Industry policy needs new focus

ONE of the many challenges facing the new state government will be development of a coherent industry policy. This week's cover feature on the oil and gas services sector should provide a few pointers.

The Carpenter government and its hapless industry minister, Francis Logan, spent the past few years pushing an industry policy that focused on side issues.

Mr Logan concentrated much of his attention on the development of niche industries, such as biofuels, biotechnology, and information and communication technology.

These sectors can make a contribution to Western Australia's development, but wouldn't it be better to focus on areas that build on the state's competitive strengths?

That means building on WA's resources and agricultural sectors, which have always been the long-term drivers of exports and prosperity.

Premier-elect Colin Barnett has signalled a strong intention to boost activity in resources and agriculture.

On the resources front, he has portrayed himself as an experienced 'can do' minister who will make sure that big projects proceed in a timely manner.

One of his immediate priorities will be ensuring that the Ichthys liquefied natural gas (LNG) project is built in WA rather than Darwin.

The project operator, Japanese company Inpex, has been evaluating Darwin after failing to gain environmental approval for its preferred site, the Maret Islands off the Kimberley coast.

The new government also plans to open up WA to uranium mining, which will add further diversity and resilience to the mining sector.

On the agricultural front, the incoming government is expected to approve the introduction of genetically modified crops.

This is most significant for the Ord River irrigation area in the Kimberley, where GM cotton holds great potential.

GM cotton crops have been trialled successfully in the Ord over several years - one of the mysteries of the Labor government was how it reconciled these long-running trials with its blanket ban on GM crops.

Promoting resources and agricultural projects is one dimension of an overall industry policy.

A second dimension is enabling the development of businesses that service these sectors.

This newspaper has often highlighted the fact that WA is home to a world-class mining services industry.

A prime example is mining software. Mine sites all around the world use software written in Perth.

Similarly, many international mines employ mining engineers, geologists, drilling contractors and other professionals who learned their trade in WA.

WA has an opportunity to build a similar world-class standing in the oil and gas sector, which is attracting huge investment support, particularly for LNG projects, and there is potential for much larger investment over the next decade and beyond.

This investment provides an enormous economic and commercial boost in its own right, but the projects are just the start.

They could also be a catalyst for Perth's emergence as a world-class oil and gas services city.

This hasn't happened in the past, in part because the oil and gas sector in WA historically has been characterised by one-off developments.

Skilled professionals have come to WA, worked on a single project, and then moved on.

This is starting to change - there is a 'pipeline' of projects, from those under way to others at an advanced stage of planning and many at a conceptual stage.

The opportunity to work on a succession of big projects has already encouraged many international oil and gas companies to either establish or expand their presence in WA.

Some of these companies are keen to work on projects during the construction phase, others recognise that big LNG projects are highly complex and need servicing and maintenance over 30 years or more.

There is no guarantee that the work will flow to industry in WA. Indeed a large portion of work on recent big projects, like the North West Shelf venture's 'train 5' expansion and Woodside's Pluto LNG project, has gone offshore.

International engineering company FosterWheeler, for instance, has done most of the engineering design work at its UK office, while international contractor J Ray McDermott, has managed the construction of these facilities at Asian construction yards.

This outcome reflects several factors: WA has limited experience in LNG engineering; there is a shortage of skilled engineering talent in Perth; the state's steel fabrication industry is small and faces high labour costs; and the construction industry has a history of industrial disputes in WA.

Despite all this, the opportunity is clear. Big gas projects are poised to play a major role in WA's development and should become a pillar of the economy