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SA Banker’s Briefing on the MDB

SA Banker’s Briefing on the MDB. Prof. Mike Young Research Chair, Water Economics and Management The University of Adelaide SA Banker’s Briefing, Friday 15th June 2007. Caveat

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SA Banker’s Briefing on the MDB

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  1. SA Banker’s Briefing on the MDB Prof. Mike Young Research Chair, Water Economics and ManagementThe University of AdelaideSA Banker’s Briefing, Friday 15th June 2007

  2. Caveat This is presentation is offered by an independent observer who is not fully informed, who does not have access to all the information necessary to make reliable predictions about the future and who has no training in the provision of financial advice. Before making any decisions associated with investments reliant upon the health or otherwise of the River Murray, independent advice as to the State of the River Murray and likely nature of government policy decisions pertaining to this resource should be obtained.

  3. Total Murray-Darling Basin inflows Annual flows (year ending June) showing forecast for 2006/07 Source: Craik, MDBC

  4. Impacts of drought on average seasonal irrigation allocations Source: Craik, MDBC

  5. River Murray inflowsAverage and Selected Years Source: Craik, MDBC

  6. River Murray System Cumulative Inflows2007 to date compared to 2006 Source: Craik, MDBC

  7. Murray System TotalStorage June 2000 to May 2007with indicative outlook to end September 2007 Source: Craik, MDBC

  8. Modelled outlookTotal MDBC storage 10000 Total Capacity 9000 Current June 2007 Forecast 8000 Current November 2007 Forecast Modelled Current Conditions Values : Long Term Average Values are marked with 7000 Minimum Values are marked with Current May 2008 Forecast 6000 5000 Total Storage (GL) 4000 3000 2000 1000 0 100% 95% 90% 85% 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Probability of Exceedance Source: Craik, MDBC

  9. Rainfall outlook3 months June – August 2007 Source: Craik, MDBC

  10. Temperature Outlook3 months June – August 2007 Source: Craik, MDBC

  11. BOM Outlook • Current ENSO conditions neutral • All 6 international models predict a La Nina in 2007 • => Higher than average rainfall over winter/spring Source: Craik, MDBC

  12. Indicative Water Availabilityin 07/08 Low Reserves Remain - 'Normal' Sharing Arrangements - Reserves may remain depleted - Consider building strategic reserve for 2008/09 - Effective markets Transition Zone - transition back to normal water sharing arrangements - limited 2007/08 allocations • Special Arrangements • - Normal Agreement sharing suspended • Don’t get 1850 GL to SA • Contingency Measures Required • - Carryover able to be progressively allocated • - Markets limited Current estimate of water availability Contingency Arrangements - Repeat 2006/07 inflows - Normal Agreement sharing suspended - Contingency Measures Required - Markets inoperable Source: Craik, MDBC

  13. Water accounting bottom lines • At 1850 GL, SA is nearly over-allocated! • Evaporative losses ~1100 - 1300 GL • Urban and industrial allocation 650/5 = 130 GL • Irrigation ~ 500 GLA bit for the Coorong and to flush salt ~ 120 GL • Total ~1850 - 2050 GL • Options under worse case scenario • Close parts of the system (Lower Lakes, Bonney & wetlands) • Lower the River (but salinity) • Empty Snowy (very expensive)

  14. Policy recommendations • Any announcement made must be bankable • Speedy, unrestricted basin-wide trading • Put Adelaide on tougher restrictions • Unrestricted carry-forward • Govt. buy-up and lease back for two years to resolve over-allocation • Don’t invest in subsidised infrastructure upgrades until we see how the system responds to less water • New agreement and new governance system

  15. Contact: Prof Mike Young Water Economics and Management Email: Mike.Young@adelaide.edu.au Phone: +61-8-8303.5279Mobile: +61-408-488.538 www.myoung.net.au

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