North Australia Weekly Digest – 21/06/13

The Australian
Tony Abbott has announced the Coalition’s Developing North Australia policy in Townsville, pledging that his government would implement a raft of measures to fast-track development across the North, turning it into a “thriving, strong and prosperous tourism, food bowl, medical and Asian trading mecca” if elected. The policy plan involves lower personal and business tax rates, government relocation subsidies and investment incentives to encourage a major population shift across the region.  “No longer will northern Australia be seen as the last frontier; it is the next frontier,” Abbott said. “We are determined to break the ongoing development deadlock that has held northern Australia back”.
In an opinion piece, Andrew Robb highlights the courage and boldness behind the Coalition’s Northern Australia policy, which aims to double Australia’s agricultural output, expand the tourist economy in the north to two million tourists annually, bolster the energy export industry and create world-class education hub across the region. “The key to our approach is to leverage the strengths of the north and several competitive advantages to promote sustainable growth and vibrant communities. As a nation we need to back our strengths,” the piece reads.
In a market report released this week, the International Energy Agency has warned that Australia’s LNG projects are at risk of further delays and cost blowouts as many developments may be too exposed to price changes in LNG. The IEA also predicted that it is unlikely existing LNG plants in Australia, such as Gorgon, will expand, nor that any new developments will go ahead in Australia’s current uncompetitive environment, particularly as LNG export prospects from the US emerge. “If you have very, very high project costs some of these projects will be quite exposed to any change in Asian markets,” said Laszlo Varro, IEA head of gas, coal and power.
Despite its $80 billion of new gas-export projects in Western Australia, a senior Chevron executive has warned that costs are still too high within the resources sector, warning that high labour costs and red tape continue to make investments in Australia less attractive. “The cost pressures remain – there is no let-up, obviously, in wage demands,” said Colin Beckett, Chevron’s general manager of the Greater Gorgon area.
Chief of Northern Star Resources Bill Beament has said that many structural changes across the mining industry that have underpinned recent “productivity drives” would need to go much further before global investors start returning to Australia. Beament, who has taken 20 per cent off the cost base of the Paulsens gold mine in the Pilbara over the past two years, said that many companies would need to follow suit in order to attract necessary capital for projects. “I think we can only get them back in when we get that cost base right and get the productivity going inside our industry and return money with that,” Beament said.
The Australian Financial Review
BHP Billiton and Rio Tinto have both cut staff from their Australian operational offices in an effort to restructure and reduce costs amid commodity price volatility and increasing pressure on returns. Andrew Harding, chief executive of iron ore at Rio Tinto, said that the new, leaner structure aimed to “minimise the number of layers and functional overlaps”, meaning that some roles “no longer existed”. This follows the industry-wide refocusing on cutting costs and improving productivity.
The West Australian
West Australian Premier Colin Barnett has launched a new attack on Royal Dutch Shell for its plans to develop a floating gas processing facility in place of the shelved land-based LNG hub at James Price Point. Barnett threatened to strip Woodside Petroleum and its Browse Basin partners of their state-based gas retention leases next year if they pursued floating technologies, citing concerns regarding the reliability of supply given the platform is in a cyclone belt. However, the high cost pressures of developing the project onshore remain the key factor underpinning Shell’s decision.
Two companies linked to China’s largest agricultural conglomerate, Beidahuang Group, are reportedly being offered to buy or lease “hundreds of thousands” of hectares of land in the West Australian wheat belt as the proposal to develop an independent grain supply chain from the port of Albany progresses. Vicstock Grain and Heilongjiang Feng Agricultural have planted crops on 40,000 hectares in the state and are looking at expanding further. “We are already proving the worth of this investment in WA agriculture and we can keep improving on that,” said Vicstock managing director Will Crozier.
The Courier Mail
BMA’s Red Hill mining project, which has been “on the drawing board” since 2008, has been reignited, with the potential to create more than 3500 jobs in central Queensland – 2000 of which will be created in the construction phases and a further 1500 in operation. The mine, which had previously been shelved because of market conditions, could meet 14 million tonnes production capacity, putting it on par with several of the “mega-projects” in the Galilee Basin.