Continued strong growth in iron ore and gas projects in the Pilbara has underpinned WA's economic growth.
Continued strong growth in iron ore and gas projects in the Pilbara has underpinned WA's economic growth.
WESTERN Australia is home to 31 major resource projects investing a total of $78 billion in the state, WA Business News' annual major projects survey has found.
The project investment has been the main reason behind another healthy period of growth this year, with economic activity increasing by 6.7 per cent over the year.
The survey is limited to projects either under way or committed, and contrasts with other surveys that include many projects labelled 'possible'.
To put the latest figures into perspective, in 2004 WA Business News identified 25 major resource and infrastructure projects worth $11 billion.
Three years later, the 2007 survey identified 38 major resource and infrastructure projects worth $49 billion, with that number at the time rising to a level few pundits had anticipated.
This year, the level of project developments reached new heights, even though the survey is now restricted to resources projects. WA Business News has initiated a separate survey of infrastructure projects, published in March.
"Looking at Western Australia with the higher [production] costs, the labour issues, energy prices, these are all aspects having a definite impact on the economics of projects," Perth-based Hartleys resource analyst Andrew Muir said.
"And yet, WA is still strong, mainly due to these projects already up and running."
While the resources sector as a whole is buoyant, the future of some players was uncertain at the time WA Business News went to press due to the political stalemate following the state election.
Uranium mining and giant gas projects in the Kimberley are likely to get the green light if the Liberal Party forms the next government, but their future is uncertain if Labor retains office.
Whichever party gains office, their work will be cut out to ensure future developments, particularly in the gas, iron ore and power sectors, continue to insulate the state's economy from the global economic slowdown.
Three major developments in those sectors last month highlighted WA's ability to continue its growth, despite current economic conditions.
The most significant was the decision by the three partners in the Gorgon Gas project to spend more than $1 billion and employ 1,200 workers to determine whether they should go ahead with what would be Australia's largest-ever resource project.
Another important announcement was that Australia's biggest engineering company, WorleyParsons Ltd, would head a consortium of some of the state's biggest companies to study the development of a series of $1 billion, 25-megawatt solar thermal power stations across Australia.
Industry partners including Woodside Petroleum, BHP Billiton, Rio Tinto, Fortescue Metals Group and Wesfarmers will jointly fund the study.
Three of those companies - BHP Billiton, Rio Tinto and Woodside - make up a significant portion of activity in WA at the moment, including new mines, rail and port projects, liquefied natural gas plants and offshore gas platforms.
Key projects such as Rio Tinto's $1.5 billion Argyle Diamonds underground mine and its $952 million Cape Lambert port expansion, BHP Billiton's $1.3 billion offshore Pyrenees oil project, and Woodside's $12 billion Pluto LNG project, have contributed immensely to WA's booming economy.
With other projects soon to come online, such as CITIC Pacific's $5.2 billion Sino Iron Ore Project at Cape Preston, the possibility of Australasian Resources Ltd's $2.7 billion Balmoral South Project getting under way, as well as CBH Resources Ltd's $213 million Panorama zinc-copper mine, the level of activity throughout the state continues to look healthy.
But Mr Muir warns that rising materials and labour costs, and the difficulties securing funding from investors could slow major project development.
"Everything costs more now," Mr Muir said. "Steel prices have gone up 30 per cent in the past six months. It will be interesting to see whether a couple of mines will shut down or be scaled down as a result."
China has been a driving force in WA's robust growth, with an enormous demand for energy and for steel-making commodities like iron ore.
This has led to big increases in the price of most export commodities, which has helped project developers cope with sharp increases in construction and materials costs.
Projects such as FMG's $3.85 billion stage 2 Pilbara iron ore project and the proposed Oakajee Port development in Geraldton were aided by China's need for WA's resources.
The private sector has also ramped up its infrastructure investment, particularly in the Pilbara, where mining companies are building new ports and railways.
Chamber of Commerce and Industry WA chief economist John Nicolaou said WA's growth during the past six years had been the result of the "phenomenal business investment" from major projects.
"In Western Australia we have built an economy that's typically been built around major projects," Mr Nicolaou told WA Business News.
He said the projects pipeline in WA "puts us streets ahead of any other state in terms of total value and that certainly shows we punch above our weight in terms of economic activity, in this state anyway".
"It's across all regions of the state, it's across different sectors of the economy, but by and large, the major projects are mining related and oil and gas related," he said.
"To date if you look at it, resources have been the primary driver behind investment activity in the state but looking forward I guess in the longer term, between three and eight years, it's going to be oil and gas, particularly LNG developments, which will be the primary driver of investment activity in the state.
"And it's those that sit in the possible and under consideration basket."
Mr Muir said with increasing cost pressures, continued skilled labour shortages and increasing difficulties in obtaining funding, projects either under construction or deemed 'possible' were at a high risk of not getting off the ground.
Mr Nicolaou said business investment was expected to remain the primary driver of growth in WA, however economic growth was anticipated to ease to 5.5 per cent in 2008-09 as a result of an interest rate-led moderation in consumer spending and an expected pause in investment activity after the completion of a number of key projects.
