Chevron has awarded a Chinese engineering company a $US180 million contract for the construction of modules for the Gorgon gas project that was originally earmarked for Australian steel fabricators.
Chevron has awarded a Chinese engineering company a $US180 million contract for the construction of modules for the Gorgon gas project that was originally earmarked for Australian steel fabricators.
China's Offshore Oil Engineering Corp (COOEC) won the contract for the construction of more than 150 modules as part of the $43 billion project leaving a sour taste in the mouth of the nation's steel fabricators.
COOEC, a subsidiary of oil giant China National Offshore Oil Company Limited (CNOOC), recently won the deal to help build some key facilities for Chevron's Gorgon gas field.
Australian Steel Institute WA/SA state manager, David Holbrook said the strength of the local economy propping up the Australian dollar meant that companies like Chevron, which were looking for the cheapest deal, were awarding lucrative contracts overseas at the expense of local companies.
"There was a lot of work scheduled for Australian fabrication but because of the difference in the dollar, any business, like Chevron, will go out and buy the cheapest out there," Mr Holbrook told WA Business News.
"They're not looking at Australian content, they're looking at dollar for dollar.
"And $50 million contracts here in Australia would've cost $32 million 12 months ago."
Mr Holbrook explained that this $180 million contract was part of the important PAR and PAU work which his members could actually tender on.
Back in 2004, Mr Hilbrook said his organisation clearly presented to Chevron that, of the 250,000 tonnes of steel fabrictaion up for grabs as part of the Gorgon project, Australian companies only had the ability to fabricate about 50,000 tonnes due to labour and manufacturing restraints.
"Gorgon on the whole required about 250,000 tonnes of steel," he said.
"200,000 tonnes of it we said we can't do as we don't have the manpower or the faciltities to do those sort of things.
"However, what we can do is the PAR and PAU, and we expected a full, fair and reasonable opportunity to do this work.
"They gave us the opportunity to tender, and if tender process had occurred 12 months ago, when converting the dollar back at 64 cents, our tender process...would've been more competitive.
"Now it's far off the competitive edge, and it's getting worse due to economy propping up the dollar."
To counter this trend, which he said has left a sour taste in his mouth, Mr Hilbrook suggested the federal and state governments should offer royalty reductions to these mining giants if they agreed to utilise local content.
"We need the federal and state goverments to put their hands up and offer royalty reductions if they invest in local content," he said.
"We've been pushing government to put royalites up: for example, 3.75 per cent on iron ore is not good enough and they say 3.75 per cent is what BHP (Billiton) and Rio (Tinto) are paying in iron ore royalties.
"Why not make it five to six per cent and if they show they've used local content and other stuff that they could've bought offshore but they didn't, then we'll give them a per cent off in the royalites."
Despite reports regarding this recent contract circulating the globe, Chevron said it was unable to confirm any details.
"Please be advised that Chevron does not disclose this type of commercial detail because tender information is confidential," a note from Chevron's media department said.
The construction of more than 150 modules will be started in January next year in Qingdao, a coastal city in east China's Shandong province.
The Chinese Ministry of Commerce said it will be finished by September 2012.
