As world markets sweat over credit issues, oil major Chevron’s announcement of plans for another multi-billion dollar gas project further underline Western Australia’s perceived inoculation from the worst of these global symptoms.
As world markets sweat over credit issues, oil major Chevron’s announcement of plans for another multi-billion dollar gas project further underline Western Australia’s perceived inoculation from the worst of these global symptoms.
The vast scale of the major developments taking place in the north west, and the long lead times required, provided a high level of immunity from the global haemorrhaging taking place.
Chamber of Commerce and Industry WA chief economist John Nicolaou puts the overall value of projects either committed to or proposed at almost $165 billion, with the majority of that number in the north west.
“What is happening in the north west is significant and will clearly outweigh any negative effects in other segments,” Mr Nicolaou said.
US-based Chevron this week unveiled a $10 billion - $15 billion proposal to develop its Wheatstone gas field off the north west coast.
While there has been much conjecture that this development could divert attention from other projects, Chevron, for its part, has not publicly signalled any intention to deviate from the $20 billion Gorgon project, which is a joint venture with ExxonMobil and Shell.
Meanwhile, on the nearby Pilbara coast and hinterland, development is ramping up at an extraordinary pace, driven by Rio Tinto Ltd and its takeover suitor BHP Billiton Ltd.
Rio Tinto has flagged expenditure of about $A10.9 billion for its 100 million tonne per annum mine, rail and port expansion plans for the next four years as it aims to achieve iron ore output of 320mtpa from the Pilbara region.
Last calendar year, Rio Tinto’s Pilbara iron ore production rose above 155mtpa and is projected to hit around 200mtpa by the end of this calendar year.
A further 100mtpa capacity expansion at Cape Lambert, taking Rio Tinto’s total production in the Pilbara to 420mtpa by 2017-18, is uncosted at this stage.
BHP is currently producing about 108mtpa from the region and has committed $A2.02 billion to hit 155mtpa by 2010.
Along with its partners, a further $A1.18 billion has been committed towards an expansion to 200mtpa by 2011, though the full approval will not be made until later this calendar year and costings are not available.
Other big iron ore projects in the area include CITIC Pacific Mining’s $5.2 billion operation to produce 26mtpa of concentrate and pellets at Cape Preston and Fortescue Metal Group Ltd’s 45mtpa development costing $2.7 billion Then there is the Mid West, where billions of dollars of development are planned.
At a junior level, resources players are feeling the impact of the global credit crunch, which has made fund raising tougher than the past two years.
However, many in the resilient sector have already shifted gears, with corporate advisers revealing an increase in backdoor listings through the revival of shells.
Cashed up juniors are also running the ruler over their less comfortable rivals, seeking projects with the right fit in what is expected to be a wave of consolidation.
“We are drawing up a hit list,” said the CEO of one junior explorer.
However, WA is not totally immune from the downturn and even those of the stronger-for-longer viewpoint are watching China closely.
A month ago, gold miner View Resources Ltd went into voluntary administration and two weeks ago Palandri Wine Group, one of the state’s largest wine producers, followed suit.
Mr Nicolaou warned that interest rates could impact on consumers, housing and some related businesses.
