Gorgon, Train 5 concerns

Oil and gas giants ChevronTexaco and Woodside have set off alarm bells in business and government by raising the possibility of sending engineering design work for the Gorgon and Train Five projects offshore.

The mere possibility of this happening has created grave concern about Western Australia’s ability to secure jobs and become a world leader in oil and gas engineering.

It has also raised concern about the ability of local industry to supply the Gorgon and Train Five projects, which are two of the biggest resource projects on WA’s horizon.

Spokesmen for ChevronTexaco and Woodside have confirmed the possibility that engineering design work will be done overseas but also insisted that each project would work hard to maximise local content.

Gorgon development manager Joe Gregory told WA Business News that sending engineering design work to Houston was “one possibility” for the $6 billion Barrow Island project, particularly for process engineering of its LNG plant.

Woodside spokesman Tony Johnson said the successful bidder for Train Five was likely to complete the engineering design “in its home country, wherever that may be”.

He said this was because Train Five was expected to be a carbon copy of the recently completed $1.6 billion Train Four project, and therefore 60 per cent of the design work has already been done.

State Development Minister Clive Brown told WA Business News he expects both ChevronTexaco and Woodside to maximise local content.

“Our expectation is that the Gorgon venture will be true to what they have said publicly,” Mr Brown said.

“We have a very high expectation that a good part of the work will be done in WA.”

Mr Brown was even more blunt when commenting on Woodside, which won high praise for encouraging local content on Train Four but has been criticised for the lack of local content on the more recent Enfield gas project.

“We were very disappointed with Enfield. We hope [it] was not a turning point.

“We thought that was pretty poor and they know that and we expect better in the future.“

Mr Brown said current market conditions should help both projects.

“With oil and gas prices at current levels, no one can suggest there are thin margins in these things,” he said.

David Kobelke, director of the Industry Capability Network – a body charged with maximising local content on big projects – believes local industry would lose substantial opportunities if engineering design of both projects were done offshore.

“I’m yet to find an instance where local content wasn’t adversely affected by doing the engineering design overseas,” Mr Kobelke said.

“The overseas engineers will automatically design against equipment they know and will use different specifications.”

He estimated the level of local content would be cut by 5 per cent to 10 per cent from whatever might otherwise have been achieved.

Mr Gregory said a detailed plan for the engineering work on Gorgon would only be prepared after ChevronTexaco selects its engineering contractors later this year.

He said the two short-listed bidders for the downstream component, which includes the LNG plant and is by far the biggest part of the Gorgon project, had identified a lack of local expertise.

“None of them have the process engineering expertise in Perth to the extent we would need it,” Mr Gregory said.

He added that ChevronTexaco was planning a national roadshow with the Industry Capability Network to inform potential suppliers about work opportunities.

In Woodside’s case, a final decision on Train Five is expected in late 2004 or the first half of 2005.

Mr Johnson said it made sense for the successful engineering contractor to complete engineering design work in their home country, to save them from having to set up a new office and relocate staff to Perth.