New laws requiring up to 50 per cent of the components for renewable energy projects built in Ukraine to be manufactured locally came into force on 1 January, 2012.
The Ukrainian government has paid renewable energy generators a “green” feed-in tariff since 2008 as a part of a proactive policy to develop the country’s renewable energy sector. To be eligible to receive this tariff going forward, new projects will need to meet mandated local content levels, which will step up from 15 per cent in 2013 to 50 per cent in 2015.
This Ukrainian policy is one of a number of international examples of government taking a strong stance to develop local industries and jobs for the future. In addition to the this example, we have recently seen Chevron award a 60,000 tonnes steel fabrication contract to Malaysia’s Kencana NL Sdn Bhd – a company that has been developed under a Malaysian government policy of requiring 100 per cent of the fabrication for their domestic oil and gas industry to be performed in Malaysia.
There is also the well documented policy of the Canadian provincial government of Newfoundland and Labrador requiring Chevron commit to high levels of locally performed engineering and fabrication work, before being granted the rights to develop the Hebbron petroleum project.
While our campaign believes that mandating arbitrary percentages of local content on projects has its weaknesses, we have consistently called for stronger State Government policies that would require our major resources projects to commit to the items of skilled engineering and fabrication work that will be performed locally, before being given the final go-ahead for their projects by the State Government.
The State Government has taken some steps in the right direction, but far more needs to be done.
When announcing the go-ahead for Chevron’s $29billion Wheatstone LNG project last year, Premier Colin Barnett said he would be bringing a State Agreement for the project to Parliament in the “near future”. State Agreements typically include details of the local content requirements the State Government has negotiated with projects.
Unfortunately, Mr Barnett has not yet brought his Wheatstone agreement to Parliament, and the vast majority of skilled engineering and fabrication contracts for Wheatstone are being awarded to offshore suppliers before Parliament and the community has the opportunity to scrutinise the deal he has done with Chevron.
Wheatstone has awarded contracts for more than 150,000 tonnes of fabricated steel to date – with 100 per cent of this skilled work going offshore.
This offshored work has included:
- Offshore platform – 57,000 tonnes – awarded to Daewoo Shipbuilding, South Korea
- Onshore LNG processing modules (outer battery limits) – 42,000 tonnes – awarded to Bohia Oil Marine Engineering and Supply, China
- Onshore LNG processing modules (inner battery limits) – 60,000 tonnes – awarded to Kencana, Malaysia
While talk of tonnes and processing units may seem intangible to many, the impact of this off-shoring of work becomes far more real when you consider the impact on local people.
Despite all of the media releases from the State Government and the advertisements from Chevron that talk up the benefits flowing from Gorgon and Wheatstone, we continue to go backwards. Figures released by the ABS in December revealed the number of manufacturing jobs in and around Kwinana fell from 14,000 to 12,000 over the last year and youth unemployment in the area has gone past 25 per cent.
The problems in the manufacturing sector are being masked by the large number of jobs being created while projects like Gorgon and Wheatstone are being built. However, on the State Government’s own numbers, these two projects will require 10,500 people to build them and only 700 people to operate them.
The question for Mr Barnett is, once Gorgon and Wheatstone are built, what will all the people who build the projects do for work, if our manufacturing jobs have all gone offshore in the meantime? And what will the broader impact on the WA economy be once all these construction workers are without work?
While we are grossly opposed to the importing of engineering services and fabricated steel from offshore, we would be very happy for the State Government to import some more proactive policies. If countries like Canada, Malaysia and Ukraine can stand up to industry to create local jobs and opportunities, a State like Western Australia should be able to.