21/07/2011 - 00:00

Local content debate rages despite new deals

21/07/2011 - 00:00


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A $US2.3 billion contract awarded by Chevron has been lauded as a significant contribution to local content; but the deal, the biggest single agreement for the Gorgon project so far, is unlikely to temper the fierce debate about the amount of work taking

Local content debate rages despite new deals

A $US2.3 billion contract awarded by Chevron has been lauded as a significant contribution to local content; but the deal, the biggest single agreement for the Gorgon project so far, is unlikely to temper the fierce debate about the amount of work taking place in Western Australian fabrication yards.

Chevron confirmed last week that a joint venture between New York-based CB&I and Kentz Corporation, a Channel Islands-domiciled company that originates from Ireland, will undertake structural, mechanical, piping, electrical, instrumentation and commissioning support for the construction of three LNG trains at Chevron’s Gorgon natural gas project.

A spokesman for Chevron said the contract was part of the forecast $20 billion it expected would be local content for the $43 billion project, with more than half of that now contracted.

However, it was unclear how much, if any, of the CB&I/Kentz deal would have been anything other than local content due to the nature of the work involved.

At the same time it was revealed that Civmec Construction and Engineering had won a contract to supply about 10,000 tonnes of structural steel for the construction of the gas processing plant on Barrow Island.

That followed a $50 million Gorgon contract won by AusGroup subsidiary AGC Industries in May.

Civmec said the contract would create work for 60 employees at its Henderson workshop over the next 18 months.

The contract is the first Civmec has announced since opening the first stage of its $30 million workshop at Henderson in April.

Australian Steel Institute WA state manager James England said the contract vindicated Civmec’s commitment to building its facility at the Australian Marine Complex.

“They could have built it anywhere in the world, and if you believe some of the people in the resources companies, they should have built it somewhere else,” Mr England told WA Business News.

But while he welcomed the contract announcement, Mr England said the institute was concerned about the level of work going to small- to medium-sized workshops.

He said there was an enormous group of smaller engineering and fabrication firms struggling to tick things over.

“We’re taking care of the tip of the iceberg, we need the rest of the iceberg looked at now,” Mr England said.

“Most of them, the majority of the small to medium workshops are just going from month-to-month, struggling to pick up what they can. They are feeling very worried about the future.”

Mr England called on the state government to be clear over long-term support for the sector.

“The big headline projects and the big attention grabbers are all well and good, but what’s paying everyone’s mortgages is the day to day work that goes through the little shops,” he said.

Mr England said the $2 billion-plus contract announced by Chevron last week was unlikely to create work for WA steel fabricators.

“As far as I can tell no there is not, there is nothing in that contract for any steel company in this country,” he said. “It is zero.”

The CB&I/Kentz contract followed media speculation earlier this week that Australian listed engineering firms UGL and Downer EDI had abandoned a $2 billion deal for a similar scope of works at Gorgon over rising costs concerns.

A spokesman for Downer said that speculation was incorrect and the company had been informed by Chevron that it had not been successful.

Meanwhile, there has been plenty of other work contracted at WA mining ventures.

Civil and mining services contractor NRW Holdings this week announced two new deals with Fortescue Metals Group worth a combined $192 million.

NRW announced it had been awarded a further $112 million earth, concrete, piling and track works project at Fortescue’s Herb Elliot port in the Pilbara.

In a separate announcement, NRW said its joint venture with the Ngarluma and Yindjibarndi Foundation and Eastern Guruma had won a mining contract worth about $80 million at FMG’s Solomon iron ore project.

Last week, NRW won a $70 million contract for FMG’s main rail line duplication project in the Pilbara.

Mining contractor Macmahon Holdings has won a ten-year, $900 million mining contract for the Tropicana gold joint venture between AngloGold Ashanti and Independence Group.

Last week, Pacific Energy was appointed to build, own and maintain a power station for Sandfire Resources’ DeGrussa copper gold project and a three-year contract to build, own and operate a 3 megawatt power generation facility at Avoca Mining’s Chalice gold mine near Kambalda.


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