FLNG would ‘devastate’ WA economy

flngA state Parliamentary committee has warned embracing floating LNG technology would cost WA tens of thousands of jobs, billions of dollars in revenue and put the state’s gas supply at risk. The Economics and Industry Standing Committee (EISC) report, handed down in Parliament last month, follows a Woodside Petroleum decision to abandon processing gas onshore from the Browse Basin and instead opt for FLNG technology being pioneered by Shell’s Prelude project, also off WA.

Tabling the report, EISC chairman and Liberal MLA Ian Blayney said the impact of FLNG on WA employment would be “devastating”. “The advent of FLNG leads to the direct importation of the entire assembled unit… [It] applies the principles that Henry Ford brought to the automobile industry to the production of vessels that weigh 600,000 tonnes, are 500m in length, and cost maybe $12 billion,” he said.

“The emergence of global engineering, procurement and construction, and the associated supply chains, has largely cut off opportunities for local fabricators to be involved.” Labor MLA and EISC deputy chairman Fran Logan lambasted federal colleague and former Resources minister Gary Gray, calling for a Federal Parliamentary inquiry into his decision to alter the Browse Basin retention leases to allow offshore development.
“This unilateral decision by the former federal minister has cost WA, its government and its economy billions of dollars in income and economic development and tens of thousands of jobs. It is absolutely vital that that decision be investigated and challenged legally,” he said.

“The Browse LNG project at James Price Point could have delivered a minimum of 10,000 jobs and, if the multiplier effect is taken into account, 30,000 jobs for Western Australia. “As a result of that unilateral decision… there will be no jobs of that scale in Western Australia. Those 30,000 jobs have gone.” Mr Gray told The Australian he was confident he and his department had followed due process in approving the changes and had ensured several legal checks were made before he signed off on the leases.

The EISC report called for wider reform of Commonwealth-state relations in developing offshore oil and gas. While it could not quantify revenue loss to the Commonwealth if projects moved offshore, Mr Blayney said FLNG revenue flows to the Federal Government ahead of the state would be at a ratio of 100 to 1. He called for federal funding to support a supply base for Browse FLNG at the controversial James Price Point site to ensure employment opportunities for WA.

The report also warned of potential impacts to WA’s domestic gas supply, with LNG produced off the coast unlikely to ever be regasified for use in WA. Mr Logan said “not one molecule” of gas would be landed in WA, causing severe long-term impacts on gas supply to business and the state’s sovereign right to develop its resources. Mr Blayney admitted that with fields predominately in Commonwealth waters, WA could do little but complain about FLNG development.

However, he urged Woodside and other operators to work with local manufacturers and suppliers as well as the state government to extend benefits to WA’s economy. Mr Logan was less conciliatory, accusing companies of working against the state’s interests.
“The Commonwealth Government has vacated the field on the development of offshore oil and gas in Australia…its view of the world is to leave it up to the companies because they know best,” he said. “This report highlights that the companies do not know best and, particularly, they do not act in the state’s interests, and nor does the Commonwealth.”

The Australian Petroleum Production and Exploration Association (APPEA) hit back at the report’s findings. “We simply cannot afford to reject floating technology, because in some cases it may be the only viable means of developing some of our offshore gas,” APPEA chief operating officer Western region Stedman Ellis said. “WA has the opportunity to become a world leader in this new technology through training, research and development and greater co-operation between industry and government.

“We need also to recognise the substantial opportunities available to the local services sector through FLNG’s long operations phase. If we don’t seize this opportunity, others will.” Mr Ellis said just one FLNG vessel had the potential to deliver up to 1000 highly skilled, well paid jobs and around $12 billion in tax revenue during its 25-year operating life. The same project could also generate around $45 billion in economic activity and up to $200 million every year in maintenance and supply contracts for local companies, he said. Mr Gray reaffirmed his support for FLNG at an Australian Mines and Metals Association summit in Perth last month, describing the technology as a gift to WA.

“Floating LNG is an opportunity for us – Australian industrial designers, scientists, operators, mechanics, petroleum engineers, clerks and marine engineers – to shine,” he said. “Shell’s Prelude LNG Project off Western Australia – the world’s largest floating platform – provides Western Australia with a golden opportunity to use innovation to drive productivity. “We would be foolish not to embrace the future; if we do not, the future will not be kind to Western Australia.”