North Australia Digest – 15/11/2012

by 15 November 2012

The Australian

Nationals Senate Leader Barnaby Joyce and NSW Liberal Bill Heffernan appealed to the WA government to rethink its deal with Shanghai Zhongfu. Senator Joyce asked if Zhongfu would pay Australian tax on any sugar or ethanol biofuel products produced from Ord land.

The joint venture partners of the $43 billion West Australian Gorgon LNG project have played down speculation they are facing a $20bn cost blowout that would dwarf anything in the country previously announced.

BHP Billiton will focus more on cost cutting after the dip in iron ore prices, but is still expected to drive production increases at its Pilbara operations in Western Australia. Earlier this year, BHP deferred its expensive outer harbour development at Port Hedland in favour of lifting productivity at the inner harbour, in the wake of high costs and low iron ore prices.

Fracking technology has enabled the energy equivalent of Saudi Arabia to be discovered in America. That’s why the cost blowout at the Gorgon LNG project is so dangerous to Australia, according to Robert Gottliebsen. ‘The US shale discovery has already contributed to the demise of our thermal coal and is now set to contain future gas developments’.

Australian Financial Review

Hancock Prospecting will formerly begin asking lenders for $7 billion in debt financing for the Roy Hill iron ore project within days. Executive Director Tad Watroba says, ‘we have very good support from the big Aussie banks…They are very keen to invest in this project. They are telling us Roy Hill is one of the best mining opportunities for them. We are looking forward to ticking all of the boxes’.

If Hancock Prospecting finds the $7 billion debt financing required to fund the Roy Hill project, another extraordinary chapter in WA resources development is underway, writes Jennifer Hewett. ‘It certainly challenges the idea that only major established miners can capitalise on the continuing Chinese demand for volume at prices likely to be far lower than their peak’.

Chevron only has itself to blame for any cost blowout at the Gorgon LNG project, says Chris Cain, head of the West Australian arm of the Maritime Union of Australia. ‘It’s (the wharf at which construction materials for the Gorgon project is loaded) going very well at the moment… Delays at Chevron are their own fault’.

Sloppy management practices have driven rising costs on large resources developments and made Perth ‘close to being the most expensive place for engineering in the world’, according to Worley Parsons managing director Ian Wilkinson. ‘There needs to be a re-check of expectations in places like Perth… I think we will see a rebalancing of costs in Australia over the next few years’.

The Australian Financial Review also reports on the oil and gas industry, blasting the cash-bidding scheme for offshore exploration licences.

Former Patricks boss Chris Corrigan has lambasted port managers for lacking ‘vigour and talent’ by allowing industrial activity to weaken productivity on the waterfront. ‘The management practices and management capabilities in the terminals are not being prosecuted with the right amount of vigour and the right amount of talent’.

The Age

The petroleum industry has slammed a federal government plan to extract cash bids for exploration permits, which would add to the cost pressures afflicting Australian oil and gas projects. Amid speculation of the Gorgon projects cost blowout, federal Energy Minister Martin Ferguson surprised the industry on Wednesday by announcing the government would introduce cash bidding for release of offshore acreage. ‘This will apply only to mature areas or those known to contain petroleum’ he said.

The West Australian

Consolidated Minerals has become the latest Pilbara operator to slash its workforce, with the manganese and chromite miner chopping jobs at both of its WA mines. The company said its cash costs had fallen since it moved to an owner-miner model earlier this year after sacking the mining contractor. However, ConsMin reports cash costs on a consolidated basis and does not separate its Australian and Ghanean operating costs.

Sugar cane growers have backed moves by a Chinese company to revive the industry in WA under a lease agreement with the State Government which will give it control of 15000ha of prized Ord River farmland. Australian Cane Farmers Association general manager Stephen Ryan says, ‘we have no issue with foreign investment, we are just dismayed that there is no more Aussie investment. The important thing to do is develop the industry’.

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