Gorgon – content not clear

THE Western Australian government gave in-principle support this week for what could be one of Australia’s biggest resource projects but major questions remain about the amount of work local industry will pick up from the Gorgon project.

The project is expected to use modular construction, making it fundamentally different from onshore projects such as the North West Shelf, and local industry is concerned that most of the construction and fabrication work will go offshore.

Premier Geoff Gallop said the $11 billion Gorgon gas project “has the potential to underpin WA’s and Australia’s economic prosperity for decades to come”.

He said key benefits would include 3,000 construction jobs when activity peaks in 2006, 400 permanent jobs and a further 6,000 indirect jobs across the nation.

However these projections are based on arbitrary assumptions about the amount of capital expenditure in Australia.

A fact sheet issued by the Government says 50 per cent of cap-ital spending will be in Australia.

Project proponent ChevronTex-aco has distanced itself from this figure.

External affairs manager Peter Coglan said it was far too early to comment on procurement plans or the likely level of local content, though he did emphasise that the joint venture was keen to maximise local content.

He also said ChevronTexaco had not yet made up its mind about construction techniques.

However, every engineering source contacted by WA Business News expects Gorgon to adopt mod-ular construction, which means ass-embled modules would be trans-ported by barge to Barrow Island.

Therein lies the concern.

“History tells us projects built in modules tend to have lower local content,” Australian Steel Institute State manager Rupert Grayston said.

Mr Grayston said he recognised that local industry must compete with overseas suppliers but was hoping for a genuine commitment to maximising local opportunities.

Industrial Supplies Office of WA director David Kobelke, whose role is to facilitate local participation, agrees that local industry is worried.

“There is industry concern that the use of Barrow Island will lead to greater modularisation, which opens up more global compe-tition,” he said.

Mr Grayston and Mr Kobelke both said they believed Australian industry was capable of supplying Gorgon, especially following completion early this year of a $200 million fabrication and ass-embly yard on Cockburn Sound.

While Mr Coghlan declined to comment on local content plans, the environmental, social and economic review commissioned by the company provides some clues to its thinking.

“Specific areas where a high degree of Australian industry participation can be achieved include site preparation and development, civil works and installation,” it says.

“Other areas such as major equipment and instrumentation may have less Australian content.”

ChevronTexaco expects to invest about $6 billion during the first phase of the project.

“Based on the North West Shelf experience, about two thirds of this could be spent on goods, services and labour from Australia,” it said.

This comment contradicts the 50 per cent assumption used by both the Government and ChevronTexaco when modelling the likely economic impact of capital spending on the project.

Mr Kobelke said ChevronTexaco would have to be very proactive with Australian industry.

“To achieve two-thirds Australian content, all modules and all engineering would have to be done in Australia,” he said.

“It’s a challenge for the project and it’s a challenge for Australian industry.

“The first step is where are they going to do the engineering. If you do the engineering in your own country, the opportunity for local industry to participate will be much better.”