Voelte defends local content on train 5

Woodside chief executive Don Voelte has defended the limited Australian content on the North-West Shelf venture’s $2 billion train 5 expansion, saying the company had “no option” but to send the work offshore.

Mr Voelte has also foreshadowed further expansion of the NW Shelf project, as part of the company’s rapid international growth plans that include eight projects worth nearly $10 billion.

“We at Woodside anticipate the possibility of further LNG trains being built on the Burrup in the near future, even possibly overlapping construction of train 5,” he told an Institute of Chartered Accountants function.

Woodside estimates that about 45 per cent of the work on train 5 will be awarded to Australian companies, well below the 65 per cent local content on the previous train 4 expansion.

The international work will include “a substantial contract to build the pre-fabricated modules”, to be awarded next month.

The reduction in local content follows Woodside’s decision to switch from a ‘stick build’ approach, in which the LNG plant is built on site, to a modular approach where the plant is pre-fabricated off-site and transported by barge to the Burrup Peninsula.

Mr Voelte said this change was partly in response to the skills shortage and “will ensure that we meet our project schedule and result in significant cost and time savings”.

Two Australian companies were invited to submit tenders for this work, he said.

“One declined. The other submitted a tender but was unable to complete the work on the project schedule and its tender price was about 250 per cent above the provisional budget.”

This left Woodside with no option but to continue negotiations with international companies that submitted competitive tenders.

Mr Voelte said the train 5 expansion would provide a long-term economic boost, with extra jobs, higher exports and higher royalty and tax payments.

“The ongoing benefits of the expanded Karratha gas plant will easily overshadow construction spending when increased LNG production becomes a reality in the fourth quarter of 2008,” he told WA Business News.

“So I must admit that when I hear our critics complain about the reduction in train 5 Australian content compared with train 4, I believe they are missing the point.”

Australian Steel Institute state manager John Yeudall said he still believed Woodside could have achieved higher local content.

“When they do their next project, we would suggest a much closer and earlier engagement with the [steel] fabricators, the way Gorgon is doing it,” Mr Yeudall said in reference to ChevronTexaco’s planned $11 billion project.

Mr Voelte also repeated earlier comments that Woodside may establish satellite engineering offices in London and Houston to help it deal with the shortage of engineers in Perth.

This followed its decision to award the engineering contract for train 5 to Foster Wheeler, which is doing the work in Reading in the UK.