07/09/2009 - 15:27

Local steel body fears Gorgon lockout

07/09/2009 - 15:27

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The Australian Steel Institute has raised its concerns that local steelmakers could be locked out of supply contracts for the $50 billion Gorgon gas project after design standards were changed to Japanese levels.

The Australian Steel Institute has raised its concerns that local steelmakers could be locked out of supply contracts for the $50 billion Gorgon gas project after design standards were changed to Japanese levels.

ASI chairman Ian Cairns said the industry was not getting its fair share of access to massive projects including Chevron's planned Gorgon LNG project in the Pilbara and the proposed Oakajee port in the Mid West.

Mr Cairns said the $50 billion Gorgon project and the $4 billion Oakajee development were causing the industry great concern.

"Our immediate issue there is that in some instances we are being designed out of the project and that's what's happening with Gorgon," he said.

" ... originally there was an Australian standard design and that has recently been changed to a Japanese standard design.

"So that means at least half of the Australian value chain are the manufacturers and the distributors have just been designed out.

"We don't make Japanese standard steel here so we've lost all of that.

"We believe it also puts the fabrication sector at a disadvantage with their Asian competitors."

Chevron general manager Colin Beckett said there may not be enough Australian standard steel to supply the project.

"It is now evident that the use of Australian steel sections would impose unacceptable schedule constraints and risk on ... fabrication and introduce an unacceptable additional fabrication complexity and cost," Beckett said in a letter to the ASI.

Mr Cairns said the ASI refuted Chevron's claims.

He said Australian steelmakers were globally competitive and shortfalls were not a concern.

"We've been less than satisfied with the replies we've had (from Chevron)," Mr Cairns said.

The institute said it had also made its concerns clear to Premier Colin Barnett about the Oakajee port and rail project, which will see iron ore shipped out north of Geraldton.

Both the state and federal governments have committed more than $300 million to the Oakajee project.

"What we've seen there is Premier Barnett making some promises to the Chinese supply chain when he's recently been in China," Mr Cairns said.

"He's signed MOUs with (Chinese) steel companies, strategic alliance agreements with Chinese Construction and Railway Corporation.

"And this is all happening when we belive the Australian construction and steel industry haven't been consulted on this project at all."

After six weeks Mr Barnett responded to a letter from the ASI but the premier had missed the point and the institute had contacted unions in the state and the opposition in a bid for more answers, Mr Cairns said.

"The majority of our questions were unanswered and it was pretty much a straight political answer we got back," he said.

"He missed most of the points we tried to make and most of the questions that we tried to answer."

A letter from Mr Barnett to the ASI said the WA government and Oakajee Port and Rail Pty Ltd were required to investigate opportunities for participation of Chinese companies in the Oakajee project.

OPR will also be required to prepare an industry participation plan to set out its intended procurement strategy and identify opportunities for local industry participation.

Mr Barnett said in the letter he encouraged the ASI to work with OPR and the state's commerce department in relation to the industry participation plan.

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