Gorgon deals local content

The $11 billion Gorgon gas project has announced plans to award engineering contracts that are expected to pave the way for substantial local industry participation in the project.

The Gorgon joint venture said it would be awarding engineering contracts worth $100 million this month, and that two thirds of this work would be done in Perth.

The news on Gorgon has been welcomed by local industry and government representatives amid concern about falling local content on other projects, particularly Woodside’s $2 billion train 5 project.

The State Government has been pressuring the project companies to maximise local content, with State Development Minister Alan Carpenter saying they needed to lift their game.

“The simple response that … costs are too high and skills are in short supply is not good enough,” he told parliament recently. “There are more opportunities for maximising or increasing local content than seem to be currently pursued.

“They should maximise local content, and we will be very unhappy if they do not.”

Premier Geoff Gallop welcomed the Gorgon announcement, saying it was another milestone towards the goal of starting construction of the gas plant on Barrow Island late next year.

“It is also very pleasing to see the emphasis the Gorgon Joint Venture is putting on sourcing labour and supplies in WA and carrying out major parts of the project development within the state,” Dr Gallop said.

Gorgon’s downstream contract, which includes the LNG plant and covers the biggest part of the project, will be awarded to the Kellogg joint venture.

Kellogg will undertake the process design in Houston but other aspects of the project, including construction preparatory work, civil and marine engineering and procurement, will be in Perth.

The upstream contract, which includes sub-sea facilities and pipelines, will be awarded to a Technip JP Kenny joint venture, which will conduct most of its work in Perth.

Industry Capability Network director David Kobelke said it was “very pleasing” that a significant part of the project would be based in Perth.

“The vendor identification and procurement will be in Perth, which will make it a lot easier for local suppliers,” Mr Kobelke said.

The state director of Engineers Australia John Ruprecht described the Gorgon announcement as a step in the right direction but emphasised the importance of developing design skills in Perth.

The approach adopted by the Gorgon joint venture contrasts with Woodside’s North West Shelf expansion projects.

The completed $1.6 billion train 4 project was hailed for its high level of local content, which included the Kellogg joint venture performing all of the engineering work in Perth.

In contrast, the engineering and procurement for train 5 is being done in the UK by contractor Foster Wheeler.

Commenting on the engineering contracts, Great Gorgon Area general manager Paul Oen hinted at the cost pressures facing the project.

“This phase will help respond to the development’s economic challenges to improve the project’s international competitiveness,” Mr Oen said.