BHP Billiton has bailed on its plan for a rail and port project in Queensland, after being told that the current facilities are good enough.

BHP was set to start work on terminal two of the Abbot Point expansion near Bowen, and a rail line linking the port with mines in the Bowen Basin.

A new report from the Centre for Policy Development has shown BHP that existing coal terminals are underused and further port expansions are probably unviable, leading the giant firm to pull the pin and look for more profitable ventures.

The Centre for Policy Development report found the state’s coal ports are operating at around 65 per cent capacity and new ports would become obsolete quite quickly, author Laura Eadie said.

“Queensland is likely to still to have surplus port capacity by the end of the decade,” she said.

Queensland Resources Council spokesman David Rynne says new coal ports will be needed to support the mega mines in the Galilee Basin, which the Queensland Government can barely contain its willingness to approve.

“Supply will come on and that spare capacity will be absorbed,” he said.

In recent weeks, BHP has scrapped a similar project from Moranbah to Abbot Point, meanwhile Glencore-Xstrata is trying to sell almost half its capacity at the Wiggins Island Coal Terminal in central Queensland.

The now-defunct $5 billion Abbot Point plan would have shipped up to 60 million tonnes of coal per year from 2015, but BHP has abandoned the idea.