With Chevrons “Wheatstone” LNG project getting final investment decision on 26 September, I thought it timely to write about the incredible story of gas that is unfolding throughout Australia at present. Wheatstone will be the second largest resources project in Australia’s history, second only to Chevrons other majority owned project, GORGON ($43b).
Wheatstone initially had a project cost of around $25b, and with the latest news that’s already crept up, with the announcement yesterday of an estimated cost at Final Investment Decision (FID) of $29b. And I’m pretty sure that won’t be the end of the spend.
The Chevron/Wheatstone project will be competing in an already full project market. The wave of investment in LNG projects has raised concerns about cost overruns due to labour shortages. The vice-chairman of Chevron, George Kirkland, said he had concerns about looming skills shortages in Australia..
Wheatstone is the fourth major LNG project to be given the go-ahead in Australia this year, after Santos’s GLNG project in Queensland, Shell’s Prelude floating project and the Australia Pacific LNG project led by Origin Energy and ConocoPhillips. The Japanese oil and gas company Inpex’s $25bn Ichthys LNG project in Darwin is also expected to be approved within months.
Not only is Australia welcoming monster natural gas projects, like Chevron’s, we’re also seeing world first projects coming up the pipeline – Floating LNG (Prelude) and CSG to LNG (like GLNG & APLNG).
Finally, there is another boom looming onshore, with land grabs and joint ventures springing up across Australia’s shale gas plays, with potential to supply the current LNG projects in the Cooper, Canning and North Perth basins. Shale gas, which has seen phenomenal growth in the US, has arrived in Australia very quickly. Committed project expenditure has gone from zero to $500m in just 12 months.
To put this into a jobs perspective, Wheatstone will require 6500 workers during construction and around 300-400 for operations. That’s in addition to the CSG to LNG projects which have estimated skills requirements of 4500-5000 personnel for construction and 900-1000 once operational. The additional operational roles in CSG to LNG projects is mainly due to the thousands of CSG wells that must be drilled and serviced, compared to conventional gas projects.
From a ‘spend’ perspective, Iron Ore in WA will account for 14% of project spend over the next 12 months, whereas LNG projects on the other hand will represent a massive 61% of project spend. Wheatstone going to FID has strengthened that trend and puts Australia well and truly on the path of ousting Qatar as global No.1 supplier by around 2025.
Ultimately, this wave of oil and gas projects will put even more pressure on skills shortages. The skills needed in the construction phase particularly, have a huge crossover with traditional mining projects, and it’s the construction phase that’s starting right now. So skilled tradespeople will be in even hotter demand and will be able to take their pick from a number of massive projects.
Once these projects are operational, the skills required become much more specific. But with those skills already in short supply- and of critical importance to keep projects running- we must look at upskilling workers now in preparation. The construction phase of these projects lasts between 3-4 years. That doesn’t give us much time.