The great distances encountered in mining generate high costs for power distribution infrastructure.
The remoteness of many mines, which are located in wilds of WA, affects operators.
Gas and LNG powered equipment offers significant advantages to Australia and to miners looking to cut rising diesel costs.
Miners face a number of serious issues when operating in this country, the heat, dust, the climate, and importantly - distance.
The tyranny of distance is one of the major issues facing Australian miners, particularly in the hard rock mining sector, where iron ore, gold, nickel, copper, and lead mines are located hundreds, if not close to thousands of kilometres away from major cities and major ports.
This puts a strain on all aspects of miners' infrastructure, including water, fuel, and importantly - power.
In 2007 BHP used more than 1400 megalitres of diesel - accounting for more than five per cent of Australia's total diesel consumption, and in 2013 used 2041 megalitres of distillate and gasoline, demonstrating the consistently rising demand for fuel and in turn the significantly rising costs associated with it.
The remoteness of many Australian mines traditionally means it is necessary to build heavy duty infrastructure to connect to the grid, or build their own diesel fuelled generators or power stations (which are all costly options) or look to the alternatives.
There are a number of options for miners looking to power their operations without relying heavily on diesel.
These include solar (which is already in use at few Australian mines), wind, and gas.
Gas has been pegged as the new cost-saving fuel for many Australian mining operations, powering not only the site itself, but also the vehicles.
According to recent reports by BIS Shrapnel the LNG and gas industry is set to boom in Australia, while a study by Deloitte outlined the growing LNG sector as the foundation for one of the largest boosts to Australia's economy over the last two decades.
Gas driving mining
Energy giant Shell are looking to introduce LNG-powered fleets at Australian mines as part of a push to increase natural gas use beyond the export of LNG, with BHP and Rio Tinto both looking to implement the technology.
The two big miners are said to be looking at LNG-powered fleets for their West Australian operations as a way to offset high energy costs.
A spokesman for Rio Tinto said that it was looking at dual fuel technologies for the use in the Pilbara.
"There are some real challenges with the impact on payload, refuelling frequency and certainty over supply sources, but our work in this area remains ongoing," he said.
Shell says natural gas has many advantages over diesel: it is cleaner, abundant in Australia, and cost competitive.
The company said as a result it can lead to reductions in greenhouse gas emissions, which are proving to be a major factor in a company's decision to make the switch.
Stuart Macdonald, a global LNG applications technologist working for Shell, pointed out the advantages of using the fuel in the mining industry at Shell's Technology Forum last year.
Macdonald said a 27 per cent reduction in greenhouse gas emissions from well to wheel was apparent when using engines in their current technological form, which will improve as new technology is developed.
Westport Resources Australia and Caterpillar have joined forces to develop natural gas fuel systems for mine trucks and EMD locomotives.
"We recently signed an agreement with Caterpillar to jointly develop direct injection engines specifically for the mine trucks the 793, 795 and 797 - and also part of that agreement is with EMD for the MD&10 engines used in the locomotives," Westport Innovations Australia managing director Bruce Hodgins said.
Power in the Pilbara
Commodity prices are putting the squeeze on profits, but throughout a number of companies in the Pilbara there have been plans running for a couple of years to reduce the price of power generation.
Diesel has been the staple form of fuel for generators and mobile plant in the mining industry for many decades, but the expense of petrochemical power generation has been identified as an unnecessary running cost that can be slashed down to size.
Recently at the Diggers and Dealers conference in Kalgoorlie, Fortescue Metals group CEO Nev Power indicated that FMG planned to contribute to its strong commitment to debt reduction by slashing costs on fuel used for power generation and in haul trucks.
"If we could switch to all gas throughout our operations, it would be around 50 per cent of our current diesel costs, $400 million dollars, but how much of that we are able to achieve, because a lot of that is technology driven, how quickly we can get trucks to burn natural gas," he said.
Aside from the technological impediments associated with complete gas refits for haul truck engines, plans for gas fired power station have been in the works for a few years.
"Our first priority will be switching our power stations, the Solomon Power Station will switch to gas by trucking in the next month or so," Power said.
FMG had already planned for the gas conversion, with duel fuel turbines already installed at the suite.
To plan beyond trucked gas, which still depends on diesel costs, Fortescue announced the signing of a long term gas transportation agreement back in January, one which has seen construction of a 270 kilometre gas pipeline to deliver gas from the existing Dampier to Bunbury Natural Gas Pipeline to Fortescue Metals Group's 125MW Solomon Hub power station.
The pipeline, worth $178 million to construct, has been built by Monadelphous and the DBP Development Group (a joint venture between the DUET Group and TransAlta subsidiary TEC Pilbara), and will be operational early next year.
"TransAlta, our existing partner at Solomon, and DDG have outstanding reputations with proven capabilities within the energy infrastructure industry. Their expertise will allow Fortescue to focus on its core business of efficient, low cost delivery of iron ore to customers in China and South East Asia," Power said.
A 20 year, 100 per cent take-or-pay gas transportation contract was signed between the joint venture DBPP Group and the miner, with Fortescue securing Shipper Rights under the Gas Transportation Agreement.
BHP Billiton approved the gas-powered Yarnmina Power Station back in late 2011, and by projections at the time it ought to have been up and running by now, although the collapse of construction contractor Forge put a kink in the plans earlier this year.
In addition to providing power at a lower operational cost, by using gas miners are also helping to cut their carbon operating footprint and emissions levels.
Kim Palfrey, general manager of projects at New Hope Group, told Australian Mining that he expects the technology to be slowly phased in by Australian companies.
"LNG is some way off yet and will be expensive to implement," he said.
"It will mean that this technology will more likely be phased in over time due to the extent of modification required convert to LNG power."
However, Palfrey added that the gas was an important chapter in Australia's fuel needs.
"It offers significant advantages to Australia as the mining and transport industries convert to LNG powered equipment.
"We should be somewhat protected from the volatility of the fossil fuel markets," he said.
The mining industry is currently on a precipice when it comes to over-running costs and the business of operation.
It must now choose to bear the cost of converting now, or bear the unrepairable costs in the future.