Burrup costs add up

THE provision of additional infrastructure support is emerging as a key issue for planned industrial projects on the Burrup Peninsula.

Last week’s collapse of the $800 million Methanex project has highlighted the issue of high construction costs, and additional infrastructure support would help to ameliorate this problem.

Japan DME, owned by four major Japanese companies, has become the latest project to raise the issue of high construction costs.

“We finished our feasibility study, however it indicated high plant construction costs on the Burrup Peninsula and therefore we need more studies,” a spokesman for Japan DME told WA Business News.

The spokesman added that the cost of the project had risen to more than $1 billion.

Dampier Nitrogen, backed by Australian Stock Exchange-listed Plenty River Corporation, has called explicitly for Federal Government infrastructure support.

“There is a real requirement in my view for multi-user infrastructure support,” Plenty River director Peter Streader said.

“Because of its remoteness and high construction costs, every bit of assistance is going to be much needed.”

He said areas needing support included wharf facilities, power supply and water supply.

This would be additional to the $137 million of multi-user infrastructure currently being developed by the State Government.

This comprises new water supply facilities, including a commercial desalination plant, upgraded port facilities and a service corridor linking industrial sites with the port.

Chamber of Minerals & Energy chief executive Tim Shanahan believes infrastructure should be supplied on a common user basis, rather than being project specific.

“There is a role for both spheres of government, Federal and State, to deal with these infrastructure issues,” Mr Shanahan said.

A spokesperson for Federal Industry and Resources Minister Ian Macfarlane said infrastructure packages would be negotiated in relation to specific projects, but on the basis that the infrastructure would be available to multiple users.

This contrasts with the State Government’s approach.

Its infrastructure package was triggered by the formal go-ahead of Burrup Fertilisers’ $645 million ammonia project but is being developed independently of specific projects.

Japan DME and Dampier Nitrogen are among four gas processing projects working towards formal go-ahead on the Burrup.

UK-based GTL Resources is seeking to finalise financial backing for its $700 million Liquigaz methanol plant.

The one-million-tonnes-a-year plant would be GTL’s first project.

Chairman Peter Middleton said earlier this year that: “Clearly it is taking longer to reach final close than we would have wished.

“Although we have never been deterred by the challenge or technical difficulty of the project we did underestimate the sheer volume and complexity of the tasks involved and the legal documentation required.” 

The $900 million Dampier Nitrogen ammonia project has also made slow progress over the past year.

Mr Streader said Plenty River was currently in discussions with Canadian fertiliser giant Agrium and local engineering group Thiess, following the termination on July 31 of their consortium agreement.

Japan DME and a second Japanese consortium, DME International, are separately pursuing plans to develop the world’s first dimethylether plant.

The Japan DME spokesman said the consortium still had not appointed an engineering, procurement and construction contractor, which is considered a critical step towards formal go-ahead.

The Japan DME consortium is comprised of Mitsubishi Gas Chemical, Itochu Corp, JGC Corp and Mitsubishi Heavy Industries. DME International was formed in October 2001 by a consortium of nine Japanese companies, including NKK Corp, Hitachi, Marubeni Corp, and LNG Japan.

It has not released details of its proposed project.

Dimethylether is considered an environmentally friendly fuel that could be used in power generation and as an alternative to LPG and diesel.

The new projects proposed for the Burrup are additional to the expansion of the North West Shelf Venture’s existing operation.

It is about three quarters of the way through a $2.4 billion expansion, including a fourth production ‘train’, and construction of a fifth production ‘train’ in the next few years is probable.

The big offshore projects proposed for the region, such as ChevronTexaco’s $11 billion Gorgon gas project and the Sasol Chevron joint venture’s $4 billion gas-to-liquid fuel project, would also boost commercial activity, particularly around the Port of Dampier.

While these are important positives, the State Government has invested enormous political capital in the development of new projects and new industries on the Burrup.

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