10/01/2006 - 21:00

Resource boom drives contracts

10/01/2006 - 21:00


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Western Australia continues to ride an economic and investment wave on the tide of a spectacular resources boom, with resource giants BHP Billiton, Rio Tinto and Woodside all committed to major projects in 2006 and beyond.

Resource boom drives contracts

Western Australia continues to ride an economic and investment wave on the tide of a spectacular resources boom, with resource giants BHP Billiton, Rio Tinto and Woodside all committed to major projects in 2006 and beyond.

The ongoing unprecedented level of activity in iron ore, oil and gas and has underpinned the strength of the state’s economy, with flow-on effects at all levels of the supply chain.

This is evidenced by the number of major contracts awarded recently to support these massive resources and infrastructure projects.    

Calibre Projects, Macmahon Holdings, WorleyParsons and Sinclair Knight Merz are some of the companies benefiting from recently approved projects totalling more than $13 billion.

Calibre Projects has enjoyed rapid growth since starting out as a boutique project management company in 2002.

With its headquarters in Perth, Calibre is currently involved in a number of projects, including Rio Tinto’s $375 million Brownfields expansion, where it recently implemented the first stage of the Marandoo mine expansion – a new level of automation of the mine’s control systems.

Other contractors involved in Rio’s Brownfield works include Kellogg Brown and Root, and Aker Kvaerner.

Calibre is also engaged at Rio Tinto’s Yandi mine, where it has the engineering, procurement and construction management contract for the $700 million, 36 million metric a year expansion project.

It also recently put pen to paper on a five-year project services contract for Argyle Diamonds’ $760 million underground development project.

“This project provides Calibre with another solid base-load of work as we continue to diversify into other mining markets,” Calibre’s operations manager, David Maher, said.

In December last year, another WA-based company, Macmahon Holdings, was awarded the mining and crushing contract for BHP Billiton’s Orebody 18 iron ore mine near Newman.

The four-year, $250 million contract is the company’s single largest and comes on top of other contracts Macmahon has with Rio Tinto, BHP Billiton, Woodside and the state government.

Macmahon chief executive officer Nick Bowen said the company would undertake the full range of mining services including drilling, blasting, loading and hauling of iron ore and waste materials.

“You could say we’re delivering as close to a one-stop shop for the mining industry as you are likely to get,” Mr Bowen told WA Business News.

The new mine is expected to employ 140 people and produce up to 8mt of iron ore a year when fully operational.

North West Shelf Venture operator Woodside awarded the EPCM contract for its Train 5 LNG Plant expansion project to a Foster Wheeler-WorleyParsons joint venture.

The $2 billion project, to be built at Karratha, will include the addition of a fifth liquefied natural gas processing train with a production capacity of 4.2mt a year (bringing total capacity to 15.9mtpa) and a second loading berth.

While the majority of the engineering work is to be done in the UK, the project is expected to employ up to 1,500 people, with the first LNG cargoes planned for late 2008.

Further, the North West Shelf Venture partners have developed the Australian Industry Participation Plan to give local industry and suppliers the opportunity to tender on supply chain opportunities as they become available.

WorleyParsons has previously worked with Woodside, winning the FEED contract for its Angel gas platform, and is also currently involved with Roc Oil’s $227 million Cliff Head oil field project off Dongara.

The Sinclair Knight Merz-Fluor partnership secured major contracts for BHP Billiton Iron Ore’s Rapid Growth 2 and 3 projects.

Under the $2 billion Rapid Growth 3 project, approved in October 2005, a new pit will be developed and a new crushing facility constructed at its Area C mine in the Pilbara.

Work on the project is already under way and comes hard on the heels of Rapid Growth 2, which is on schedule for initial production forecasts in the second half of 2006.

The staggering level of investment and development in the state’s north-west brings with it significant economic and social benefits to the local region, WA and Australia.

For example, North West Shelf Venture’s Train 5 LNG Plant project is expected to generate annual royalty payments of more than of $800 million when in full production.

And it is projected the Pilbara region will benefit from anticipated local spending of about $220 million a year from this project alone.

The providers of contract services are well placed to reap benefits from the state’s resources boom into the foreseeable future, but this growth may also pose some challenges.

According to Calibre, the rising costs of materials and labour continue to be an issue for the engineering and construction industries. 

The company said that, potentially, the rising costs of materials and labour could cause resource projects to be shelved or completed in stages, which would prolong the shortage in commodity supplies and therefore extend the resource cycle.

Macmahon acknowledged similar pressures, with Mr Bowen saying people shortages are to be expected for years to come, but that the situation had now stabilised from a previous period of intense pressure.

“Given our ongoing involvement in the region we have been able to attract skilled people from interstate and even overseas,” he said.

“We are able to provide stability in employment and offer innovative remuneration packages where staff can live permanently in the north-west or fly-in fly-out from Perth.”

Calibre also works closely with Curtin and Murdoch Universities to ensure a stream of new engineers coming through the ranks.  

The state’s mining and exploration growth is also producing other supply chain opportunities, with Wesfarmers recently approving the $200 million expansion of CSBP’s ammonium nitrate facility at Kwinana.

Contracts are yet to be confirmed but production will be doubled to a world-scale capacity of 470,000 tonnes a year through the duplication of the existing plant.

Wesfarmers managing director Richard Goyder said the decision to proceed came after a feasibility statement and the negotiation of long-term agreements for explosive grade ammonium nitrate with major mining customers.

“There is currently a shortage of supply of this product in WA and we expect that the increased production capacity will meet current and projected demand over the next 10 years,” he said.

Perth group Monadelphous has secured a number of recent supporting contracts to the iron ore industry in WA.

The company’s engineering construction division was awarded a structural and mechanical contract at Rio Tinto’s Yandi mine in December 2005, which it is due to be completed in late 2006.

In addition, its maintenance and industrial services division has inked a two-year agreement with Rio’s Tom Price iron ore operation for ongoing structural refurbishment at the site.

In total its recent contracts are worth more than $100 million.

Major contracts aren’t just the sole domain of the resources sector, with utilities Alinta and the Water Corporation both embarking on significant projects.

Alinta is well advanced with its $165 million co-generation 2 power plant at Alcoa’s Pinjarra alumina refinery, with Hatch the major contractor involved.

Construction of two further plants located at the Wagerup alumina refinery is due to commence by mid 2006, once environmental approval has been secured.

Global power giant Alstom has been awarded a $110 million contract to supply two gas turbines for the project, which will be used to provide reserve capacity in WA’s new wholesale electricity market.

The Water Corporation awarded the contract for the design, construction and operation of Perth’s seawater desalination plant at Kwinana to a joint venture of Multiplex Engineering and French-based water treatment leader, Degremont.

The contract forms part of a public-private partnership, with the Water Corporation taking an active role in the project and day-to-day management issues.

The $387 million joint venture plans to have the plant completed by early 2007.


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