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Interview

with Michael Bailey, General Manager, Australian Marine Complex

17.08.2010 / Energyboardroom

What is the role of the Australian Marine Complex (AMC) and the Common User Facility (CUF) in servicing the growth and development of the Australian oil and gas industry?

What is called the AMC is more than just the CUF; it covers the entire Henderson Industrial Area. To the north of where we are now is the shipbuilding precinct which has grown up over the past 40 years. Inland from us is the support industry precinct consisting of about 120 companies across various industries. Those companies, such as mechanical or electrical engineers, have traditionally grown up on the back of the shipbuilding industry. With the CUF coming on, it has opened up an area where they could also access a market in the oil industry and resources sector. Those same companies have swung to supporting both shipbuilding and the oil and gas resources sector. It enables them to grow and do what they are good at, but not be totally tied into a market sector, which has been important for their stability and growth. The AMC covers quite a large area and a lot of different activities.

The CUF came online in 2003 and, as we see it, there is nothing quite like it anywhere else in the world. A small company that has won a major job can come here asking for additional infrastructure because their own facilities lack sufficient capacity to complete the job. People come in who still keep their workshops busy. But while they can build equipment up to 200 tons at their facility, they can do their various bits and pieces outside, bring it in here, and then create something that is 2,000 tons with access to our wharfs, loadouts, and ships. That is the role that this facility plays. That is what we provide and that is what has happened for the past eight years.

How many projects can be occupied at one time at the CUF?

We have had up to 15 users at one time in our complex doing all different things. Someone might be doing ship repair, another will be building an oil and gas platform, and a third company might be building a shiploader for iron ore. All of these things can happen concurrently. Our role is to make sure everyone has what they need and do not interfere with each other. It is an interesting kind of job.

What was the initial cost-sharing arrangement between the State and Federal governments that allowed the CUF to take off?

The first development was evenly split between the State and Commonwealth governments. Commonwealth put in $80 million and State of Western Australia (WA) $100. That gave us an laydown areas, a protected harbor, wharves,fabrication halls and other workshops. Since that money was put in, it grew over the following two years and about three years ago we started on Phase II. That gave a lot of additional capability in the form of a floating dock and a modular transportation system that allows us to move anything up to 4,500 tons throughout the facility and transport it on to a barge. We had a major electrical upgrade to avoid power shortages as new companies and businesses set up and we did some additional dredging. Overall there was an additional $170 million that went into further infrastructure upgrades.

We then measure the benefit of our services to the State of WA. We do very careful measurements on projects that happen in the CUF which would not have come to this state if we were not here. Already we are at the half a billion dollar mark of projects which have come to this state simply because of the presence of this facility.

The Government of Western Australia is extremely supportive of local industry, so its active role in funding the CUF comes to no surprise. Was it unprecedented, however, that the Commonwealth Government committed as much as it did – almost an even split with the State Government – towards the CUF?

The timing was perfect. In 2000 the Millenium fund was created by the Commonwealth Government for money to spend on particular projects; but they did not know which ones. Western Australia had done a survey on this some time ago and had the proposal ready to go. They told the Commonwealth Government that this is how they can spend some of the Millenium Fund. It was perfect for them as an infrastructure project coming to WA from which they could see some real benefits. So the timing was good but WA had also done its preparatory work and knew this money could fit the bill.

2010 is a very exciting year for the AMC with the opening of the floating dry dock earlier this year. What is the projected boost that it will bring to industry?

The other source of funds was private industry. The Australian Submarine Corporation – an entity of the defense industry – was one of the key agents who drove the construction of the dry dock. They built a facility which enabled them to do much more work in WA than they otherwise would have done. By having that facility and the ability to have submarines repaired and refitted under cover means that there is a whole additional amount of extra work which will happen year after year simply by having this facility here.

We are also getting a lot of interest from the support industries. We are expecting about 80 vessels to be on the North West Shelf over the next few years, many of which will be supporting the Gorgon Project. A lot of those vessels will be running to and from this facility. All of them will need repair, maintenance, and dockings. Again, we are not looking to tie in the facility with a particular market like defense or oil and gas, but rather, to look at where the real need is for this kind of facility across various markets. We are using this dock much more than we ever thought we would, even after just six months of operation.

