Local bids uncompetitive for Gorgon LNG poject, says project manager Colin Beckett

Release Date: 2011-03-07

Resources giant Chevron says Australian metal fabricators must reduce costs if they want to win more work on the massive Gorgon LNG project off the Pilbara coast.

As union and employer anger grows over the amount of fabrication work being sent offshore while local workshops sit idle, Gorgon project general manager Colin Beckett said high costs were letting Australian firms down.

He said there was "huge daylight" between local and overseas bids for some jobs, giving the example of three West Australian groups that put in bids to build around 30,000 tonnes of pre-assembled units for Gorgon last year. "Obviously, I can't tell you the exact details of the bid but they were highly uncompetitive. Price was the major determining factor in awarding overseas and it really was significant," he said.

"We factored all the things about the cost of moving things from overseas and bringing them here, the costs of supervision overseas versus supervision here, and taking all those things into account there was a huge amount of daylight between the overseas bids and local bids."

Mr Beckett said Chevron wanted to keep jobs local because it was in everyone's interest to have a viable industry to support Gorgon long term.

But he said some work was beyond the capacity of local firms, pointing to a paintshop that had to be specially built in Perth to enable one contract to proceed.

"If you go to some of these overseas yards, steel goes in one end and a fully painted unit comes out the other end without being multiple handled," he said.

"That's one of the issues. There's some work here that is very well designed for the fabrication shops and some work that is more complicated for them and involves perhaps a lot more handling. And that adds cost to their bid.

"It's not a question of labour rates necessarily at all. It's actually the facilities that people have in the first place."

Mr Beckett said he was hopeful that new work to be awarded mid-year for 12,500 tonnes of metal fabrication could be won locally if firms stepped up.

"We gave them some indication of the gap they've got to close and it's really up to them to take it from there and figure out where can we actually be a bit more keen in our bidding and how can we reduce our overheads," he said.

He urged the industry to also recognise opportunities long term. "The real money is in the next 60 years of maintaining the Gorgon project. There's a lot of money now in building it, but the real value for Western Australia is in fact in servicing these major capital projects," he said.

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Url:	http://www.theaustralian.com.au/business/local-bids-uncompetitive-for-gorgon-lng-poject-says-project-manager-colin-beckett/story-e6frg8zx-1226016696569