LIQUEFIED natural gas - LNG - is without doubt the gold of the 21st century, at least with respect to Western Australia.
LIQUEFIED natural gas - LNG - is without doubt the gold of the 21st century, at least with respect to Western Australia.
Just as Arthur Bayley's discovery of gold near modern day Coolgardie in 1892 sparked WA's first great economic boom, so does the slew of LNG projects planned off WA's north-west coast promise to power the state's economy for the next century.
According to WA Business News' annual survey of major projects, the total value of oil and gas projects planned off the state's coast in the next decade totals a staggering $195 billion, a phenomenal number in anyone's language.
Certainly the number includes some relatively speculative investment proposals that may not get to the final starting gate, given their relatively early state of development.
Yet more than $180 billion of that total comprises large-scale LNG proposals by some of the world's largest and most financially robust energy companies.
The direct benefit to WA of several of these projects - such as Inpex's $20 billion Ichthys LNG project in the Browse Basin and Woodside Petroleum's $10 billion Sunrise LNG venture in the Timor Sea - will be limited.
Inpex has already chosen to pipe gas from the Ichthys field to Darwin for processing, while Sunrise sits partly within the joint development area shared with Timor Leste.
Additionally, many projects are located within federal waters meaning WA is not automatically entitled to a share of royalties on production from the wellhead.
Nonetheless, every project that does proceed will generate enormous spin-off benefits in terms of operational and construction jobs, support and supply services, engineering design, manufacturing and fabrication work, and associated onshore infrastructure development.
Though WA is not entitled to a share of royalties from Chevron's $50 billion Gorgon project in Commonwealth waters, the federal government has pledged to provide $100 million a year from the royalty stream for investment in local support infrastructure.
More significantly, WA will be the main beneficiary of the 10,000 direct and indirect jobs created during construction. Irrespective of whether the bulk of those workers reside in the Pilbara, or fly in from Perth, most of their discretionary spending will happen within the state's borders.
On top of that, WA firms have already won a big share of the $2 billion in Gorgon contracts awarded so far and can expect to snare a generous portion of the $10 billion in additional contracts expected to be awarded by the end of the year.
Already Decmil Group has won a $170 million contract to build the construction village on Barrow Island. Nomad Building Solutions has secured a $46 million deal to supply a number of associated buildings, and Spearwood-based fabricator Howard Porter will manufacture more than 300 custom-built semi-trailers - Australia's biggest ever trailer order.
Similarly, Mermaid Marine will lease part of its Dampier supply base to the project for around $100 million, and the state government has pumped $35 million into Gorgon-related facilities at the Australian Marine Complex in Henderson.
Behind Gorgon, several other LNG ventures stand to win final approval over the next two years.
At the head of the queue is Woodside's proposed $20 billion expansion of its new Pluto LNG project near Karratha. While the first production train is due for completion next year, Woodside this month commenced FEED work for two more trains at the site. At the same time, Chevron started FEED for its $25 billion Wheatstone project to be built near Onslow.
Meanwhile, Woodside remains confident it can make a final investment decision for the $30 billion Browse LNG project in the Kimberley by late 2010, notwithstanding the fact that two of its partners, Shell and Chevron, are not yet convinced that James Price Point is the optimum location for processing Browse gas.
And by the end of this year, Shell is expected to name its Prelude field near Browse as the first of its global gas assets to be developed using innovative floating LNG technology that promises to unlock dozens of smaller gas reservoirs until now considered too small or too remote to be developed.
Santos and Frances GDF Suez are evaluating the same approach for the Petrel and Tern fields in the Bonaparte Basin, north of Wyndham.
Even though the direct benefit to WA of floating LNG ventures will be modest compared to conventional shore based projects, the state will remain the key supply and service base.
No wonder, then, that Chamber of Commerce and Industry WA chief James Pearson spoke of an energy led recovery at a recent industry conference in Perth, declaring Gorgon alone to be "an economy changing project".
In addition to multi-billion dollar LNG ventures, WA is also experiencing the biggest upturn in domestic gas development since the North West Shelf was completed in 1985.
Heading the list are Apache and Santos with the $900 million Reindeer-Devil Creek project south-west of Dampier, which is under development ahead of a 2011 start-up.
The following year, BHP Billiton hopes to complete its $1 billion Macedon domestic gas project off Exmouth. And Chevron is expected to start production from Gorgon's proposed domestic gas plant in 2015, at least a year earlier than originally proposed.
Together, these three projects alone could potentially double the amount of gas available to WA industry by the middle of next decade.
Provided the suppliers and customers can agree on price, that should ensure sufficient gas is available for the development of major projects onshore, in turn keeping WA's economic ball rolling well into the future.
