The amount of work flowing to local industry on the North West Shelf venture’s next big expansion will be substantially cut after project operator Woodside opted for a fundamentally new approach to engineering and procurement
The amount of work flowing to local industry on the North West Shelf venture’s next big expansion will be substantially cut after project operator Woodside opted for a fundamentally new approach to engineering and procurement, blaming the decision on the current skills shortage.
Australian content on the $1.9 billion phase 5 expansion could be as little as 45 per cent of total spending, down from the two-thirds local content on the $1.6 billion train 4 project completed last year.
This reduction in local content would effectively take $400 million of spending out of the local economy.
The phase 5 expansion will also create far fewer jobs. On-site employment on the Burrup Peninsula is expected to peak at 1,200, which is only half the peak workforce on train 4.
Woodside has attributed the changes to the acute shortage of skilled labour in Australia, which has already caused delays and cost-blowouts on multiple resource projects.
“That has caused us to change our execution strategy,” Woodside general manager onshore projects Wim Kemper said.
The changes include a decision to run engineering and procurement from the UK office of engineering contractor Foster Wheeler, in contrast to train 4, which was run from Perth.
Foster Wheeler has not been formally appointed, but that is considered a fait accompli.
The changes adopted by Woodside raise questions about the level of local content on other big resource projects, notably the $11 billion Gorgon development off the north-west coast.
Project operator ChevronTexaco has indicated in the past that it would aim to match the two-thirds local content achieved on train 4, but that now seems highly unlikely.
The details of Woodside’s phase 5 project were revealed at a briefing last week, attended by about 500 industry representatives keen to hear about work opportunities.
WA Business News has spoken to a number of industry representatives who expressed concern about Woodside’s plans and are keen to get more details.
Australian Steel Institute state manager John Yeudall, who is seeking follow-up meetings, said the response from his members was “a general level of disappointment”.
“All the indications are that it is being set up to be imported,” he said.
He questioned whether Woodside’s “well-meaning words” about trying to lift local content would be matched by its actions.
Mr Kemper prefaced his presentation by noting that the project owners had not yet formally committed to a go-ahead for phase 5, which involves construction of a fifth gas production ‘train’ and associated infrastructure.
He also highlighted the intense competition facing the North West Shelf venture in the global LNG market.
Mr Kemper said Woodside has committed to awarding at least $850 million of work to Australian industry and was hopeful the level will be higher.
He said local firms would be able to supply the project where they were “capable and globally competitive”.
The most fundamental change on train 5 is a move away from a ‘stick build’ approach, which involves on-site assembly of the gas plant, to off-site pre-assembly of larger modules.
“That will help to relieve the shortages of labour in the Pilbara,” Mr Kemper said.
Foster Wheeler construction director Rob Holland told the briefing his aim was to “maximise practical and cost-effective pre-fabrication”.
