Our revelation that Chevon had awarded a major fabrication contract for Wheatstone to a Malaysian company earlier this week elicited a media release (read here) from Commerce Minister Simon O’Brien yesterday, which has been picked up in today’s edition of the West Australian (read article here).
In his media release, the Minister defends the off-shoring of the skilled modular fabrication work, highlighting that there were no local bidders for the work. Mr O’Brien said he wasn’t surprised about this, with research conducted by his Department concluding that local industry, “suffered serious disadvantages in being considered for such work packages in terms of both price and capacity.”
What the Minister’s press release doesn’t mention is that the Malaysian firm that won the work from WA has grown rapidly in capacity and capability over the last ten years, under a Malaysian policy that requires fabrication for its oil and gas sector to be performed in Malaysia. It is ironic that this Malaysian firm now has the capacity to build WA projects because its own government is supporting it with policies that our State and Federal Governments won’t even go close to.
Mr O’Brien’s media release also lauds the awarding of a contract to build the accommodation village for Wheatstone to John Holland as a benefit flowing from the project to local industry. What the Minister fails to address, however, is how much of the work for this contract will be done in WA. Earlier this year, Chevron circulated a document spruiking the accommodation village for Gorgon as an example of a contract with high local industry participation. It was later revealed that the village would be designed in Qatar and fabricated in Thailand.
Projects like Gorgon and Wheatstone are given cover to claim contracts that are designed and manufactured offshore as being local by the State Government’s own method of determining whether a contract is “local”, as outlined on Page 14, Paragraph 2 of its May’s Local Content Report.
The State Government counts projects as being “local”, even if half of their value is added offshore. This enables contracts that are designed and built in cheap offshore locations to be counted as “local” on the grounds that the value of offloading and installing the finished product, in the higher cost North West environment, equates to half of the value of the contract.
This effectively means that the State Government could be over-stating the value of work flowing to locals from our major resource projects by 100 per cent. It also indicates the State Government is content with relatively low skilled earthworks, offloading and installation work, while the skilled engineering, design and fabrication work is done offshore.
If countries like Malaysia, and many others around the world, can recognise the importance of taking strong action to build industries that provide skilled local jobs for their people, surely we can do better in Western Australia.