WA engineers set to miss out on $900m of LNG work
Summary: Woodside’s award of major contracts to US giants Bechtel and KBR has heightened concerns that WA will see little from a possible $900 million worth of engineering work for the Scarborough and Browse LNG projects.....
Design done overseas could drive lower local content in construction as engineers are more likely to specify equipment not available in Australia.
It may also make maintaining Perth’s existing engineering capability difficult, according to local engineering sources.
Earlier this week Woodside announced that Bechtel would perform the concept definition for the Pluto LNG expansion to process gas from Scarborough.
Industry sources said Bechtel was likely to base the work in Houston with little local work, similar to their approach for Chevron’s Wheatstone project.
KBR announced on Thursday it would perform concept definition for two floating production vessels for the Browse project.
WestBusiness understands that no firms with a Perth-based capability were on the bid list and KBR will base the work in London. Some less-critical work will be parcelled out to so-called high-value engineering centres based in lower-paying developing countries.
Before a project goes ahead an operator performs screening studies, concept selection and definition, and then front-end engineering and design.
An industry rule of thumb is that these activities can cost up to 2 per cent of the total cost. This adds to almost $900 million of engineering work for the $15.4 billion Scarborough and $28.8 billion Browse projects.
In May, Woodside chief executive Peter Coleman said Woodside was “choosing our dream team” of preferred contractors.
An industry insider said Woodside was following a trend to split projects into fewer larger scopes that could be managed with fewer in-house engineers.
In many cases only international firms were large enough to bid for the work and they tended to use their existing engineering teams rather than base the work in Perth.
One engineering veteran said savings from lower-cost engineering could be eroded through the need for later rework.
He said it was exactly the type of work young local engineers needed to learn their trade.
“Investing in engineering capability is a long-term game ... and at the moment efforts being made are nothing more than lip service,” he said.
In March Premier Mark McGowan launched an LNG jobs taskforce to ensure WA “becomes a global LNG hub”.
“It is extremely disappointing when this work goes overseas,” he said yesterday.
Mr McGowan said addressing this was a key aim of the taskforce. The first meeting will be held by the end of the year.
A Woodside spokeswoman said the company was committed to providing opportunities for Australian industry and both the Browse and Scarborough projects had awarded contracts to local engineering companies.
Woodside did not respond when asked if it would publish the local content achieved on the two projects.
Bechtel and KBR did not respond to questions on how much work would be done locally.