Marsden Pt extension estimates '$1B under’

Press, 9 March 1984, Page 4

Marsden Pt extension estimates '$1B under’

PA Wellington The total cost of the Marsden Point Oil refinery extensions will be $1 billion more than present estimates, says the Public Service Association.

The present $1650 million price underestimates the total bill because it only refers to construction costs, the association says in a research paper. The estimate omitted the cost of interest payments which when included were estimated at more than $1 billion, bringing the cost of the refinery to more than $2.7 billion. International currency fluctuations were also having a big impact on the cost of “think big” projects. In the case of the synthetic fuel plant at Motunui, a further $240 million may be necessary to meet the unchanged United States price of $1475M.

The association’s president, Mr Colin Hicks, .said the research paper detailed

the true cost increases on the larger “think big” energy projects.

Mr Hicks said the Minister of Energy, Mr Birch, had challenged the accuracy of earlier figures published by the association. “Mr Birch said we did not take account of inflation,” he said. “I wish he had said the same thing to his colleagues who have been lambasting the Ministry of Works staff.”

In the research paper, the association said its earlier claim of an SBSOM increase at Marsden Point had prompted Mr Birch to say the increase was only $349M. While Mr Birch was correct in saying the association’s claim made no allowance for inflation he was still incorrect in underestimating the real cost increases of the refinery expansion. When approval for expanding the refinery was made in May, 1979, the cost

was quoted as S3SOM in mid-1979 dollars.

However this price failed to attract tenders from overseas contractors so subsequently the price was increased by the Government from SSSOM (the mid-1981 dollar equivalent of S3SOM) to S9SOM an increase of S4OOM. A further SBSM was then added for some design changes and the additional cost of building the Whan-garei-Auckland pipeline, bringing the cost to SIOBSM (mid-1981 dollars)

This latter figure when spent over a number of years amounted to SI3OIM the difference between the $1650M and SI3OM of $349M was the figure to which Mr Birch referred.

The research paper said Mr Birch had chosen to work from the new contract price of SI3OIM in order to arrive at a lower figure. However, the Government could not escape the fact that it was obliged to in-

crease the real cost of the project S4OOM in 1981 in order to see the project materialise. A further increase of $349M subsequently occurred. The New Zealand Steel project had increased SI9SM, the Motunui synthetic fuel plant, SI69M and the Waitara methanol plant, $33.5M. However, the Tiwai Point expansions had cost $95.9M less than originally estimated in constant dollar terms and the Kapuni am-monia-urea plant $34.6M less.

Mr Hicks said the true amount of cost increase at Maniototo was minuscule compared with the documented increases on some of the private sector projects, even allowing for inflation. “But where are the allegations of gross negligence against the private sector firms? Where are the calls for private sector heads to roll?” he said.