As Gorgon, Wheatstone, Pluto, and the plethora of natural gas projects take off over the next several years, will this CUF remain the only one of its kind in WA? Or will others spring up in response to marine industry demands?

The advantage that we have here is that WA is a big place with not too many population centers, let alone engineering expertise. You can do moderate work in Darwin, Karratha, and Dampier, but not to the same extent in those areas as here in this metropolitan area. We are one of the few areas that has the presence of a lot of the support industries and their capabilities, but also with our wharfs and loadouts we can do work that is appropriate for the North West Shelf. There might be some other common use facilities like slipways or loadout areas servicing the northwest, but not to the same extent as ours.

One of the disadvantages for us is that the Northwest Shelf is about the same distance from Singapore as it is from Perth. If your oilfields are just off the coast it would be a lot easier. But it is a balance between what you can do on land in the northwest and what you have to do. We are always looking at the competition with Singapore and Southeast Asia. We need to make sure that we are always offering something that is attractive to the oil companies. We have the advantage of the capabilities that we have here. We have never turned a customer away who wants a construction job here while Southeast Asian places tend to be quite busy. We would like to be closer to the oilfields, of course, but this is where we are.

Are there certain financial incentives offered to companies to establish operations here at the AMC?

Not by us. Obviously companies will talk to government and research the attraction of investment in WA. What we do is offer them a completely visible schedule of rates and assess what a company needs to do when coming to this area: what is your project, what do you need, and we will help point you in the correct direction of local industry. Fundamentally we offer facilities at fixed rates and a company’s advantage is to come here, pay for what they use for as long as they need it, and their overhead stops when the project stops. There is no baggage that they carry along with them afterwards which is the real advantage to them.

There is a CUF in South Australia that labels itself as “the home of the subsea industry.” Is that of direct competition to this CUF?

South Australia is very defense oriented. They have the ASC submarine maintenance on one side, ASC Shipbuilding on another side, and there is a railway down to a ship lift that is called a CUF. But if you want to access to that before 2015, good luck.

So your main competitors truly are the Southeast Asian yards.

Yes, however, those are yards that are privately owned or owned by government. If you want to do a project in any of those yards, you have a contract with the yard itself. What we offer here is the option of how you go about business. A company can come in, place the contract totally with a prime contractor, or they can manage it themselves. They do not necessarily have to go just through a shipyard or an oil and gas fabrication yard. They do have the option of managing the job themselves here with us.

The Premier of WA projects that the proposed Super Profits Resources Tax, in its original form, would scrap about ¼ of planned mining and oil and gas projects. Would that inevitably slow down activity here at the AMC and CUF?

If anything were to slow down for future projects, we would almost certainly notice it. However, we would notice mainly slow downs in the smaller scope projects. We found in the resources sector that a lot of port facilities – shiploaders for example – are being built here. A project the size and scope of Gorgon or Wheatstone will obviously continue. But we try to make sure we have a reasonable balance between market sectors. If oil and gas and resources are down, then potentially defense and the maritime sectors are not down at the same time.

WA is open for business, as many government and industry leaders have said, implying an invitation to foreign investment. Similarly, one of the aims of the AMC is to be an international center of excellence. What is the foreign presence and footprint of companies that have converged here?

Two of the largest and most important players in the subsea industry – FMC and Cameron – are based here. Where they would be had this facility not been available is hard to say. In the defense sector Raytheon is established in what we call the technology precinct. Other companies like Lockheed Martin are looking at what they should be doing here. Foreign shipbuilders like Spanish shipyards are quite keen at what they should be doing in the West. This complex gives a focus for companies to come and see what is being done at the moment and assess where they fit into it.

What do you consider the optimal growth of this complex? How much more activity do you still want to attract while sustaining value amongst the markets served and companies present here?

We are currently close to capacity from what we have within the original area. What is happening now is that there are certain other areas within the AMC which are government owned but coming under our management now, giving us more area. The lay down area is very much a constraint, but also our strong point being that we do have quite a bit of area to work with. If maintaining the boundaries that were originally drawn, we would have filled it up. But we have continuously added to our area since we have taken over the place.

Do you classify the subsea industry as one of the fastest burgeoning clusters in the AMC?

