North Australia Digest – 14/11/2012

Australian Financial Review
Australia’s biggest ever resources development, the Gorgon liquefied natural gas project, faces a $20 billion cost blowout to more than $60 billion because of the high dollar, union demands, high-cost local manufacturing and productivity issues. West Australian Premier Colin Barnett says companies were going through a tough period across the energy and mining sectors. ‘Some (companies) have become bloated with administration during the heady days…and they’ve come to the realisation their production is too expensive’.
The message from Resources Minister Martin Ferguson can’t be much clearer. Too many Australian projects are no longer competitive, according to Jennifer Hewett. ‘Partly that’s escalation in costs is due to the strong currency. Partly it’s because some resource companies allowed themselves to become “fat and lazy”’.
West Australian Premier Colin Barnett says his government will approach Chinese state-owned enterprises directly in a bid to kick start the $6 billion Oakajee port and rail project proposed to service iron ore miners in the state’s mid-west.
Australia’s rural sector has lost up to $43.5 billion in export income thanks to the Australian dollar, according to a report by think tank the Australia Institute. ‘The idea that any growth in the mining sector will serve to enhance Australia’s income is simply untrue’ the report reads. ‘The mining boom has not been managed well. It has been allowed to expand with little consideration for the collateral damage it causes to other sectors of the economy’.
The Age
The Age also reports on the Australia Institute’s study on the effect a high Australian dollar is having on rural export income.
Rio Tinto has accused the Australian government of taking its ‘eye off the ball’ in terms of productivity reforms, and called for action on workplace laws, taxation and foreign workers. Rio’s Australia chief David Peever says ‘Interventions like the recent increase in Queensland coal royalties and the more perverse aspects of the carbon tax…will help strangle the sector if they are not addressed’.
On Thursday, Mackay Sugar will flick the switch on its new $120 million co-generation plant and start supplying electricity to Queensland’s regional power grid. Rob Murray-Leach, chief executive of industry lobby group the Energy Efficiency Council says Australian companies are catching on that investments to improve energy productivity can deliver significant economic and environmental benefits.
The Australian
A Chinese property development conglomerate has won the sole right to develop 15,200ha of high-value irrigated agricultural land in northern Australia’s Ord River region after the state and federal governments spent $510 million to support the deal. The West Australian government will formally announce the deal next Tuesday.
The West Australian
A proposal for a new port in the Pilbara has been lodged by Iron Ore Holdings for a 20 million-tonne-a-year multi user facility. With an initial export capacity of 10mtpa, the port could eventually double in size to allow other iron ore companies in the region access to export markets. The proposal would provide countless jobs for the Pilbara.
The West Australian also reports on a Chinese conglomerate’s successful bid to secure 15000ha of farming land on the Ord.
Chervon insisted yesterday that the 15.6 million tonne a year Gorgon LNG project remained on track to be finished by late 2014 despite speculation of a cost blow out. Chevron’s Australia general manager Brian Smith said the project, based on tapping the Gorgon and Janz-Io fields off the Pilbara coast and piping the gas to Barrow Island for processing, was 50 per cent complete. Nine thousand workers were involved in Gorgon’s construction, including 400 on Barrow Island.
Despite the setbacks that have plagued the Oakajee Port and Rail project in WA’s Mid-West , the WA government should be commended for showing leadership and trying to find a long-term solution to the lack of infrastructure in the region, according to Simon Bennison. The state government needs to undertake a complete review of infrastructure and work co-operatively with industry to ensure infrastructure needs are met. (No Link).
Courier Mail
Rio Tinto has called for unions to get out of the workplace, blaming them for falling productivity, as some of its coal workers planned to strike. David Peever, Rio Australia managing director, says ‘Reform of the Fair Work Act needs to go much further than has so far been flagged by the government…Direct engagement between companies and employees, flexibility and the need for improved productivity has to be at the heart of the system’.