ICN helps local businesses get involved in $1.33 billion oil and gas project

The Kupe Gas Project is one of the largest oil and gas projects ever to be built in New Zealand. The gas produced from the Kupe field located off the South Taranaki coast will meet an estimated 15% of New Zealand’s annual gas demand and 50% of New Zealand’s Liquefied Petroleum Gas (LNG) demand.

In 2004 the ICN approached Australian company, Origin Energy, the operator of the Kupe Gas Project, with a view to identifying competitive New Zealand and Australia companies capable of supplying products and services to the project. This offered an alternative to the traditional overseas suppliers which have been used in major projects in the past.

Design of the project: seizing opportunities

Origin went to international tender for the design of the offshore and onshore production stations and selected Technip and Foster Wheeler, two international companies with extensive experience and therefore existing global supply chains. Recognising that this pre-existing relationship may jeopardise opportunities for local suppliers to get involved, the ICN drew up an industry participation plan which was presented to the Origin project team.

“We saw that there was an opportunity for the ICN work with the two companies at an early stage to further consider local industry in the bidding process so local industry had full fair and equal opportunity to compete for opportunities, and to provide Origin with options they may have been unaware of,” says ICN’s Manager for Australian Relationships, Robert Murdoch.

Throughout the procurement process, the ICN worked closely with Origin and Technip, providing specific information on NZ capability. A key focus was on matching specific procurement requirements and introducing the bidders to relevant local suppliers. ICN also arranged a very successful briefing in New Plymouth where the alliance partners met with 150 potential suppliers from around New Zealand.

Successes

Over the duration of the project 161 companies were recommended by the ICN to Origin and Technip as capable of supplying suitable products or services. Some local companies that were seen to be superior to overseas competition include, Flotech Compressor units, ABB Transformers, Fitzroy Engineering, Energy Works, Olex, McKay Electrical and Meco.

“ICN have offered tremendous support and guidance throughout the project, working closely with Origin to advise, review and ensure inclusion of appropriate local capabilities. ICN fills an important role that many commercial organisations today do not have - they provide up to date and detailed market knowledge and expertise about local supply markets,” says Origin’s Commercial & Coordination Manager, John Ferguson.

During the project, Origin placed an estimated $620 million worth of orders in New Zealand and invested $200 million in local supply and service contracts. The project has also led to other economic benefits. For example, at the start of the project in 2005 Origin had one permanent full time member of staff; they now have over 150 and at the peak of construction activity in 2009, there were up to 994 people on site.

A platform for the future

Origin plans other projects in New Zealand and has acquired additional exploration licences in the Taranaki area the Southern and Canterbury Basin. Thanks to the ICN, Origin can engage in future projects with a better understanding of local capability and the support of local resources. Indeed, Origin is already working on major projects in Australia with some of the companies the ICN recommended. An example of one such company is Fitzroy Engineering who recently won a large order for accommodation modules for one of Origin’s off shore platforms.

Opening of the Kupe Gas Project

The Kupe Gas Project was opened by Rt Hon John Key, Prime Minister of New Zealand, on 18 March 2010. A presentation of a Maori Carving was made by the Prime Minster to Origin Energy in recognition of the company’s contribution and commitment to local industry.

The ICN was involved in the $1.33 billion project since the design stage and helped Origin identify local companies to work with them.  The ICN recommended New Zealand companies that eventually won $200 million of the $620 million worth of orders placed in New Zealand, and recommended Australian companies that won $60 million worth of contracts.