THIS week’s good news on the resources front – the formal go-ahead of the $29 billion Wheatstone gas project – has quickly turned into a political stoush over the issue of local content.
Global energy company Chevron announced that construction would start immediately on the Wheatstone project, which includes development of offshore gas fields and construction of a liquefied natural gas (LNG) plant near Onslow.
It said the project would create 6,500 jobs at the peak of construction, and 300 permanent jobs during operations.
Chevron expects that 50 per cent of the capital spending on development of the project (equivalent to about $14.5 billion) will go to Australian industry. Adding in operational spending over the life of the project, it is estimated the project will generate $17 billion in spending on Australian goods and services.
Unions, engineering and steel industry groups were critical, however, saying large contracts had already been awarded to overseas suppliers and local opportunities were limited.
Premier Colin Barnett called on the critics to be more positive.
“There’s plenty of fabricators around, elsewhere in Australia and in other countries, Europe in particular, where there’s not any work on the horizon at all,” Mr Barnett said.
He said the most important factor would be alliances between the local firms and the project’s proponents at an early stage.
The expected 50 per cent local content on Wheatstone is similar to other recent LNG projects, such as Gorgon and Pluto.
It reflects the awarding of engineering contracts to major international players (in this case Bechtel), the fabrication of large modules that exceed the capacity of local workshops, and the ordering of specialist equipment that is not manufactured in Australia.
However it is lower than the local content achieved on some earlier LNG projects, such as expansion of the North West Shelf venture, which occurred prior to the emergence of modular construction techniques.
In contrast to the LNG projects, iron ore developments have a much higher proportion of local content, typically about 85 to 90 per cent.
This occurs in large part because they involve a lot of civil engineering tasks such as mine site preparation and railway construction.
Chevron deputy chairman George Kirkland said he expected about $3 billion of contracts would be awarded to local industry before the end of 2011.
“Local content for us is very important, we are always trying to balance that with the cost of the project,” he said.
