Australia's contracting work to go to other countries

Written by
Russell Searancke

Published
23 May 2019

23 May 2019 • by Russell Searancke

Collaboration: Western Australia's Premier Mark McGowan Photo: BLOOMBERG

Lack of capability in EPC jobs proves to be a stumbling block in Australia

Australia has entered a new phase of offshore field developments, but it is difficult to gauge to what extent the homegrown oil and gas contractors will benefit.

The Barossa, Scarborough, Crux and Browse projects could require potential total investment of more than US$35 billion, but the big-ticket engineering, procurement and construction contracts and installation packages will not be awarded to Australian companies. These prizes will go to overseas yards and companies.

For example, ConocoPhillips, which is developing the Barossa project, concludes in its Australian Industry Participation Plan (AIPP) that “there is no capability in Australia to undertake” certain major EPC work on the Barossa floating production, storage and offloading vessel, the subsea equipment or its export pipeline.

Instead, ConocoPhillips says there are many second and third-tier opportunities for Australian contractors, some of which will not be available to non-Australian companies.

Australia's contracting sector is forced to adapt Read more 

Similarly, Shell says in its Crux AIPP that Australian companies “are not capable of tendering” for jacket and topsides on the Crux offshore platform.

“This can be attributed to the limited work of this nature in Australia and the scale of the... platform, topsides and jacket which require suitable wharf infrastructure and a workforce familiar with this type of construction," says Shell.

Australian companies are also not capable of tendering for the Crux offshore foundation piling, pipeline, flexible riser, umbilical and wells infrastructure, and there are no Australian shipping companies “with the capability to transport and install loads of this nature”, adds Shell.

Fabrication

Australian contractors will qualify for some smaller contracts, including subsea fabrication packages, but that does not mean they will be selected.

Woodside’s AIPP for Scarborough is more welcoming to the Australian services sector in terms of not excluding them from any work package.

However, Woodside has selected its main contractors for Scarborough, and the only Australian company among them is IntecSea, a subsidiary of Worley. Unlike other major petroleum nations, Australia has no prescribed local content targets, but there is a legal requirement that project proponents must provide “full, fair and reasonable opportunity” for Australian companies to supply goods and services.

Because there are no prescribed local content targets, Australia is seen as a land of opportunity for overseas contractors, particularly those in South-East Asia, South Korea and China.

It is a situation that breeds discontent in the Australian contracting fraternity, who view the statements by oil companies that they are “committed to providing full, fair and reasonable opportunity for Australian industry” as disingenuous.

The local services sector also believes that state and federal governments should be doing more from a policy standpoint.

If local content is a requirement in other countries it should be a requirement in Australia, they argue.

Sources say it is difficult to know how much work will be allocated locally from the current and planned batch of offshore projects — even the onshore Pluto expansion train will be fabricated in modules overseas. The likelihood is that Australian contracting will not accrue the benefits that it should, sources say.

Taskforce

The Western Australia state government last year established an LNG task force to maximise local jobs and economic benefits from the region's liquefied natural gas industry.

“The aim for the LNG Jobs Taskforce is to capitalise on the massive growth in LNG production that has occurred in WA over the last decade, and establish WA as a global leader in LNG collaboration, innovation, maintenance and support,” says Premier Mark McGowan.

Sources say the task force has had little or no impact as yet on the way oil and gas companies are making decisions regarding Australian content.

The last offshore platforms to be fabricated in Australia were the Pohokura, Linda and Blacktip wellhead platforms in the 2000s, built by Ausgroup AGC at the Australian Marine Complex near Perth.