Small part of ‘think big’ work to N.Z. firms

Press, 28 October 1982, Page 1

Small part of ‘think big’ work to N.Z. firms

By

OLIVER RIDDELL

in Wellington

New Zealand’s heavy engineering firms have got only a small slice of the offsite development work for four of the “think big” petro-chemical plants.

The first big survey of the impact o f the “think big” energy-based projects on New Zealand industry shows that only a fraction of the offsite engineering work is being done in New Zealand. The estimated capital cost of the four big petro-chemi-cal plants (at September 30) was $2420 million. Of this, $606 million was estimated to be in the form of offsite main equipment work. Yet only $76.2 million, or 12.5 per cent, is being done by New Zealand heavy engineering firms, according to the first report of the Heavy Engineering Research Association (H.E.R.A.).

H.E.R.A. estimates that 87.5 per cent of this heavy engineering work has been contracted to be done overseas, and shipped to New Zealand. For the synthetic petrol plant at Motonui in North Taranaki, the figures are even worse. Of its estimated capital cost of $l2OO million, $3OO million is in major heavy equipment. Only $ll million worth of this work (3.7 per cent) has been let to New Zealand heavy engineering firms. This report has only just been published, but there is a gathering sense of outrage among engineering firms and the engineering unions.

In some branches of the union, there are moves afoot to have the national union, with the support of the Federation of Labour, ban all the made-up heavy engineering work contracted to overseas firms from entering the country. The four petro-chemical plants studied by H.E.R.A. are the ammonia urea plant ($95 million capital cost), chemical methanol plant ($175 million), refinery expansion ($950 million) and synthetic petrol plant ($l2OO million).

Companies surveyed by H.E.R.A. fell into three categories — those which had not been asked to tender at all (37 per cent), those which had bid without any success (6 per cent), and those which had bid and were partially successful (57 per cent).

The total value of contracts let so far on eight main projects studied by H.E.R.A. is about $l5O million for offsite engineering work by New Zealand firms, representing about 3.5 million direct labour manhours.

The potential from all eight major projects for heavy engineering work offsite was $971 million, using the accepted standard 25 per cent proportion of heavy engineering offsite work of the

total. If only half of that offsite work had gone to New Zealand firms, it would have generated 11 million manhours of direct labour, an increase of 7.8 million.

H.E.R.A. is funded 50 per cent by the Government and 50 per cent by a levy on the heavy engineering industry. It said most of the work offsite that had been generated by the eight major projects would have ended by mid-1983. It estimated that by the end of 1983, twothirds of all the heavy engineering capacity in New Zealand would be “uncommitted,” and main project work for their workshops would have almost dried up by the start of 1984.

H.E.R.A. reported uncertainty surrounding ongoing work for the heavy workshops from other main projects. “Offshore sourcing of a number of items wholly or partially within the capability of local industry is a cause for concern," it said.

The eight main projects it studied were the ammonia urea plant, third aluminium potline, chemical methanol plant, refinery expansion, synthetic petrol plant, L.P.G. distribution, New Zealand Steel expansion (stage 1), and the Clyde dam.