Locals missing Gorgon opportunity

Foreign bidders have begun snatching even minor fabrication contracts for the $43 billion Gorgon LNG project as Australian workshops are priced out of the market by the strong dollar and undercutting by their overseas rivals.

A week after Australian companies were passed over for $300 million in plant component fabrication contracts, WA-based crane manufacturer Eilbeck Cranes missed out on a $6 million-plus contract to manufacture and supply gantry cranes.

The century-old Bassendean manufacturer specialises in heavy lift overhead cranes and has provided similar equipment to Woodside Petroleum’s North West Shelf and its Pluto LNG project nearby.

The company recently committed to expand its Perth facilities to cater for resources-related demand growth.

But although its tender was technically compliant, it was unable to match the bargain basement price offered by a European rival.

Eilbeck declined to comment, but it is believed its European rival’s bid was at least 30 per cent lower.

Industry sources said lower European labour costs, the desperation of European fabricators to secure work in the wake of the global financial crisis, and the strength of the Australian dollar had made life tough for local firms bidding to supply major projects.

The Australian Steel Institute, a vocal critic of the small volume of Gorgon fabrication work awarded to local companies in recent months, has previously identified Asian fabricators as the biggest beneficiaries of the Gorgon tender process.

While Asian labour costs are significantly lower, the ASI argues Asian bidders also enjoy an unfair advantage in bidding for Gorgon related work through hidden subsidies, such as China’s deliberate devaluation of its currency, tax incentives, and Chevron’s requirement that fabricators use Japanese-standard steel.

ASI industry development manager Ian Cairns said although he had not previously heard of undercutting by European bidders, it was clear that local fabricators were not competing on an even footing.

“We’re certainly in consultation with the federal government … and are really just saying make sure it is a level playing field, because we don’t think it is,” Mr Cairns said.

Chevron declined to comment directly on the crane tender, but noted it had already awarded more than $7 billion in Gorgon contracts to Australian companies, though only a minority involve fabrication.

Local fabrication work include Ausco’s $50 million contract to manufacture accommodation units, a $20 million deal to supply road trailers won by Perth manufacturer Howard Porter, and a $20 million deal with Adelaide-based Osmoflo for desalination units.