LNG engineering a growth goal

MANY Australian engineers fondly remember 2001; that was when the Kellogg joint venture assembled a team of 400 engineers in Perth to design and manage construction of the North West Shelf venture’s train 4 expansion project.

It was the first time an LNG engineering project of that type and scale had been managed outside the traditional centres of London, Houston and Yokohama.

The optimists thought it would be the start of a trend, with future LNG projects in Western Australia’s north also being designed in Perth.

Those hopes were shot down six years ago when FosterWheeler won the contract to design the NWS venture’s train 5 project; it did the work at Reading in the UK.

Its joint venture partner WorleyParsons did engineering work in Perth, but most of the critical design and procurement work was done in the UK.

Woodside’s Pluto gas project followed the same pattern.

Similarly, the Kellogg joint venture, which won the engineering contract for the Gorgon gas project, has done most of the design and procurement work in Houston.

Against this backdrop, what are the chances that Perth will emerge as a world-class LNG engineering centre?

If this were to occur, it would provide a boost to the amount of local content awarded to Australian industry.

And it would occur in a sector where WA has the potential to hold a long-term competitive edge based on our skilled workforce and growing expertise, unlike the blue collar fabrication workshops that are struggling to compete with larger, more efficient yards in Asia (as discussed in this column last week).

Judging by Perth’s experience with mine engineering, this goal certainly won’t be reached easily or quickly.

The city’s status as a world leader in mining engineering, especially for gold process plants, was reached only after decades of mine development in WA.

We now accept that WA engineers such as Minproc, Lycopodium and Southern Cross Electrical regularly win international contracts based on their skills and expertise.

This is no guarantee that local firms will always win, even for contracts in their own backyard.

The process plant for Newmont’s giant Boddington gold project, for instance, was largely designed at Aker Kvaerner’s office in Santiago, Chile.

One of the barriers that historically stood in the way of Perth’s development as a LNG engineering centre was the lack of continuity from one project to the next.

That will be the least of our problems over the coming decade, as Gorgon proceeds, Pluto expands, and Wheatstone, Browse, Ichthys, Prelude, Sunrise and possibly other gas projects get under way.

In fact, the number of big projects in WA, especially compared to many traditional oil and gas centres, has prompted many international engineering companies to set up shop in Perth or expand their operations; hence the preponderance of Scottish, Norwegian and American accents at the west end of the city.

Some of these businesses see Perth as a base for their regional operations, though that is more likely to still be Singapore.

Nonetheless, the work opportunities and the skilled labour force in Perth is a strong lure, with the pleasant lifestyle a bonus.

Governments can contribute to all of these factors, especially skilling the workforce to ensure we deliver the right kind of university and Tafe graduates.

Perth’s major universities are doing their bit. The University of Western Australia has established its Energy & Minerals Institute while Curtin University has established the Curtin Institute of Minerals & Energy.

There are no prizes for originality in the names, but both initiatives signal the universities are in lively competition for the brightest academics and corporate dollars.

Global companies such as Chevron and BHP Billiton are tipping dollars into R&D and other university collaborations, as are local firms Woodside and Monadelphous, all with a goal of getting people with the right skills.

Government also has a role to play, as a facilitator that can bring parties together, as a provider of information that helps informed decision making, as a judicious investor in R&D and as a provider of infrastructure.

Often there is danger when governments try to do too much; better to focus on clearing barriers and reducing costs to allow business to flourish.