Review of resources industry activity

2016–17 review of mineral and petroleum industry activity

WA Mining Employment

Employment

According to data collected by DMIRS, the average number of persons employed in the Western Australian minerals sector in 2016-17 was 108,769. This was an increase of four per cent from last year. This total includes 2268 people who were employed in relation to exploration activities, at both new and existing deposits.

Direct employment remains high relative to just 10 years ago, when the average number of people employed was 62,117 (an increase of over 75 per cent).

The average number of people employed by the States onshore petroleum sector continued to decline, down from 1382 people in 2015-16 to 1203 people in 2016-171.

[1]These figures only include employment in onshore facilities and pipelines covered under the Petroleum Pipelines Act 1969, Petroleum (Submerged Lands) Act 1982 and Petroleum Geothermal Energy Resources Act 1967.

Australia Mining Investment

Investment activity

A total of $22 billion was invested in Western Australia’s mining industry in 2016–17, representing more than 57 per cent of national expenditure.

Nationally, mining investment has fallen almost 60 per cent in four years. The decline has been slightly less severe for Western Australia, with mining investment falling 54 per cent over the same period.

Despite the lack of new investment in traditional iron ore and LNG projects, interest and investment in new sectors, such as lithium, are rising. While not the mega–investment projects seen during the peak of the commodity cycle, these investments will lead to future production, employment and royalties in Western Australia.

In monitoring investment activity in Western Australia, DMIRS also collects information on mineral and petroleum projects to estimate actual and possible investment. Where possible, information is collated relating to expected capital expenditure, project timing and employment during both the construction and operation phases2.

As of September 2017, Western Australia had an estimated $148 billion worth of resource projects in the pipeline, down slightly from the March 2017 estimate of $152 billion.

Sector Commodity CAPEX

A number of new projects have been announced recently including:

  • St Barbara’s Gwalia gold mine extension ($100 million)
  • Tawana and Alliance Mineral Assets’ Bald Hill lithium/tantalum project ($42 million)
  • Talison Lithium’s Greenbushes lithium mine expansion ($320 million)
  • APA Group’s Yamarna Gas Pipeline and power station ($180 million)

The value of projects under construction or in the committed stage of development was an estimated $99 billion, down slightly from $100 billion in March earlier this year. The number of planned or possible projects also declined from $52 billion to $49 billion over the same period. These changes are attributable to several projects being completed, progressed, or placed on hold due to the prevailing market conditions.

Following the expected start–up of Chevron’s Wheatstone project in the near future, Shell's Prelude FLNG project and Inpex's Ichthys LNG will be the last two of Western Australia's wave of new LNG supply projects to come online. Both are expected to start production in 2018. However, the completion of major projects such as these will see a substantial decline in the total value of the State’s projects in the investment phase.

[2]Mineral and petroleum projects are categorised as follows:

  • Projects under construction – those actually under construction.
  • Committed projects – company has reached a  final investment decision (FID)
  • Planned projects – those undergoing advanced feasibility studies including definitive and bankable feasibility studies and Front End Engineering and Design (FEED).
  • Possible Projects – comprise those raising capital but not yet conducting definitive and bankable feasibility studies.

Exploration activity

Exploration expenditure and drilling activity is another indicator of the health of the minerals and petroleum industry. DMIRS currently reports data collected by the ABS around exploration expenditure, exploration by commodity and the location of drilling activity, i.e. whether it is occurring at new or existing deposits.

Australia’s mineral exploration expenditure was $1.6 billion in 2016–17, up from $1.4 billion in 2015–16. Western Australia contributed over $1 billion of this spend with the gold and iron ore sectors attracting the largest share. Gold exploration expenditure in Western Australia increased significantly from $385.9 million in 2015–16 to $509.5 million in 2016-17. Iron ore exploration also increased (but only marginally to) $281.6 million.

National petroleum expenditure continued to decline, down from $1.8 billion in 2015–16 to $1.4 billion in 2016–17. Western Australia typically attracts around 70 per cent of Australia’s petroleum exploration spend however this dropped to 47 per cent this period. The decrease in the State’s share is due to Quadrant’s aggressive 2016 drilling campaign ending at prospects in Western Australia and the start–up of a drilling campaign by ConocoPhillips at the off the coast of the Northern Territory.

[3]A summary of total capital expenditure by commodity is provided however, it should be noted that investment in several projects is publicly reported in US dollar terms and the data may therefore vary over time in line with movements in the US$/A$ exchange rate.

Exploration Activity Iron Ore Gold
Petroleum Exploration Expenditure
Royalty Revenue Growth 201516 to 201617
* Includes the Commonwealth's share of royalties collected under the Western Australian Petroleum Submerged Land Act (PSLA).

Royalties

The Western Australian Government received royalty revenue from the State’s mineral and petroleum producers totalling $5.7 billion in 2016–17, an increase of 24 per cent on 2015–16.

Iron ore provided the bulk of collections (80 per cent) for 2016–17 with strong prices and volume growth during the year, increasing iron ore royalty collections 33 per cent year–on–year. The gold sector was the other positive contributor with royalty receipts totalling $263 million for 2016–17, an increase of close to 10 per cent for the period.

Petroleum royalty receipts were significantly down for the year, declining by almost 53 per cent from $7.2 million in 2015–16 to $3.4 million in 2016–17. It should be noted that royalty receipts are offset compared to sales value figures. Royalty receipts are reported for the June, September, December quarters 2016 and March quarter 2017.

The State also received grants for North West Shelf projects which accounted for 10 per cent of Western Australia’s royalty receipts with $573 million.
   
For an overview of how Western Australia’s key commodities performed, please see 2016-17 Mineral and Petroleum Commodity review.

 

For an overview of how Western Australia’s key commodities performed, please see 2016-17 Mineral and Petroleum Commodity review.