The North West Shelf venture’s $1.9 billion phase 5 expansion project starkly illustrates the adverse impact of Australia’s acute skills shortage.
The North West Shelf venture’s $1.9 billion phase 5 expansion project starkly illustrates the adverse impact of Australia’s acute skills shortage.
Numerous industry surveys have found that the skills shortage has emerged as the biggest constraint facing businesses wanting to expand.
As reported in last week’s WA Business News, multiple resource projects already under way have revealed delays and cost blow-outs as a result of the skills shortage.
It has now culminated in project operator Woodside opting for major changes to the way it manages the phase 5 expansion, so that it can cope with the skills shortage and save itself a few dollars along the way.
The changes have also been driven by the fact the fifth production train – the major component of the phase 5 expansion – is a carbon copy of train 4, completed last year.
This means most of the engineering design work has already been done.
As such, Woodside believes it is more sensible to run engineering and procurement from the home office of its engineering contractor, rather than mobilising an engineering team to Perth for the residual work.
Foster Wheeler has not been formally named as the engineering contractor but it is widely known that the work will be done from its offices in Reading, in the UK.
This is a setback for the local engineering community, which had been hoping phase 5 would be one more step toward Perth becoming a global centre of excellence in LNG engineering.
Shifting the engineering design to the UK also meshes neatly with the shortage of engineers in Australia.
Foster Wheeler procurement manager Trevor Barwick told last week’s industry briefing on phase 5 that its approach to procurement has been changed to suit the “carbon copy” approach.
Where possible, it will seek to negotiate supply contracts with the same firms that supplied train 4, with an expectation that costs will be saved because the preparatory work has already been done.
“Australian companies were successful on train 4, there is no reason why they shouldn’t repeat that on train 5,” Mr Barwick said.
If a supply agreement cannot be negotiated, supplies will be sourced via competitive tendering.
Foster Wheeler construction director Rob Holland said the aim was to maximise Australian content, subject to being globally competitive.
He said competitiveness would be measured on the basis of the cost of delivery on-site, on the Burrup Peninsula. This is expected to assist local industry compete with overseas suppliers.
Woodside’s general manager onshore projects Wim Kemper said the company’s target was to award Australian industry 85 per cent of the work that could be done here.
The biggest unknown variable is the capacity of local engineering workshops to compete for the pre-assembled modules, which will be awarded in packages of up to 2,000 tonnes.
This work would inevitably have to be completed at the ‘common user’ assembly hall at the Australian Marine Complex at Jervoise Bay.
General manager Mike Bailey said LandCorp was planning to build another fabrication hall at the AMC to meet growing demand, which he said reflected the success of projects completed to date.
Mr Bailey said this was helped by the AMC’s “almost totally trouble free” industrial relations track record.
Woodside has adopted a range of measures to assist local industry.
Its procurement manager Clive Palmer said the Industry Capability Network – a government-funded body charged with boosting local content on big projects – would have a staff member based at Foster Wheelers’ UK office.
Mr Palmer said Australian design standards and codes would be used on the project and ‘pre-award’ meetings would be held in Perth to make life easier for potential local suppliers.
He said Woodside plans to nominate a minimum percentage of Australian content on key packages.
He cited the example of Italian company Nuovo Pignone, which supplied equipment for train 4 and is already in discussions on supplying phase 5.
“We have told Pignone what we expect to see as a minimum,” Mr Palmer said.
Mr Barwick said major international suppliers would be required to prepare a formal plan, setting out how they intend to secure Australian inputs.
Woodside adopted a similar policy on train 4, but the impact was limited, with only a handful of Australian companies securing deals to supply international firms.
Mr Palmer said Woodside anticipated lots of negotiation with suppliers over the scheduling of work on the project.
This was designed to ‘smooth’ the demand for labour.
