks in PDS documents for infrastructure projects.

12-06MR ASIC improves disclosure by infrastructure entities


It would have been common sense to have followed these guidelines for all oil dependent projects in the last years at least. Courts will decide later who has the responsibility for this failure as many investors will lose their money.

According to financial documents on the Transurban website borrowings increased from $4 bn in 2010 to $4.2 bn in 2011

Extract from page 73 in: http://www.transurban.com/Financials_2011.pdf

Total liabilities including tax liabilities were $5.4 bn, page 135 in


Causes and Consequences of the Oil Shock of 2007-08


(2) Peak oil in Iran is now one of the biggest problems

Jean Laherrere from ASPO France, who holds technical (as opposed to political) reserve data wrote in November 2006:

M. Saeidi (VP of Iranian Atomic organization) stated (Guardian 27 Aug. 2006) that Iran has only 25 to 30 years of oil, contrary to NIOC reports of 132 Gb with a R/P of 93 years (2004 OPEC report & BP Review) or more than 3 times more. Ali Bakhtiari (ASPO & former NIOC) has already declared that NIOC estimates were exaggerated when reality is close to 40 Gb (from estimates of M.A.Saidi (geologist and former NIOC head). In 2005 Iran has produced 4 Mb/d with a cumulative production of 58 Gb. R/P of 25-30 means that remaining reserves are close to 40 Gb, giving a total discovery about 100 Gb.


Saeidi and Saidi confirm that 120 Gb is a likely ultimate, which leads to an oil peak right now.


By the way: BITRE 117 assumes an ultimate of 160 Gb for Iran!!! (page 267)


That is why 2017 as peak is too optimistic.

The Guardian article is here, actually dated 21/8/2006

Mohammad Saeidi is a practical man. Sidestepping the political, ideological and historical aspects of the nuclear dispute with the west, the vice-president of Iran’s Atomic Energy Organisation is focused on a set of problems that must be solved logically if the country and its people are to develop to their full potential. “The country’s oil and gas reserves will last a maximum of another 25 or 30 years,” he says. “Therefore we have to provide other resources.”



Incidentally, this was just weeks after Dr. Bakhtiari gave a 3-hr lecture on peak oil to a Senate hearing on oil supplies (11/7/2006)

CHAIR—If I understand you correctly, you are saying that we should be investing now as a

matter of priority in public transport.

Dr Samsam Bakhtiari—Certainly, yes. Right now. As soon as possible. Start tomorrow on

public transport. It is better than starting the day after tomorrow. You also have the problem that, at some stage, you will not be able to invest that easily. The further we go down the line,

investment gets more difficult. People who think they will undertake projects in 10 years time do not realise the problems of making these projects


Well, instead of following Dr. Bakhtiari’s advice on public transport, Transurban and the RTA, with the blessing of the NSW government, are going to pull down a bus ramp connecting bus lanes on the M2 with the rail hub in Epping, on 10/2/2012.

From a community newsletter of the Hills M2 upgrade:

Beecroft Road bus ramp removal commences on 8pm Friday, 10 February 2012

The bus ramp will be dismantled and removed over three weekends in February, from 8pm on Fridays to 5am on Mondays starting Friday, 10 February, weather permitting.


The dashed lines show previous bus routes connecting the M2 directly with Epping station


2 buses leaving the tunnel under the rail line and heading up the ramp which was quite busy

Who will have the courage to stop this? If there were to be a war in the Gulf there would be diesel shortages within weeks. Buses from the North West could no longer afford the luxury to run parallel to rail lines into the CBD, but would have to connect to the nearest station, Epping (not Macquarie Park)

US aircraft carrier passing through Hormuz

The six vessels strong battle group is made of:
– USS Abraham Lincoln (CVN-72) Nimitz class nuclear-powered aircraft carrier.
– USS Sterett (DDG-104) and USS Russell (DDG-59) Arleigh Burke-class destroyers.
– USS Cape St. George (CG-71) Ticonderoga-class cruiser.
– HMS Argyll (F231) Type 23 ‘Duke’ Class frigate.
– French Ship La Motte-Picquet (D645) Georges Leygues Class Destroyer (Frigate in French designation)


Pentagon deploys mothership to Persian Gulf as tensions with Iran escalate

Jan 28/2011

The Pentagon is rushing a “mothership” to the Middle East to be used by commando teams as unrest in the region heightens, reports The Washington Post.


Happy motoring! Thanks to the US, British and French Navy.


Previous, related  posts – there were enough warnings:

4/4/2011    Sydney’s RTA builds M2 exit lanes for $200 oil

5/1/2011   Sydney’s M2 toll increase high above RBA inflation target (part 3)

9/12/2010    Will Transurban ever pay back its debt? (part 2)

7/12/2010   Sydney vandalizes its own public transport infrastructure (part 2)

25/10/2010    Sydney’s RTA about to pull down public transport infrastructure  (part 1)

21/9/2010    RTA fails to present business case for M2 widening (part 1)
19/6/2010    M2 widening: Primary Energy Dilemma for cars