Crocodile-Fighting Darwin Hits Gas-Fueled Economic Fast Lane
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Near the site where the first bomb landed on Australia in World War II, Il Lido restaurant serves watermelon cubes with aged balsamic vinegar at A$3 ($3.12) each to diners overlooking a swimming lagoon and artificial wave pool.
This is the new face of Darwin, a transformation from the capital of Australia’s hardest-drinking region, where a crocodile is caught almost every day, into a boomtown enriched by gas and bolstered by its location between the Pacific and Indian Oceans, where Asia and Australia meet. The heart of the change is a $34 billion liquefied natural gas project by Inpex Corp. (1605) and Total SA (FP) that will help fuel Japan for four decades.
Darwin is in the express lane of Australia’s two-speed economy -- a division the Reserve Bank of Australia used to separate resource-rich regions in the north that are powering growth and sucking in workers, from the tourism, manufacturing and retailer industries of the southeast that are teetering under a currency that has risen 65 percent in 3 1/2 years.
“This is Darwin’s century,” said Sean Kildare, Inpex general manager in the city. “The economic development that got Australia on its feet and got us going -- that happened in the southern half of this country. That was last century. Above the Tropic of Capricorn is what’s going on now and Darwin has the central, iconic role to play.”
The Inpex-Total Ichthys project, worth double the size of the surrounding Northern Territory economy, is spawning office towers, waterside apartments, shopping malls, port facilities and an expansion of the airport. Spending by households, businesses and the government grew at a 26 percent annual pace in the quarter ended Dec. 31, bureau of statistics data show.
Gas isn’t the only impetus to the region. Singapore Airlines Ltd. (SIA)’s Silk Air unit began flights in March, bringing gamblers to the city’s casino and Asian tourists to sample Australia’s outback. U.S. marines arrived this month to a new base near the city, which overlooks the strategic shipping lane in the Timor Sea.
“We’ve not seen anything of the sheer scale and size of this,” said Delia Lawrie, deputy chief minister of the territory, which is almost twice the size of Texas. “The Ichthys project really does put Darwin on the global LNG map.”
Asian demand for energy and metals has prompted the RBA to maintain the highest benchmark interest rate among major developed nations, at 4.25 percent. Investment in resources will probably be equivalent to almost 10 percent of the nation’s gross domestic product in 2012-13, up from an average 1.65 percent between 1960 and 2004, said James McIntyre of Commonwealth Bank of Australia, the nation’s biggest lender.
‘Wall of Investment’
“One of the things significantly influencing the RBA is the wall of foreign investment that’s hitting the economy, with Ichthys the latest incarnation,” said McIntyre, a senior economist in Sydney who worked at the Treasury for seven years. While he expects the RBA to cut rates at its next meeting in May, the major resources projects “could prove to be an obstacle to further rate cuts,” he said.
The statistics bureau reported on April 12 that national payrolls rose by 44,000 in March, almost seven times the median estimate of economists surveyed by Bloomberg. The Australian dollar traded at $1.0369 at 7 p.m. in Sydney, up 1.3 percent this year.
The Northern Territory, of which Darwin is the capital, contributed A$17.1 billion, or 1.2 percent, of the nation’s A$1.4 trillion GDP in the fiscal year to June 2011.
Chevron Corp. (CVX), Royal Dutch Shell Plc (RDSA), Woodside Petroleum Ltd. (WPL) and ConocoPhillips (COP) are among energy companies spending $180 billion to explore and develop gas fields in Australia. Ichthys holds more than 12 trillion cubic feet of gas, enough to meet Australia’s energy needs for 13 years, according to Inpex. Gas will travel to Darwin via an 889-kilometer pipeline, the longest in the Southern Hemisphere.
It marks the latest chapter for a city that has a history of mineral booms and disasters. The one-time British garrison was leveled by three cyclones and a Japanese attack that dropped more bombs on the city than on Pearl Harbor.
Darwin was best known in Australia as a haven for runaway husbands, fugitives and others looking for a fresh start. The Northern Territory has drawn fortune hunters since the 1870s gold rush lured Chinese migrants, whose knowledge of tropical agriculture helped feed the growing settlement.
“We’ve always been the Asian city in Australia,” said Lawrie, who is also minister for Asia relations. Asians make up about 9 percent of Darwin’s population. The city’s newly elected Mayor Katrina Fong Lim, a fifth-generation Australian-Chinese, is following in the footsteps of her father, who ran the city from 1984-1990.
