Future attempts to establish downstream processing industries in Western Australia should focus on attracting end-users to set up operations in the state, Premier Colin Barnett has told a US oil and gas gathering.
Future attempts to establish downstream processing industries in Western Australia should focus on attracting end-users to set up operations in the state, Premier Colin Barnett has told a US oil and gas gathering.
The premier also turned up the heat on liquefied natural gas exporters, saying public support for their development plans hinged on their willingness to make cost-competitive gas available to domestic industry.
In a speech at Rice University in Houston, Mr Barnett conceded past efforts, including his own, to make mining and energy companies undertake further processing of minerals from the WA operations had been a failure.
But by establishing attractive investment conditions, based on competitive energy availability and the provision of dedicated industrial sites, he said WA could hope to attract the buyers of the state's natural resources to establish value-adding facilities here.
"The objective of value adding for this century is more likely to be achieved by
attracting the buyers of natural resources to set up their manufacturing plant
in Western Australia," Mr Barnett said.
"To do that two things are necessary. First, a world class industrial site, with all the necessary services, in which to locate the plant and second, the availability of reliable and competitively priced energy. After all, the further processing of minerals is energy intensive.
"If the dual policies of industrial estates and competitive energy can be achieved, then Western Australia may just capitalise on the unique opportunity presented by the Asian expansion and realise the dream of moving beyond a mining economy."
Mr Barnett pointed to the state government's support for the Oakajee deepwater port and industrial estate near Geraldton, the Anketell iron ore port and estate near Karratha and the James Price Point gas hub near Broome as examples of his government's push to attract new industry to WA.
Mr Barnett acknowledged that the intent of many existing state agreements, which include obligations for miners and energy producers to pursue value-adding options for their WA output, was noble but misdirected.
"Admirable as the further processing obligations are, they have not worked. The success stories have been limited to the production of intermediate products or the application of new technologies to low grade mineral deposits."
Mr Barnett conceded that he had in the past also pursued such an approach, in a nod to his strong backing of the doomed Kingstream Steel venture in the late 1990s.
"I now have a slightly different view," he said. "The objective of value adding is still there, though the pathway is different. If you think about it, there is little to be said for trying to make an iron ore miner become a steel producer or a natural gas producer become a chemical company. And why would a raw material producer want to go into competition with their overseas customer?"
Turning to the provision of energy, Mr Barnett said it was vital that LNG producers also considered the needs of domestic users.
Though he agreed most large LNG projects must focus on export markets, he said it was vital for "some of that gas" to be supplied to local industry at a price no higher than the "effective price at which the gas is fed into the LNG plant".
"Without that, the dream of a more mature economy with value adding to our natural resources will not be realized," Mr Barnett said.
"It is not an acceptable situation to have domestic gas prices well above world prices, as is the case at present with current domestic gas prices in Western Australia.
"I would say to the major companies, public support is heavily dependent on
your support for the domestic gas market in Western Australia."
Mr Barnett's comments will be welcomed by the WA DomGas Alliance, which argues that LNG producers are warehousing reserves for supply to the international market, leading to a shortage of affordable new supplies for local industry.
The alliance represents major industrial users, such as Alcoa, Alinta and Verve Energy, which have benefited from artificially low gas prices for three decades.
But gas producers argue WA is undergoing its most substantial phase of domestic gas development in 30 years that is likely to boost local supplies by at least 50 per cent by 2015 and potentially double it by 2020.
