The head of the Department of State Development today said the $678 million in state and federal funds committed to the $4 billion Oakajee deepwater port project could change.
The head of the Department of State Development today said the $678 million in state and federal funds committed to the $4 billion Oakajee deepwater port project could change.
The state and federal governments last year each pledged $339 million of taxpayers' money to build common user infrastructure, notably the breakwater and turning basin, at the planned $4 billion port north of Geraldton.
On completion, these common user facilities will remain the property of the state and federal governments. Construction remains on track to start in mid 2011 ahead of first iron ore exports in 2014.
The funding pledge has drawn strong criticism from the state Labor opposition, which argues the project should be funded solely by the private sector as originally intended.
Speaking before the Legislative Assembly's Public Accounts Committee hearing today, department director general Ann Nolan confirmed the exact amount of government investment in the port could not be finalised until developer Oakajee Port & Rail completes a bankable feasibility study at the end of the month.
Responding to a question from state Labor MP Rita Saffioti, Ms Nolan said the $678 million estimated cost of the common user port infrastructure was based on information provided by OPR in the 2008 tender process.
But she said it was too early to tell whether the final cost would be higher or lower, given the cost of some inputs may have fallen since the original estimates were compiled. That cost estimate would be updated following receipt of OPR's feasibility study, she said.
Ms Saffiotti asked if that meant an increase in the government spending was expected.
"We expect that number to be updated ... at the end of March," Ms Nolan said. "Then we will be better able to estimate whether the number will be more or less."
OPR's estimates would also be subjected to detailed review by the government to ensure the level of investment represented good value for money, she said.
However, she said it was probably unlikely that the final cost estimate would be ready in time to be included in the May state budget.
Nor would the actual schedule of state and federal funding payments be finalised for some time. The state government has to date indicated its share of funding would be contributed in 2012-13, implying federal funding would occur first.
Committee chairman, Labor MLA John Kobelke, asked if the federal government was seeking a commercial return on its equity investment in the port, and how that would be calculated.
Ms Nolan said one of the conditions attached to Canberra's investment was a "reasonable prospect of recovery", concluding that "ultimately" the federal government would expect a commercial return on its investment.
But Ms Nolan said the state and federal governments were not only considering their direct return from the common user facilities, but also the significant economic benefits the whole project would generate for both WA and the nation.
But Ms Safiotti said the public investment needed to be considered against the prior Labor government's intention that port would be entirely funded by the private sector.
Mr Kobelke then asked Ms Nolan if there was any reason to justify the government subsidising the project.
But Ms Nolan replied that the government had taken a policy decision to invest in the common user infrastructure in order to take advantage of the "unique opportunity" created by the Oakajee development.
Asked why the government was prepared to invest in Oakajee and not the newly announced Anketell iron ore port in the Pilbara, Ms Nolan said Oakajee was a totally different proposition as it would ultimately be a multi-commodity export facility.
Ms Nolan said while Oakajee would initially export iron ore only, the department had estimated there were over 100 potential mining proponents who may ultimately seek to export a range of commodities.
While the project will have an initial iron ore export capacity of 35 million tonnes per annum, Ms Nolan said the department estimated there was potential for that to grow to 110 mtpa based on the resource potential of the Mid-West.
In comparison, Anketell would be solely used to export iron ore by a handful of iron ore companies.
Speaking after the hearing, Ms Nolan said she was confident that OPR would provide the necessary feasibility study information by the end of March.
OPR also said it was on track to meet its end of March deadline.
"We are bringing together all of the components of the project and we are well positioned to complete the studies required by the end of March," a spokesperson for OPR said. "We are targeting financial close in early 2011 and first ore on ship by early 2014."