Another 11 percent of the population is indigenous, the highest proportion among Australia’s eight major cities. Alcohol-fueled violence and crime in the territory’s aboriginal communities prompted the federal government in 2007 to suspend the Racial Discrimination Act and send in troops, a crackdown that worsened the highest incarceration rate in Australia. As the government begins the second phase of Darwin’s ritzy A$1 billion waterfront renovation, it’s also spending A$500 million on a new prison.
At the same time, the region has a lower unemployment rate than any of the nation’s six states. And Darwin, about the size of Waco, Texas, has a younger population than the state capitals, with an average age of 33.
The speed of the city’s transformation has been dramatic -- Darwin didn’t have a rail connection to the rest of Australia until 2004. Now tourists sip champagne and eat grilled kangaroo fillet in the dining car of the 26-carriage luxury train, The Ghan, which takes more than two days to travel from Adelaide on the southern coast.
The changes have created a clash of old and new. Il Lido’s glass, climate-controlled display of 1,200 bottles of Australian and Italian wine contrasts with the beer-drinking culture that gave the territory the highest per capita alcohol consumption in Australia.
As swimmers jump in the wave pool’s man-made surf, the local daily newspaper, the NT News, runs a tally of saltwater crocodiles caught in the territory -- 71 by March 27.
The reptiles, stars of the 1986 Paul Hogan movie “Crocodile Dundee,” have increased to as many as 100,000, from a low of about 3,000 four decades ago, when hunting was banned.
Human numbers are also on the rise. The government forecasts a 50 percent surge by 2030, a jump that is fueling a construction boom after the median house price rose 197 percent in 10 years, according to figures from RP Data and Rismark International.
“There’s pressure on rents to go even higher because vacancy rates are so low,” said David Loy, director of estate agent LJ Hooker in Darwin and president of the Real Estate Institute of the Northern Territory. The residential rental vacancy rate was 0.7 percent in February, compared with 1.5 percent in Sydney and 3 percent in Melbourne, according to SQM Research Pty.
To help meet demand, the equivalent of an entire suburb has been built in Darwin’s central business district in the past five years. Another 3,000 units across Darwin have development approval, and a new shopping and residential district is being built at Coolalinga on the city fringe. Myer Holdings Ltd. (MYR), Australia’s largest department store chain, is in talks about opening a Darwin branch, said Jo Lynch, a spokeswoman for the company in Melbourne.
Some long-term residents are skeptical about the latest boom after seeing previous projects peter out, such as a predicted uranium rush in the late 1970s, which dwindled in 1983 with a change of government and restrictions on mining the nuclear fuel.
“The Territory for the past 40 years has had a mentality of the next big project being ‘the one,’” said Chips Mackinolty, a ministerial adviser to the NT government from 2001-2009. Inpex “will only really change the structure of the economy if they do the value added, like services for the energy industry.”
Construction starts this month on a A$104 million marine supply base, built by Macmahon Holdings Ltd. (MAH), to service offshore vessels. Shell said it will use Darwin as a supply base for its Prelude Project, the world’s first floating LNG plant. ConocoPhillips started production in 2006 at its Darwin LNG plant, in which Inpex has an 11 percent stake.
Others are concerned about the arrival on April 3 of 200 U.S. marines, the first of as many as 2,500 who will be based at Robertson Barracks on the city outskirts.
“The jury is still out on that,” said Rod Hocking, a retired medic in the mining industry who has lived in Darwin since 1970. “We don’t want the city to end up like the back streets of Manila.”
A planned A$60 million expansion of Darwin’s airport will allow passenger numbers to rise 30 percent to almost 3 million by 2016. Travelers from Hong Kong can reach Darwin in 5 1/2 hours, compared with a 9-hour flight to Sydney.
Tourism NT’s plans to attract Chinese travelers included a trial charter flight in January that included sites like Uluru in the outback, said Jennifer Simon, a spokeswoman for the office. “They photographed everything in sight,” she said.
Brad Morgan, general manager in Darwin for Sky City Entertainment Group Ltd., is hoping Asian high rollers will fill a A$36 million expansion under way at his casino. The Chinese enclave of Macau had more than $33 billion in gambling revenue in 2011. “We see an opportunity to get some of that Asian gaming market,” he said.
Silk Air now has four flights a week from Singapore to Darwin, connecting with markets in the U.K., Germany and China, Simon said. Jetstar, a unit of Qantas Airways Ltd. (QAN), operates services from Tokyo to Darwin via Manila, and Virgin Australia has begun daily flights from Sydney.
As residents and tourists mingle over tapas and cocktails by the waterfront at the end of the day, Mackinolty said the city has kept its unique identity through the changes.
“I think it’s still a place with a lot of people who just walk out and start a completely new life,” he said.
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