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Wednesday, 21 August 2002
Page: 3443

Senator EGGLESTON (12:45 PM) —I would like to talk today about the stunning proposal to develop further trains on the North West Shelf in Karratha and Dampier, and the contract which has recently been signed for Western Australia to provide gas to the Chinese market. This is an enormous achievement for Australia, and it means that we are going to see enormous development on the Burrup Peninsula. This will benefit not only the people of Karratha and Dampier in terms of employment and the development of industry there but the people of Western Australia as a whole and in fact the people of Australia.

The plan to develop North West Shelf gas was first proposed by Sir Charles Court way back in the 1970s and 1980s. The North West Shelf project was originally his concept, and he brought it to fruition. More recently, Richard Court, who was the Premier of Western Australia in the last Liberal government, worked very hard to obtain this contract to provide gas to the Chinese market. In the end the Australian government worked very hard in lobbying the Chinese government to give this first contract for gas to Western Australia. I understand that it seemed the contract was going to go to Indonesia but, because of the enormous lobbying effort by the Prime Minister, John Howard, and his ministers, that decision was changed, and now Australia has the first contract to provide gas to the Chinese market.

That is very important because it is a threshold decision. The Chinese are moving from the use of coal to the use of gas as a means of generating power. They also, of course, use large amounts of oil from the Middle East. It means that the Chinese are sourcing energy for electricity generation from Australia, whose political climate is much more reliable and stable than that of the Middle East. The United States Department of Energy's International energy outlook 2002 has estimated that natural gas consumption in China will increase by 10.1 per cent annually until 2020. The implication of this is that the Chinese market is one of great potential for the further expansion of the Australian liquefied natural gas industry.

The new LNG trade deal with China will create thousands of jobs in the construction phase in the Karratha-Dampier area and will necessitate the construction of a fifth LNG train on the Burrup Peninsula. That is going to involve additional capital expenditure of more than $1 billion over three years. Even before the announcement of this new deal, the North West Shelf venture was going through a major process of expansion. The processing facility on the Burrup Peninsula near Dampier and Karratha currently has three LNG processing trains, and in late 2001 the construction of a fourth train commenced in order to meet further demand for LNG from the Japanese market. This in itself involves capital expenditure of some $1.6 billion, and this new train is scheduled to come on-line in mid-2004. It will have an annual capacity of 4.2 million tonnes of LNG and will be the largest LNG train to have been built anywhere in the world when it is up and running.

According to Woodside, the operator of the North West Shelf venture, it is expected that the fourth LNG train will add a further $2 billion annually in export revenues for Australia, as well as contribute some $6.7 billion in extra taxes and royalties over the life of the project. The new train will be a showcase of Australian engineering expertise and will provide a lot of opportunities for Australian business. Indeed, according to Manfred Henze, Woodside's general manager of onshore expansion projects:

This is the first time such a plant has been designed and built in its country of origin ... our aim is to develop a world-class project, using Australian engineers, contractors and supporting staff wherever competitive so that we maintain and build the Australian skills base to service the industry in future.

That is a very good thing for Woodside to be doing, because we do need to develop engineering skills in Australia and maintain those skills. What all of this translates to is more jobs both for Western Australia and Australia generally. During its construction phase, the fourth LNG train is expected to directly and indirectly support no less than 9,000 jobs across Australia. In general terms, the North West Shelf venture has been a great Australian success story. It currently supplies about 70 per cent of Western Australia's natural gas needs, as well as supplying LNG to Japan and condensate, crude oil and liquefied petroleum gas, or LPG, to international markets.

Commercial development of the North West Shelf began in 1980. In 1984, what was then the world's largest capacity offshore gas production platform, North Rankin A, began producing natural gas, initially for use in the domestic market and then later for the Japanese market. From 1989 on, the Japanese market became a recipient of LNG from the North West Shelf, and today the North West Shelf provides gas which is used to generate electricity for some 73 per cent of the Japanese population. As I said, the North West Shelf has contributed markedly to the economic prosperity of Dampier and Karratha, the wider Pilbara region, the state of Western Australia and Australia as a whole. It is a major export earner, bringing annual export revenue of around $3 billion to this country. Overall it has involved capital expenditure of $13.2 billion as of November 2001. More than $9.5 billion has been spent on the purchase of Australian goods and services. The North West Shelf has created no less than 80,000 jobs estimated on the basis of the multiplier effect around Australia and is a source of annual royalty payments to the government of Western Australia and the Commonwealth running into millions of dollars.

