Concern mounts on Woodside project

Fears that oil and gas giant Woodside could import the entire process plant for its $2 billion phase five expansion project are causing increasing concern within the State Government and among local industry players.

A senior Government adviser told WA Business News it would be a “huge disappointment” if local industry missed out on contracts for the gas plant.

“We will be pushing them to do a lot better than we have been hearing so far.”

He said the phase five project would be one of the first issues put before the new State Development Minister, once Premier Geoff Gallop completes his ministerial reshuffle.

Industry sources describe Woodside’s plans as a “massive shift” that could have a “serious long term impact on the state”.

The phase five project takes on extra significance because it will set a precedent for local content levels on future LNG projects, such as ChevronTexaco’s $11 billion Gorgon project and BHP Billiton’s Scarborough project.

“It’s very hard to hold back the flood once you let Woodside go,” the Government adviser said.

Woodside, led by managing director Don Voelte, told an industry briefing last month that local content on phase five would be lower than on the earlier train four expansion, but did not specify the likely outcome.

It did announce some fundamental changes, however.

In particular, engineering design and procurement will be managed from the UK office of engineering contractor Foster Wheeler rather than from Perth.

Woodside also said it would move away from a ‘stick build’ approach, which involves on-site assembly of the process plant, to off-site pre-assembly of larger modules.

General manager onshore projects Wim Kemper said that, as a result of this change, on-site employment would peak at about 1,200 workers – substantially below the peak workforce on train four.

Mr Kemper cited the shortage of skilled workers in Australia as the main reason for the planned changes.

He told the industry briefing that local businesses would be able to supply the project where they were “capable and globally competitive”.

That is still Woodside’s official position, yet industry sources say it is becoming increasingly clear that Woodside expects to import the entire gas processing plant.

If that was the case, local content would largely be limited to civil engineering work and on-site erection.

One industry source told WA Business News that: “Woodside would love to be able to source materials locally” but was unlikely to do so because the skills shortage, the high utilisation of engineering workshops, and increased union unrest made it too risky.

Sourcing materials from Asia was also likely to be cheaper, but this was considered a secondary factor.

The engineering industry is concerned that Perth’s emergence as a centre of excellence in LNG engineering is being lost.

This would be especially the case if engineering design of the Gorgon project was to be done in Houston, as rumoured.