ECONOMIST Ian Satchwell doesn't mince his words when describing the likely impact of big LNG projects like Gorgon.
ECONOMIST Ian Satchwell doesn't mince his words when describing the likely impact of big LNG projects like Gorgon.
"It's huge," the ACIL Tasman director told WA Business News.
"The construction phase is nice but it's difficult to cope with and a big chunk of the work will, of necessity, be done overseas.
"The real pay-off is the 40-odd year life of the project, when they will be spending hundreds of millions of dollars every year. That's what is exciting, I think, for Western Australia."
The commercial spin-off from the LNG industry is already apparent from the number of international oil and gas services companies that have moved to Perth, or expanded their presence.
Energy and consulting groups such as Helsinki-based Pöyry and Edinburgh-based Wood Mackenzie are just two examples of this.
Pöyry consulting manager Larry Narraway sees more upside ahead, as further LNG projects proceed.
"These are big facilities, they are going to have large Perth-based support staff as well as significant site staff plus all the support contractors required to keep them going," Mr Narraway said.
"The sustained benefit will be the 20 to 30 to 50 years of operation."
The development of Perth as a regional oil and gas centre means there is longer-term potential for firms here to export their services to the wider region.
This includes projects in the Northern Territory; Japanese company Inpex still has its main Australian office in Perth and has engaged contractors in Perth, even though it is planning to build its LNG plant in Darwin.
Despite these arguments about long-term operational benefits, there is also a big focus on the construction phase.
The construction of LNG plants has changed radically over the past decade, moving away from being 'stick built' on-site to a process of modular construction.
This means most of the construction is done in low-cost Asian yards, leaving the Australian workforce to assemble the modules.
Woodside's Pluto LNG plant, for instance, has been broken down into 261 modules, which are being fabricated in Asian construction yards and transported on barges to the Burrup Peninsula for assembly.
Modular construction will be the standard mode for future LNG projects, giving developers a lot of flexibility.
It is anticipated that work on Gorgon, because of its scale, will be spread across 10 different countries.
Even though a lot of the construction and fabrication work on Gorgon will occur overseas, the project will still require a peak construction workforce in Western Australia of 6,000.
Chevron has taken tangible steps to facilitate local content.
It has signed an agreement with the Australian Marine Complex to establish the AMC as a logistics hub to service future fabrication at workshops in Kwinana.
In addition, it has assessed Australian capability to fabricate pre-assembled racks and units for the project.
A big challenge for the Australian fabrication and construction industry, and project developers, is the possibility of multiple, very large LNG projects proceeding concurrently.
In the past, there has never been more than one project under way.
Looking ahead, there is a chance that construction of four regional projects - Gorgon, Exxon Mobil's PNG project, Inpex's Ichthys project in Darwin and at least one LNG project in Queensland - will overlap between 2011 and 2015.
Industry observers believe there could be even more Queensland projects getting under way.
"The progress that they are making is extraordinary," Wood Mackenzie senior analyst Richard Quin said.
"They have great resources, they are aligned joint ventures, well funded, well skilled."
JP Morgan energy analyst Mark Greenwood doubts this many projects will proceed concurrently.
He says the Gorgon and PNG projects are set to proceed, leaving room for only one more LNG project over the next few years.
"A Gorgon go-ahead threatens to displace or at least defer competing LNG projects in the region given a deterioration of demand conditions," Mr Greenwood wrote in a research note this month.
Looking further ahead, the local fabrication and construction industry would face a very different challenge if gas producers commence the development of floating LNG production vessels.
The nature of these vessels means they can be built in their entirety in overseas shipyards and simply towed to the offshore location for mooring.
