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July 2015 Market Update: Eastern Seaboard Australia

03/07/2015
Jeremy Innes is Fircroft’s Business Manager based in our Brisbane office. Here he discusses the current oil and gas, urban infrastructure and mining industry markets in Eastern Australia.
 
Consistent with global markets the Eastern Seaboard of Australia is suffering the impact of the global oil price, however we must put this in some context. Queensland has just gone through an unprecedented period of construction in relation to the APLNG, GLNG and QCLNG projects, so 2015 was always going to create some challenges to the local industry. The oil price has affected this with a significant slump in exploration and drilling activity, coupled with delays in the sanction of subsequent gas field development(s). Along with the recent acquisition of BG-Group by Shell, we have a further dynamic which is compounding the ‘holding pattern’ that we find ourselves in.
 
From a local recruitment perspective the first part of the equation was forecast. The second part regarding drilling activity was also forecast, albeit not to the extent that we have witnessed. The third part was perhaps unexpected, yet may just provide the stimulus that the market needs.
 
Looking Forward

1) Oil and Gas
 
All three construction projects mentioned above are either producing or about to produce gas. Upcoming commercial gas exports will inject cash flow into further gas field developments, coupled with commencement of a number of significant maintenance and service contracts. As a result, we are seeing a different set of needs and skills within the local industry. Those who seek the mega projects exclusively may find things a little challenging, however some great long term service agreements and capital projects exist for those who can deliver quality outcomes in a cost effective manner.

The North East Gas Interconnector project (connecting the Northern Territory with either Queensland or South Australia) may be a contradiction to the above mentioned comment, with the preferred pipeline builder to be selected by the end of this year. This development has substantial support from the NT government (and private sector) and would be a great stimulant to our pipeline industry that has gone from ‘feast to famine’ in recent times.
 
2) Urban Infrastructure

Other market segments are looking more positive. The urban infrastructure sector is gaining momentum with extensive state and federal investment in transport infrastructure being of specific interest. The recent award of the 155km duplication of the Pacific Highway (Woolgoolga to Ballina in NSW) under a delivery partnership model is testament to this (Roads and Maritime, Laing O’Rourke and PB). Sydney is experiencing strong construction activity with multiple tunnel, rail and road related projects underway across the city. As a result, we have noted a shift of civil construction talent to the region.

In SE Queensland we have recently seen the award of two significant civil infrastructure projects (the $1.6b Toowoomba 2nd Range Crossing (Nexus Infrastructure) and the $600m Gateway Upgrade North (Lend Lease) which will create some much needed enthusiasm within our local construction sector. The Kingsford Smith Drive upgrade is slated for award in October, while construction activity in relation to the Gold Coast Commonwealth Games and ongoing commercial and residential development is also encouraging. 

3) Mining

Our Mining sector continues to suffer under suppressed commodity prices, however we have noted an increase in activity within asset management and capital projects. With Adani’s Carmichael Mine being put on hold it appears some time before we see significant investment in major greenfield developments. That said, we watch with interest as projects such as Frieda River (now owned by PanAust) enter into a new pre-feasibility phase. These opportunities have benefits for our Queensland engineering sector with a number having picked-up valuable contracts.

Overall, 2015 may continue to provide some industry challenges, but 2016 looks considerably more promising.

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