The new contract with China and the expansion of the North West Shelf venture is especially good news for Karratha and Dampier but, as I said, it is going to have a broader effect throughout this country. One of the most important things it is going to do is lead to the development of secondary downstream processing. Australia is a great commodity exporting nation. We export many commodities, from agricultural commodities to minerals and gas, but many people feel we really ought to be into secondary downstream processing and developing industries which use our natural resources rather than sending them to other countries. I must say that the Pilbara gas industry looks like being the first really important success story in the development of secondary downstream processing from an Australian commodity.

According to the Pilbara Development Commission, the Pilbara region is on the cusp of an exciting new phase of industrial growth, with existing industries expanding and new ones emerging. At the Pilbara Industry Conference in 2000, Colin Barnett, the Minister for Resources Development in a former state Liberal government, said:

In the next few years, Karratha will witness the birth of a significant chemical industry based on the downstream processing of natural gas into products such as ammonia, ammonium nitrate, synthetic hydrocarbons, methanol, urea and other petrochemicals. Collectively, these new industries will be much bigger than anything on Australia's eastern seaboard.

So Karratha-Dampier is going to develop into a major industrial area. Some of the companies which are considering the Burrup Peninsula as the site for downstream processing projects include the Syntroleum Corporation, with the Sweetwater gas-to-liquids plant; Burrup Fertilisers Pty Ltd, who are developing an ammonia plant which will annually export around 759,000 tonnes of ammonia to India for the manufacture of fertilisers; the Dampier Nitrogen Project, which involves a group of companies who are considering the construction of a $900 million world-scale ammonia and urea plant on the Burrup; and Japan DME Ltd, who have a dimethyl ether project. Japan DME is a consortium of a number of Japanese corporations, and they are considering the investment of $1 billion to develop a dimethyl ether plant on the Burrup. Another company, Methanex, are developing a methanol plant and are already on the Burrup and proceeding with the early site works for the development of their plant. They will be constructing the world's largest methanol plant and, again, this plant represents an investment of $1 billion. Then there is GTL Resources, who have another methanol project proposed for the Burrup Peninsula. What we are seeing happening in the north-west of Western Australia is secondary downstream processing, which I am sure everybody in the Senate and those listening around Australia will regard as a very worthy outcome. It is time that we stopped just exporting minerals and began secondary downstream processing.

The one thing that I would like to say as a caution, however, is that the Burrup is an area of great heritage significance to the Indigenous people of the north-west. When I was on the board of the Pilbara Development Commission, Harry Butler, who was the chairman at that time, took me to the Burrup Peninsula. There are literally thousands and thousands of Aboriginal rock carvings or petroglyphs on the Burrup, and concern has recently been expressed that, with further development of chemical plants on the Burrup, these rock carvings may be endangered by the effects of chemical emissions. I think that is a legitimate concern, and I hope that consideration will be given to preserving those petroglyphs, preserving and protecting the general amenity of the beaches on the Burrup Peninsula and protecting the people of Karratha from noxious emissions from petrochemical plants.

As it happens, the state government has developed a potential industrial estate, known as the Maitland Estate, about 20 kilometres south of the Burrup on flat land which would need to have a gas pipeline and infrastructure put into it. I think that is the site on which further industrial development on the Burrup Peninsula should go. The site costs of developing plants on the Burrup are very high because it is a very rocky area, but at Maitland there is flat land and, once the initial infrastructure were put in place in terms of roads, electricity, gas pipelines and perhaps the development of new port facilities, there would be endless potential for expanding that site as further petrochemical projects were proposed.

The amount of land free on the Burrup Peninsula for further development is very small and, as I said, there is a potential for endangering the petroglyphs on the Burrup and also, possibly, a danger to the people of Karratha-Dampier from noxious emissions from petrochemical plants. So I do hope that the current Western Australia government will listen carefully to the public views expressed by the people of Karratha that they would prefer to see development placed on the Maitland Estate and not on the Burrup Peninsula.

I recently attended a rally on the Burrup Peninsula, where there was a cross-party group in support of the Maitland Estate being the site for further development. I attended for the Liberal Party, and the group also included the Greens, One Nation and the shire president, who belongs to the ALP. Of course the ALP itself did not support the proposal.