West has capability for naval work

The federal government’s $89 billion spend for new naval vessels represents an opportunity for businesses at the Australian Marine Complex in Henderson, as energy and resources projects dry up.

Local businesses are not being held back by the low profile of defence work undertaken in Western Australia, pitching strongly for involvement in a series of major projects, including the much-anticipated Sea-1000 future submarines.

The submarines are part of a forecast spend of up to $89 billion on defence acquisitions for the navy in the coming 30 years, with two such builds given to South Australian-based businesses earlier this month.

Worth $40 billion, the future frigate program and the offshore combat vessels program will use a continuous-build strategy, a policy intended to give increased certainty to the sector.

An opportunity for WA remains, however, in the building and maintenance of submarines.

Three international players are bidding for the submarine building contracts, with an estimated value ranging from $20 billion to almost $50 billion in some reports.

Between them, those companies have significant global experience in such builds, with German ThyssenKrupp Marine Services, French DCNS Group and Japan’s Mitsubishi Heavy Industries all offering a portfolio of naval work.

For the purpose of the Sea-1000 bid, each company will be asked to provide three alternative bids – entirely overseas, entirely local, or a hybrid build.

ThyssenKrupp has reportedly expressed an interest in building such a vessel in Australia, arguing that a hybrid build would be more expensive than simply replicating its German facilities in Port Adelaide.

It could also buy the Australian Submarine Corporation, the government-owned business that built and now maintains the Collins Class submarine fleet, if the Commonwealth chose to privatise it.

Local play

As Australian companies go, Austal has undertaken work on several defence contracts, including delivering coastal combat vessels built in Mobile, Alabama.

One such ship completed trials in July and was delivered to the US Navy last week as part of a $3.5 billion contract.

However, Austal’s Henderson facility does not have the capacity to construct new vessels the size of the new future frigates, while Osborne in SA does.

Nonetheless, the state government-owned Australian Marine Complex at Henderson has had its share of naval contracts.

Austal, for example, is producing smaller Cape Class patrol boats under a contract for the new Australian Border Force.

Additionally, the facilities at Henderson are already a key location for maintenance of ships and submarines, including at the ASC west facility.

The location is superior logistically, with all six of the current Collins Class submarine fleet based at HMAS Stirling naval base at Garden Island, a short distance from Henderson.

Other companies at Henderson include Raytheon Australia and BAE, while myriad players have engaged heavily in the oil and gas market. BAE is currently refurbishing ANZAC frigates.

Overall, successive governments, both state and federal, have invested about $370 million in the infrastructure at Henderson, with the most recent upgrade undertaken in 2010.

Both ThyssenKrupp and DCNS have recently toured the facilities, which includes common-user infrastructure such as the floating dock. The dock is used for existing submarine maintenance work.

WA Senator Linda Reynolds, who sits on parliament’s foreign affairs defence and trade committee, has been a supporter of bringing a portion of the naval work to WA.

Senator Reynolds said defence-contracting work would bare some similarities to oil and gas project contracting.

She said that while some of (the state’s heavy manufacturing) was supporting the mining and oil and gas industry, it was very clear those skills sets and the expertise were readily transferable to shipbuilding.

“With the transition in the mining sector from construction to production, we’ve got a workforce readily available, both in terms of highly skilled engineers through to highly skilled metal trades and related trades.

“We didn’t really have the capability when we were at full employment … but it’s just a perfect time now for WA to put a joint case.”

For example, some of the subsea work for offshore oil and gas projects is built to withstand pressures similar to those experienced by submarines, including ‘Christmas tree’ wellheads.

Senator Reynolds said the state’s shipbuilding sector was internationally competitive.

“I’ve been down to Henderson and seen first hand the capability that we have, not only with our existing shipbuilders but with the facilities (at) the Australian Marine Complex,” she said.

“The shipbuilding here is trade exposed like all our other industries.”

The continuous-build strategy would bring benefits too, Senator Reynolds said, as it encouraged efficiency improvements.

“Military capability contracts should be awarded competitively,” she said.

WA Commerce Minister Michael Mischin agreed it was a good time for the state to be awarded defence work.

“As the extractive resources industry transitions from construction to an operational phase, a natural slow-down in activities is evident,” Mr Mischin said.

“This is being echoed at the Australian Marine Complex common-user facility.

“As a direct result, increasing opportunities have arisen for local industry for naval shipbuilding, not only in construction, but in support and maintenance activities.”

He said the Department of Commerce would continue to engage the three potential builders for contracts to be awarded to the state, particularly with regard to ongoing maintenance.