Yes, certainly. What will be the biggest fabrication shop in Australia – over 27,000 square meters – is currently under construction. Another area under development is allocated to the construction of the LNG wharf for the Gorgon Project. That will be 55 concrete caissons each weighing 3,500 tons each. They will all be fabricated in this area, loaded on the transporters, and sent off to Barrow Island. Ultimately you will see FMC, Matrix, and Cameron all located in the new areas being developed.

This complex is a testament to success breeding success. Once companies have invested and established themselves here, such as Chevron, they will want to get the most out of it and attract other businesses.

Part of what we have here for Chevron is their quarantine base since anything going to Barrow Island has to be quarantined. The equipment arrives, it gets washed down, racked, sealed, and shipped off to Barrow Island. That quarantine station was built almost ready to handover to Chevron.

A big industry blossoming now in Australia is coal seam gas in the eastern states. If Queensland set up a CUF or a similar complex to promote its industrial growth, what would be the main lessons that they could look to and extract from this CUF?

What we have found with CUFs around Australia is that it comes down to not being linked to just one market sector because any one market sector is too up and down. South Australia and Queensland would most likely be very focused on one particular sector. We have sent modules through to Darwin and New Zealand that would give anyone there more of an option. But again, we do not bid jobs ourselves. The person bidding a job might have two options on where it could work. It would therefore come down to the most efficient area that they could do it in. We would be hard to beat as an efficient area for doing work because we are so immediately well supported by local industry.

The aim of this report is to showcase Australian oil and gas. Being that 75% of Australian oil and gas is Western Australian oil and gas, what would be your final message to our readers about the support that this facility provides to a growing industry?

Our role is very clear. We need to facilitate a company to become competitive in any project. We are linked quite closely to high-wide load corridors to many areas throughout metropolitan area. What we would like to see is a local fabricator doing what they are good at – fabricating in their own shops. But our role is to enable them to do projects that they could not otherwise undertake with just their facilities, and do those projects efficiently. Whereas they could fabricate something up to 200 tons in their workshop, our role is to give them the ability to make a module of 2,000 tons. Our role is to facilitate and provide a virtual expansion in their capacity. When they are bidding a job, they can use us in their bid. When they assess their capability, our facility is part of their capability. We need to be in a position where we are supporting them by giving them that virtual capacity increase. We want to see projects coming to WA that can and should be done here. We are very biased in that sense.

So “industrial empowerment.”

Yes, exactly.

What is called the AMC is more than just the CUF; it covers the entire Henderson Industrial Area. To the north of where we are now is the shipbuilding precinct which has grown up over the past 40 years. Inland from us is the support industry precinct consisting of about 120 companies across various industries. Those companies, such as mechanical or electrical engineers, have traditionally grown up on the back of the shipbuilding industry. With the CUF coming on, it has opened up an area where they could also access a market in the oil industry and resources sector. Those same companies have swung to supporting both shipbuilding and the oil and gas resources sector. It enables them to grow and do what they are good at, but not be totally tied into a market sector, which has been important for their stability and growth. The AMC covers quite a large area and a lot of different activities.

The CUF came online in 2003 and, as we see it, there is nothing quite like it anywhere else in the world. A small company that has won a major job can come here asking for additional infrastructure because their own facilities lack sufficient capacity to complete the job. People come in who still keep their workshops busy. But while they can build equipment up to 200 tons at their facility, they can do their various bits and pieces outside, bring it in here, and then create something that is 2,000 tons with access to our wharfs, loadouts, and ships. That is the role that this facility plays. That is what we provide and that is what has happened for the past eight years.

How many projects can be occupied at one time at the CUF?

We have had up to 15 users at one time in our complex doing all different things. Someone might be doing ship repair, another will be building an oil and gas platform, and a third company might be building a shiploader for iron ore. All of these things can happen concurrently. Our role is to make sure everyone has what they need and do not interfere with each other. It is an interesting kind of job.

What was the initial cost-sharing arrangement between the State and Federal governments that allowed the CUF to take off?

The first development was evenly split between the State and Commonwealth governments. Commonwealth put in $80 million and State of Western Australia (WA) $100. That gave us an laydown areas, a protected harbor, wharves,fabrication halls and other workshops. Since that money was put in, it grew over the following two years and about three years ago we started on Phase II. That gave a lot of additional capability in the form of a floating dock and a modular transportation system that allows us to move anything up to 4,500 tons throughout the facility and transport it on to a barge. We had a major electrical upgrade to avoid power shortages as new companies and businesses set up and we did some additional dredging. Overall there was an additional $170 million that went into further infrastructure upgrades.

