Dont get bogged down explaining common sense with an audience clearly here for an unequivocal agenda.
You could also introduce additional counter arguments such as the incredulous cost and time blowouts in our homeland Australia. All this talk of soverign risk because its ignorantly applied to Africa, South America and alike . Risks associated with Australia are rarely discussed or considered because we live in a "progressive, modern first world country", yet here we are. Reliant on international supply, hindered by labour shortage and hamstrung by environmental / indigenous and other similar political issues. But it gets little attention. Whenever I consider and OS opportunity, I always consider it in terms of what historical similarities we have domestically. I fear this is not a common consideration for those who blindly ignore whats on their own doorstep.
Rios Ranger Uranium Mine is still figuring out if its 1.6billion dollar rehabilitation cost blow out is likely to hit the $2.2B mark. Theres quite the history over the past 2 decades and continuing to this day.
Australia’sresources sector has been hit by more than $8 billion in mega-project time and costblowouts in the past six years. And more overruns areexpected as Australia enters an unprecedented period of major project approvalsamid dwindling supplies of skilled workers.
Since 2004, only one Australian mining or oil and gasproject costing more than $2bn has hit targeted production on time and budget. Miningand energy companies show no sign of improving their records on cost blowouts. Of the four giant projects due to start in the next two years, notone is on track to meet its board-approved budget and schedule.
There have been15 mega-projects approved in Australia since 2000 but only one, ConocoPhillips'$US3.3bn Darwin liquefied natural gas project, has reached production on timeand budget. The blame for the blowouts (construction and planning, environmental and cultural heritage problemsaside) rests with surging labour and steel costs as the China-led commoditiesboom, which appears to have encountered an easily cleared hurdle in the form ofthe global financial crisis, spurred new projects, sucked up skilled workersand increased material costs.
Further, dependency on imported specialty plant and equipmentsupply and delivery, inclusive of long lead items are contributing to this dilemma.
With giant projects such as Santos's $16bn Gladstone LNG project,Chevron's $20bn-plus Wheatsone project and BHP's $20bn Olympic Dam projecttargeting board approval this year, business leaders and analysts have skilledlabour high on the list of potential problems for this year.
"The whole issue around cost and time blowouts on capital projects isconcerning people," KPMG Asia Pacific and Australian chairman MichaelAndrew said. "Boards get crucified by shareholders and the market for costblowouts, so they are very sensitive to those issues.
"But I think the issue will get worse before it getsbetter."
The biggest cost blowout has been at Woodside's Pluto liquefiednatural gas project on Western Australia's Burrup Peninsula. With nine monthsbefore first LNG, it has already had two development cost hikes.
The total blowout has been $2bn because of a below-par flare towerthat needed to be dismantled and rebuilt, other mechanical problems and lowerthan budgeted productivity. RBS oil and gas analyst Jason Mabee said a shortage of workers hadbeen the major reason for the blowouts in the energy sector. "The labour market has been a lot tighter than peopleexpected," Mr Mabee said.
The biggest project ever approved in Australia, the $43bn GorgonLNG project on Western Australia's Barrow Island, is just 16 months into afive-year construction period but there is growing speculation that it isrunning late. Operator Chevron is overseeing one of the biggest logisticsexercises ever undertaken by a private sector entity anywhere in the world andhas already had to rearrange the timing of much of the work.
Services provider AJ Lucas told disallowed last week thatit had not been able to start the drilling that was supposed to begin lastJuly.
Contractor sources say many of the delays are being caused byproblems with insufficient wharf facilities and staff accommodation, not justthe extensive quarantine procedures needed to access the island.
Theres dozens of other examples. Weigh your decisions up with a full and detailed consideration, globally and domestically. Geopolitical issues, supplychain, labour shortages etc are not confined to Africa. No matter what Kicker and the yutz brigade may have you think.
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