Resources driving $40b boom

WA Business News’ inaugural survey of resource and infrastructure projects has found that China and energy are the two common themes. Mark Beyer reports.

THE investment boom currently under way in Western Australia is likely to result in more than $40 billion being poured into about 50 big resource and infrastructure projects in the space of five years.

WA Business News has studied company plans and government announcements to produce its own list of current and likely future projects.

The scale and breadth of the project boom is unprecedented.

“This has got to be the biggest construction effort ever in Western Australia’s history,” ACIL Tasman executive director WA Ian Satchwell said.

Looking ahead, there is no shortage of opportunities.

“The next two to five years is going to be incredible for resources in WA,” said Geoff Pereira, general manager WA infrastructure with engineering group Kellogg Brown & Root.

“We are expecting phenomenal opportunities in LNG and iron ore over the next two to five years and possibly longer.”

KBR was one of several members of the Association of Consulting Engineers that provided WA Business News with details of projects they are currently working on (see page 15).

The list shows the range of projects presently under way, in areas as diverse as oil and gas, alumina, iron ore, water supply, power, transport and community infrastructure.

Consulting engineers GHD has shared in the current boom conditions and general manager Australian operations Ian Shepherd said the good news had spread further.

“Our New Zealand arm is going great guns and in the Middle East we are picking up lots and lots of projects,” Mr Shepherd said.

“We will get more and more revenue offshore but also grow the Australian business.”

The many projects presently under way are led by 25 big resource and infrastructure projects collectively worth $11 billion (see page 13).

The list is confined to projects worth more than $100 million and therefore excludes numerous smaller projects in mining, transport and other sectors.

Three of the big projects are nearing completion – the North West Shelf Venture’s 4th gas processing train, Newcrest’s Telfer gold project, and Rio Tinto’s innovative Hismelt pig iron plant at Kwinana.

Projects that are just getting under way include BHP Billiton’s Ravensthorpe nickel project and Alcoa’s Pinjarra alumina refinery upgrade, both of which will have a peak construction workforce of about 1,000 people.

Looking ahead it seems likely the investment boom will continue for several years.

WA Business News has identified 13 big projects worth $10 billion that are likely to proceed within the next one to two years (see table this page).

There are a further 13 big projects collectively worth $16.5 billion considered a reasonable possibility of proceeding.

Engineers Australia director WA division Rupert Grayston said the current boom could be markedly different from the traditional ‘boom-and-bust’ pattern.

“This has the potential to be sustained for five years, which would be extraordinary because these things never last for five years,” he said.

“What also makes this unusual is that the investment in resources projects is on top of a very busy period of infrastructure development across Australia.”

The two linking themes for most of the projects are China’s rapid economic expansion and WA’s increasing need for energy (see page 14).

Iron ore miners BHP Billiton and Rio Tinto have both cited China’s rapid economic growth – specifically the rising demand for steel to support a construction boom – as the main driver behind their rapid expansion projects in the Pilbara.

Oil and gas companies such as Woodside (operator of the North West Shelf Venture) and ChevronTexaco have eyed China as one of the prime markets for their LNG, with Japan, South Korea and the US also important markets.

Commodities including alumina and nickel have also benefited from rapid economic growth in China and the generally buoyant state of the world economy.

The single largest project coming up is ChevronTexaco’s Gorgon oil and gas development.

Stage 1, worth $6 billion, is likely to kick off next year. It features construction of an LNG processing train on environmentally sensitive Barrow Island, while the $5 billion 2nd phase would involve development of gas processing infrastructure on the mainland.

Gorgon is expected to have a peak construction workforce of 3,000 people, even more than Train 4’s peak workforce of 2,400 people.

Another big project expected to proceed next year is the NW Shelf Venture’s 5th production train.

It would be a carbon copy of Train 4, costing about $1.6 billion, and would lift annual LNG production from 11.7 million tones to 15.9mt.

On a much smaller scale, the NW Shelf venture is expected to develop the Perseus field, linking it to the existing Goodwyn production platform.

NW Shelf venture operator Woodside has a busy schedule of new projects, with the $1.5 billion Enfield oil project and the $480 million Mutineer oil project (operated by Santos) currently being developed in Western Australian waters.

It is also involved in the $1.1 billion Otway project off the Victorian coast and the $850 million Chinguetti project in Africa and is assessing further projects in the Northern territory, the Timor Sea and the Gulf of Mexico.

Another expected project is Apache Energy’s $220 million John Brookes gas field development, off the north-west coast, which will supply Newcrest’s Telfer gold mine.

Outside the resources sector, Wesfarmers subsidiary CSBP is likely to proceed with a $130 million expansion of its Kwinana nitric acid plant next year.

The list of possible projects is dominated by iron ore and alumina.

Alcoa is already working on an upgrade of its Pinjarra alumina refinery and has started community consultation on development of a third production unit at its Wagerup refinery.

Alcoa said the Wagerup project, worth $1.5 billion, was one of several being assessed to meet a projected increase in alumina demand in 2007.

Looking beyond the Wagerup expansion, an even more ambitious possibility for WA is the development of an aluminium smelter. This has long been on the State Government’s wish list and would be a rare example of value-added mineral processing occurring in Australia.

BHP Billiton is also working to increase its alumina production.

It has committed to a $275 million upgrade of its majority-owned Worsley refinery and is believed to be assessing a much more substantial expansion, potentially worth more than $1 billion.

In the gold sector, the joint owners of the Wandoo project (formerly Boddington) south of Perth have publicly stated they are moving closer to a formal go-ahead for a $500 million-plus development while Argyle Diamonds is currently undertaking a feasibility study on underground extension of its existing open cut mine in the Kimberley region.

In the nickel sector, junior miner Heron Resources recently announced plans for a pre-feasibility study on a greenfields laterite nickel project potentially costing more than $1 billion, while Minara Resources could potentially proceed with an expansion of its Murrin Murrin project.

For all of the projects that develop, there are many that spend millions of dollars on feasibility studies but fail to proceed.

Two years ago the Burrup Peninsula was slated as the home for up to six petrochemical projects, but to date only Burrup Fertilisers’ $630 million ammonia plant has proceeded.

Of the other projects, UK company GTL Resources’ $700 million methanol plant is often still listed as a possibility. However, it is understood GTL has placed the Burrup site on the back burner and focused its efforts on an alternative site in the Middle East.