BHP's plans to develop a $300 million integrated energy system in the Pilbara were a watershed in developing added-value industries in Western Australia, Premier Carmen Lawrence said today.
Speaking after inspecting the company's Port Hedland facilities, the Premier said BHP was to be complimented on accepting the challenge of developing new energy supplies which could produce cheaper power for industry.
"The Government is happy to acknowledge that BHP's existing obligations under various Agreement Acts will be waived so this project can get underway," Dr Lawrence said.
"All the indications are that the projects set under the obligations - some of which are up to 30 years old - are unlikely to be commercially viable, particularly in the Pilbara, and it is now time to encourage alternative investments which benefit the State.
"BHP's project will assist in providing the framework for added-value processing in Pilbara - a goal actively pursued by the Government in its 'Adding Value' plan."
BHP's project provided for an oversize gas pipeline to Port Hedland from Karratha, installation of 4 x 36MW gas turbines at Port Hedland, a 220kV electricity transmission line to Newman from Port Hedland, and a further 1 x 26MW gas turbine at Newman.
The Premier said the gas pipeline would have the capacity to supply the requirements of the gas turbines.
There would be sufficient spare capacity to supply both a sinter plant and a direct reduction iron plant at Port Hedland - development proposals presently under examination.
The gas pipeline could be enhanced by the addition of compressors enabling it to supply other projects.
"BHP will be able to meet its own electricity requirements at Port Hedland, Finucane Island and Mount Newman, as well as supplying SECWA with power for its distribution system in Port Hedland," Dr Lawrence said.
"Energy costs and the lack of infrastructure were identified in the recent Pilbara 21 Study as the major impediments to further processing opportunities.
"The provision of this power station and associated gas and electricity systems will encourage the development of commercially viable processing opportunities."
Dr Lawrence said BHP and its partners had agreed to continue to investigate further downstream processing opportunities.
Also, the company would look at investment proposals referred by Government if they were compatible with the company's existing business.
"The State's future lies in developing industry which processes our raw materials in WA providing long-term job security," the Premier said.
"Without the capacity to deliver energy at internationally competitive prices there is little chance of being able to develop new industries, particularly in markets which are based on international prices.
"Locating new industry in the Pilbara has the advantage of being much closer to the North West Shelf gas which reduces gas transportation costs."
The Premier said that in the past 10 years potential new industries evaluated in the State included an aluminium smelter, ammonia/urea plant, petrochemical plant, silicon smelter, LPG extraction and methanol production. In each case the cost of energy was one of the determining factors.
The Government had already committed SECWA to reducing tariffs for new strategic industries by 35 per cent by the end of the decade.
This commitment and the decision to allow greenfields energy to come from suppliers outside SECWA would result in significantly improved energy economics for major projects.