18/11/2010 - 00:00

Building the boom on north-west frontier

18/11/2010 - 00:00

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Close inspection shows there are challenges for big developments in our north-west.

I WAS fortunate to spend part of last week on a whistlestop tour of some of the north-west’s biggest development sites, which was a great way to see the boom from the very ground on which it is taking place.

While there is a limit to how deeply you can understand the situation from the climate-controlled atmosphere of a guided tour, it is still illuminating to get up on site and see things for your own eyes.

Just for the record, the Chamber of Minerals and Energy, in concert with the Australian Petroleum Production & Exploration Association, organised the trip.

In two days I visited three of the nation’s biggest development projects: Chevron’s Gorgon LNG project on Barrow Island; Citic Pacific’s Sino Iron Ore magnetite development at Cape Preston; and Woodside’s Pluto LNG plant on the Burrup Peninsula.

Each of these is at various stages of completion.

Gorgon is the least developed, while Pluto is the most progressed.

This leads me to wonder about Gorgon and where it is heading in terms of cost and timelines.

There is plenty of news out on Pluto, from its long search to find adequate gas for its first train (let alone the next two), to its horrific industrial relations battle a year or so ago to more recent disappointments such as the botched design of the flare tower.

But to the untrained observer, Pluto looks nearly ready.

Out at Citic Pacific’s project, the scale of the mine-site and processing plant is certainly impressive, even at this early stage.

The Chinese-owned facility has had its own recent troubles in terms of contractors being sacked and cost blowouts.

Looking across the processing parts of the mine development – these are significant in what will be as big a magnetite mine as exists anywhere in the world – it’s easy to see then potential for more trouble ahead unless the developer learns from early mistakes.

Just one sixth of the processing plant is anywhere near completion. That will allow the mine to start earning revenue but it provides a lot of leeway for further issues in construction, especially when mining operations are taking place in earnest simultaneously.

And if the experiences at those developments are anything to go by, then Gorgon has the potential to be the mother of all of them – simply because it is coming later, it is extra complicated and its development cost ($43 billion) is so much bigger than the others.

Gorgon today is little more than scratching on Barrow’s surface. The most obvious progress is the causeway and wharf being extended from the island’s east from where the LNG will be exported.

The wharf development has already claimed its first victim in Marine & Civil, which has run into financial difficulty due to delays and cost issues with the site.

It’s hard to imagine that the incredible quarantine efforts required for both personnel and equipment haven’t played a part in that. This onerous restriction, for environmental reasons, is likely to cause more headaches for every other contractor and ultimately the whole project.

I did ask Chevron’s representatives if any gear had been lost or temporarily misplaced, given something like 100,000 tonnes of equipment has been shipped to the island in white shrink wrap, which is so lacking in individual identity it’s surprising the government hasn’t adopted it for cigarette packaging. They said no.

Military methodology

THE logistics exercise at these sites is incredible, especially Gorgon, which also has space restrictions for storage.

To the observer there is a passing resemblance to a military operation on many of these sites, especially with the quantities of hardware that have to be delivered into harsh environments.

On my recent trip I was taken by the military language used by the industry – “critical” this and so and so “incidents”. The miners repeatedly referred to their plant and equipment as “kit”.

Also like the military it seems there is an acronym for everything

The other pervasive language was around safety. The levels of inductions, warnings and PPE (personal protection equipment) seemed over the top on many occasions, but show how much the issue is ingrained.

Every site had very strict requirements but what I noticed was the signage that was part of a bigger communications effort to indoctrinate those on site. These slogans were similar to the ad campaign messages we see for road safety and obviously had a lot of thought put into them in order to get the message across.

Funnily enough, these safety messages have to compete with other advertising on site, just as they do in normal life. The construction sites are littered with as much branding as I have ever seen, as well as other site messages such as environmental warnings or individual contracting companies’ own communications (one company had a fenced-off area carrying a banner citing its five key values).

There was obviously an industry-wide effort to cut through the jargon and connect the safety issue to normal life. Last week this was being communicated as an analogy relating to the lawn mowing back at home – contrasting the safety messages on site with the way so many people cut their grass wearing thongs and listening to the ipod.

In two days I heard the same analogy used four times, each from a representative of a different company.

“Back in Perth you should be able to pick the mine worker because they’ll be the ones with the cones on the road and wearing all the safety gear when they are mowing the lawn,” was the version I heard from one mine manager.

Indigenous shift

ON the tour I noticed little in the way of discussion or promotion of indigenous employment on any of the sites, which surprised me given that subject has received a fair amount of airtime as an issue lately.

I only actually noticed the signage of one indigenous company – Central Mining & Contracting – across the sites I visited, though we did see several Aboriginal workers. At Pluto there was discussion about the effort to locate the site around the Burrup’s extensive rock art with the help of local people.

I can’t help wondering if everyone is a little gun shy about this topic at the moment.

Fair cop

IN an unrelated event, the week earlier I attended an Australian Institute of Company Directors event where Rio Tinto Iron Ore and Australia CEO, Sam Walsh, and Wesfarmers managing director Richard Goyder explained their company’s position on indigenous employment.

Clearly Rio Tinto is miles ahead due to its much greater exposure to indigenous issues, a fact that Mr Goyder acknowledged.

Both were trying to outline what their companies were doing while recognising there was plenty more to be done.

At question time, they were both confronted with statements from indigenous members of the audience, which came across as chastisement.

Mr Goyder, in particular, received some stick for the attitude of Coles’ employees to indigenous customers at the company’s Kalgoorlie store. The issue was reported in the mainstream press as a result.

No wonder people don’t generally want to talk about this subject.

Here were two major corporate players doing what they should be doing, leading by example and prepared to tell the world about it. They did so in a cautious way that was not boastful or self-congratulatory.

Yet they cop it from the very people they are trying to help.

• mark.pownall@wabn.com.au

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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