25/03/2009 - 22:00

Infrastructure strategy lacking

25/03/2009 - 22:00

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The premier is big on rhetoric but lacks a clear plan for infrastructure.

Infrastructure strategy lacking

TWO announcements last week by the state government on economic infrastructure lead me to question whether it has its priorities right.

On Friday, Premier Colin Barnett was unusually hyperbolic when announcing an agreement that could pave the way for the $4 billion Oakajee project, north of Geraldton.

"The development of a deep sea port, associated rail infrastructure and a purpose-built, world-class industrial estate at Oakajee is the single most important project for WA's economic development over the next 50 years," Mr Barnett said in a statement.

That's extraordinary language from a premier who has been a model of judicious restraint ever since he regained the Liberal Party leadership.

Perhaps Mr Barnett felt the rhetoric would help to justify his decision to pour $350 million of WA taxpayers' money into what had been planned as a purely private sector development.

There is no doubt that Oakajee is a valuable project of strategic importance to the state. It is likely to support the development of several major iron ore mines in the Mid West region.

That is why two private sector consortia - Oakajee Port & Rail, backed by Mitsubishi Development, and Murchison Metals, and Yilgarn Infrastructure, backed by several Chinese groups - were prepared to fund and develop the port and rail network without taxpayer contributions.

To build his case for taxpayer support, Mr Barnett has suggested that Oakajee "could attract major new resources processing and export industries".

One industry it will support is uranium mining. In particular, it will give the state an industrial port for uranium exports, avoiding the need to send uranium through residential areas to any of the existing ports.

Beyond that, the chances of new resources processing industries, such as a steel mill, remain as remote as ever, for two main reasons.

Construction costs in Australia are much higher than many other jurisdictions and energy costs (ie gas prices) are increasingly set at world market levels.

That leads to the second infrastructure announcement made last week.

Regional Development Minister Brendon Grylls announced that LandCorp would invest $35 million developing a supply base at the Australian Marine Complex at Henderson to support oil and gas projects in WA.

He also announced an agreement under which Chevron will become its first user to support operations for the Gorgon liquefied natural gas (LNG) project, to be built on Barrow Island off the north-west coast.

Chevron and its partners plan to invest $35 billion building Gorgon, according to industry estimates.

Mr Barnett has stated that the total investment will be even higher, at $50 billion.

In addition, a study commissioned by Chevron estimates the project will spend a further $33 billion over its first 30 years of operation, buying goods and services from local industry.

As discussed in WA Business News last week, it is likely that Gorgon will be one of several giant LNG projects to proceed over the coming decade.

It builds on the North West Shelf LNG venture, which is considered Australia's largest resources project, and Woodside's $12 billion Pluto LNG project, currently under construction.

Surely this is the biggest game in town.

And what is the state's strategy for maximising the economic benefit of these giant projects?

If there is a strategy, I don't now what it is.

A related question: what is the state's infrastructure strategy?

Mr Barnett has radically re-ordered WA's infrastructure priorities, scrapping some of his predecessor's favoured projects, such as a new sporting stadium, and pushing new projects like expansion of the Ord River irrigation area and the Oakajee development.

He has done this without providing an overarching strategy.

In particular, he has done this without releasing the state infrastructure strategy that was completed in the dying days of the Carpenter government.

An industry reference group chaired by former Clough managing director Brian Hewitt spent nearly three years working on the state infrastructure strategy, yet the change of government means this document is unlikely to ever see the light of day.

That is a shame.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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