We then measure the benefit of our services to the State of WA. We do very careful measurements on projects that happen in the CUF which would not have come to this state if we were not here. Already we are at the half a billion dollar mark of projects which have come to this state simply because of the presence of this facility.

The timing was perfect. In 2000 the Millenium fund was created by the Commonwealth Government for money to spend on particular projects; but they did not know which ones. Western Australia had done a survey on this some time ago and had the proposal ready to go. They told the Commonwealth Government that this is how they can spend some of the Millenium Fund. It was perfect for them as an infrastructure project coming to WA from which they could see some real benefits. So the timing was good but WA had also done its preparatory work and knew this money could fit the bill.

2010 is a very exciting year for the AMC with the opening of the floating dry dock earlier this year. What is the projected boost that it will bring to industry?

The other source of funds was private industry. The Australian Submarine Corporation – an entity of the defense industry – was one of the key agents who drove the construction of the dry dock. They built a facility which enabled them to do much more work in WA than they otherwise would have done. By having that facility and the ability to have submarines repaired and refitted under cover means that there is a whole additional amount of extra work which will happen year after year simply by having this facility here.

We are also getting a lot of interest from the support industries. We are expecting about 80 vessels to be on the North West Shelf over the next few years, many of which will be supporting the Gorgon Project. A lot of those vessels will be running to and from this facility. All of them will need repair, maintenance, and dockings. Again, we are not looking to tie in the facility with a particular market like defense or oil and gas, but rather, to look at where the real need is for this kind of facility across various markets. We are using this dock much more than we ever thought we would, even after just six months of operation.

As Gorgon, Wheatstone, Pluto, and the plethora of natural gas projects take off over the next several years, will this CUF remain the only one of its kind in WA? Or will others spring up in response to marine industry demands?

The advantage that we have here is that WA is a big place with not too many population centers, let alone engineering expertise. You can do moderate work in Darwin, Karratha, and Dampier, but not to the same extent in those areas as here in this metropolitan area. We are one of the few areas that has the presence of a lot of the support industries and their capabilities, but also with our wharfs and loadouts we can do work that is appropriate for the North West Shelf. There might be some other common use facilities like slipways or loadout areas servicing the northwest, but not to the same extent as ours.

One of the disadvantages for us is that the Northwest Shelf is about the same distance from Singapore as it is from Perth. If your oilfields are just off the coast it would be a lot easier. But it is a balance between what you can do on land in the northwest and what you have to do. We are always looking at the competition with Singapore and Southeast Asia. We need to make sure that we are always offering something that is attractive to the oil companies. We have the advantage of the capabilities that we have here. We have never turned a customer away who wants a construction job here while Southeast Asian places tend to be quite busy. We would like to be closer to the oilfields, of course, but this is where we are.

Are there certain financial incentives offered to companies to establish operations here at the AMC?

Not by us. Obviously companies will talk to government and research the attraction of investment in WA. What we do is offer them a completely visible schedule of rates and assess what a company needs to do when coming to this area: what is your project, what do you need, and we will help point you in the correct direction of local industry. Fundamentally we offer facilities at fixed rates and a company’s advantage is to come here, pay for what they use for as long as they need it, and their overhead stops when the project stops. There is no baggage that they carry along with them afterwards which is the real advantage to them.

There is a CUF in South Australia that labels itself as “the home of the subsea industry.” Is that of direct competition to this CUF?

South Australia is very defense oriented. They have the ASC submarine maintenance on one side, ASC Shipbuilding on another side, and there is a railway down to a ship lift that is called a CUF. But if you want to access to that before 2015, good luck.

So your main competitors truly are the Southeast Asian yards.

Yes, however, those are yards that are privately owned or owned by government. If you want to do a project in any of those yards, you have a contract with the yard itself. What we offer here is the option of how you go about business. A company can come in, place the contract totally with a prime contractor, or they can manage it themselves. They do not necessarily have to go just through a shipyard or an oil and gas fabrication yard. They do have the option of managing the job themselves here with us.

