NORTHWEST SHELF
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Many Australian suppliers to the Northwest Shelf liquid natural gas project have difficulty meeting the high quality standards set down for the LNG plant, are often behind schedule and are sometimes not price competitive with overseas suppliers, said Woodside's LNG project manager, Frans Mittertreiner.
He made the remarks when reviewing the performance of Australian companies on the $3 billion project at a briefing in Perth, staged by Woodside Offshore Petroleum Pty Ltd at the end of last year. Mittertreiner said the review of industry's performance had been at the request of the WA State Government, the Federal Government and Australian industry. By October 1987 $2240 million, or 75% of the total estimated cost of the LNG plant, had been committed. Of the $638 million worth of equipment and materials ordered for the LNG plant, 54% was acquired locally. Overall, he said, the performance of Australian industry had been good but required improvement in specific areas. Despite some problems the plant is expected to be completed on time with the first shipment of LNG heading for Japan in October 1989. According to Mittertreiner Australian companies had problems maintaining consistently high quality. "In particular difficulties in producing acceptable castings for both valves and pumps caused numerous repairs and recastings, which resulted in serious delivery delays," he said. He went on to say that the most common problem was the relatively high incidence of dimensional errors and fabrication misalignments in Australian shops as evidenced by the relatively large number of concession requests. He pointed to a lack of understanding by vendors of the specifications and quality assurance and quality control requirements within orders. This, he said, was related to a lack of effort in the bid preparation stage and tenders received from Australian companies were generally below the standard required and poor in comparison to overseas tenders. |
"Some 70% of the tenders received from Australian companies were technically inadequate" he said.
Some local suppliers, he observed, placed more emphasis on quantity rather than quality and often lacked attention to detail. Getting Australian made or supplied items to the plant site on time presented Woodside with a few headaches.
Some 70% of the
tenders received from Australian companies were technically inadequate" "Australian vendors have not performed as well on equipment deliveries as overseas vendors. While 75% of overseas equipment items were delivered within 3 months of the promised date, only 52% of the Australian sourced items were delivered in the same time. For Australian vendors more than 26% of deliveries were more than 6 months late" said Mittertreiner. All overseas vessels were delivered on time while only 18% of vessels from Australia were delivered on time. For columns, 60% were delivered within 3 months of promised deliveries for overseas vendors, while no columns from Australia were delivered in the same period," Mittertreiner said. He also noted the need to stay cost competitive with overseas vendors. "Where orders [for columns and vessels] were won by overseas manufacturers, the lowest Australian tendered prices were between 25% and 110% higher," he said. The prices for locally made piping, flanges and process valves were some 100% to 200% higher than those of similar overseas items, he said. So far local industry has picked up 41% by value of potential orders. For the purchase of items such as pipes and valves $67 million worth could not be purchased here. Australian industry did not have the capability to produce the piping and flanges in many of the sizes and types required, he said. "In general Australian industry could only produce a small part of the |
range of piping materials required and in many instances could not meet the required schedule," he said.
Overall Mittertreiner estimates $226 miliion worth of sales were "lost" by Australian industry through lack of capability and experience. Essential items purchased overseas include cryogenic heat exchangers, gas turbine generators, gas turbine and electric drive compressors and cryogenic pumps. Other factors pushing up the cost, he claims, are decisions to reject the lowest overseas price offered and the acceptance of Australian tenders. Rankling Mittertreiner is the choice of Australian suppliers for transformers, air fin coolers for the LNG trains, and power cables. These purchases came after discussion with the State and Federal Governments through the National Liaison Group (NLG), a body set up to monitor and boost Australian participation in the project. In the case of the power transformers it appeared to the NLG, after representations from the WA Government, manufacturing groups and the trade unions - who threatened industrial action if nothing was done to stop the tender going offshore - that an anti-dumping inquiry would be undertaken into the price submitted by the originally successful foreign tenderer once the transformers landed in Australia. A spokesman for Woodside said the overseas tenderer withdrew from the contract rather than face costly litigation and Westralian Transformers, a WA-based Westinghouse subsidiary, picked it up. The general manager for Westralian Transformers, Beavan Oakes, said the original winner was substantially below the 4 other tenderers. "On the information we had it was quite clearly a dumping case. After duty the overseas price was 20% below the next tendered price," he said. Oakes is not convinced that Mittertreiner is correct in claiming Australian participation pushed up the cost of the project. "Sure Australian costs are high but Woodside chose the site so far from civilisation and imposed the stringent requirements," he said. Paul Somerville
(Why is this last sentence an indictment of local suppliers?) |
Engineers Australia, 5 February 1988