The Premier of WA projects that the proposed Super Profits Resources Tax, in its original form, would scrap about ¼ of planned mining and oil and gas projects. Would that inevitably slow down activity here at the AMC and CUF?

If anything were to slow down for future projects, we would almost certainly notice it. However, we would notice mainly slow downs in the smaller scope projects. We found in the resources sector that a lot of port facilities – shiploaders for example – are being built here. A project the size and scope of Gorgon or Wheatstone will obviously continue. But we try to make sure we have a reasonable balance between market sectors. If oil and gas and resources are down, then potentially defense and the maritime sectors are not down at the same time.

WA is open for business, as many government and industry leaders have said, implying an invitation to foreign investment. Similarly, one of the aims of the AMC is to be an international center of excellence. What is the foreign presence and footprint of companies that have converged here?

Two of the largest and most important players in the subsea industry – FMC and Cameron – are based here. Where they would be had this facility not been available is hard to say. In the defense sector Raytheon is established in what we call the technology precinct. Other companies like Lockheed Martin are looking at what they should be doing here. Foreign shipbuilders like Spanish shipyards are quite keen at what they should be doing in the West. This complex gives a focus for companies to come and see what is being done at the moment and assess where they fit into it.

What do you consider the optimal growth of this complex? How much more activity do you still want to attract while sustaining value amongst the markets served and companies present here?

We are currently close to capacity from what we have within the original area. What is happening now is that there are certain other areas within the AMC which are government owned but coming under our management now, giving us more area. The lay down area is very much a constraint, but also our strong point being that we do have quite a bit of area to work with. If maintaining the boundaries that were originally drawn, we would have filled it up. But we have continuously added to our area since we have taken over the place.

Do you classify the subsea industry as one of the fastest burgeoning clusters in the AMC?

Yes, certainly. What will be the biggest fabrication shop in Australia – over 27,000 square meters – is currently under construction. Another area under development is allocated to the construction of the LNG wharf for the Gorgon Project. That will be 55 concrete caissons each weighing 3,500 tons each. They will all be fabricated in this area, loaded on the transporters, and sent off to Barrow Island. Ultimately you will see FMC, Matrix, and Cameron all located in the new areas being developed.

This complex is a testament to success breeding success. Once companies have invested and established themselves here, such as Chevron, they will want to get the most out of it and attract other businesses.

Part of what we have here for Chevron is their quarantine base since anything going to Barrow Island has to be quarantined. The equipment arrives, it gets washed down, racked, sealed, and shipped off to Barrow Island. That quarantine station was built almost ready to handover to Chevron.

A big industry blossoming now in Australia is coal seam gas in the eastern states. If Queensland set up a CUF or a similar complex to promote its industrial growth, what would be the main lessons that they could look to and extract from this CUF?

What we have found with CUFs around Australia is that it comes down to not being linked to just one market sector because any one market sector is too up and down. South Australia and Queensland would most likely be very focused on one particular sector. We have sent modules through to Darwin and New Zealand that would give anyone there more of an option. But again, we do not bid jobs ourselves. The person bidding a job might have two options on where it could work. It would therefore come down to the most efficient area that they could do it in. We would be hard to beat as an efficient area for doing work because we are so immediately well supported by local industry.

The aim of this report is to showcase Australian oil and gas. Being that 75% of Australian oil and gas is Western Australian oil and gas, what would be your final message to our readers about the support that this facility provides to a growing industry?

Our role is very clear. We need to facilitate a company to become competitive in any project. We are linked quite closely to high-wide load corridors to many areas throughout metropolitan area. What we would like to see is a local fabricator doing what they are good at – fabricating in their own shops. But our role is to enable them to do projects that they could not otherwise undertake with just their facilities, and do those projects efficiently. Whereas they could fabricate something up to 200 tons in their workshop, our role is to give them the ability to make a module of 2,000 tons. Our role is to facilitate and provide a virtual expansion in their capacity. When they are bidding a job, they can use us in their bid. When they assess their capability, our facility is part of their capability. We need to be in a position where we are supporting them by giving them that virtual capacity increase. We want to see projects coming to WA that can and should be done here. We are very biased in that sense.

So “industrial empowerment.”

Yes, exactly.
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