Michael Fassbender in Alien Covenant. Credit:Mark Rogers Scott, now 79, is on the set of his latest movie, Alien: Covenant, in a place even locals won't know. What he calls one of the best movie backlots in the world is a former Sydney Water Reservoir at Potts Hill, near the Bankstown trotting track. Used for the first time for Mad Max: Fury Road, it now features a series of giant sets – dozens of writhing bodies frozen like statues on a huge staircase, broken monuments, stone walls with alien hieroglyphics, the base of a forest and a space ship. Sci-fi Pompei. There is activity in all directions as the crew get ready for a shot amid swirling smoke.

Ridley Scott with Katherine Waterston on the set of Alien: Covenant. Credit:Mark Rogers The movie is a sequel to Prometheus, Scott's philosophical 2012 return to the Alien universe that had Noomi Rapace as an archeologist and Michael Fassbender as an android aboard a space mission seeking the origins of humanity. The new instalment takes place 10 years later, when the crew of the colony ship Covenant discover a dangerous new world. Fassbender's android, David, is joined by Katherine Waterston (Fantastic Beasts and Where to Find Them) in a weapon totin', alien-battlin' action role that invites comparison to Sigourney Weaver's Ripley in past Alien movies. Action for Katherine Waterston in Alien Covenant. Also in the movie are James Franco, Billy Crudup, Demian Bichir, Danny McBride and Australians Guy Pearce, Nathaniel Dean, Tess Haubrich, Uli Latukefu and Benjamin Rigby.

Scott says Alien: Covenant is a return to the sci-fi horror of the original Alien, which is later confirmed by seeing 20 intense minutes of footage of the unfinished movie. He sees it as one of three sequels to Prometheus that will take the saga to "the back entrance" of the original Alien. "What we did really well on Prometheus, considering that it was a ground zero idea that was starting all over again, was I discovered that people do have an appetite for the alien and what he means and his evolution – the egg, the facehugger, the chestburster as we call them. "People still want to see it. So I return to a little bit of that but not wholeheartedly; there's a lot in here which is new as well." The first Alien, about a deadly stowaway on space ship, was a seminal sci-fi film in 1979. "That was fundamentally a film that was seven people locked in a tin can and who will survive and who won't," Scott says. "In a funny kind of way it was very much a genre movie if you like – a B movie done in an A way with a marvellous cast and a fantastic creature. We raised the bar there. "Now we've gone further than that. We go from Prometheus into both worlds of the original Alien and a little bit of Prometheus."

With Scott moving on to make Blade Runner, another sci-fi classic, James Cameron continued the sci-fi series with Aliens in 1986, David Fincher with Alien 3 in 1992 and Jean-Pierre Jeunet with Alien: Resurrection in 1997. "Frankly I watched them do 3," Scott says, pausing with a look with suggests he is no fan of Fincher's film. "Wow! OK. "Then 10 years later I came back and said 'you know what, I think I can resurrect the franchise.' Alien was special without question; it was unique really. Prometheus was a good starting block to kick off the idea that no one ever asked in the sequels." That question is who made the chest-bursting alien and for what purpose? "Prometheus was about who and why? This is getting closer to who designed it and for what reason."

The actors and key crew on the film say Scott brings an electric and creative energy to the movie, which started shooting in New Zealand's Fiordland then moved to Sydney's Fox Studios and Potts Hill. According to Oscar-winning costume designer Janty Yates, who has worked regularly with him since Gladiator, the production had a two-week break over Christmas which she didn't think was long enough. But back on set, Scott described it as interminable. He had gone to his shed to paint every day over the break – he puts his paintings on his Christmas cards – but couldn't wait to get back to the movie. A former art school student and set designer who has always brought a strong visual style to his movies, Scott sketches a lot; he also swears a lot. Waterston says his favourite expression on set seems to be "Shoot the f---er!" "He's a tough guy," she says. "He's got so much energy. It's a contagious feeling on set. It really inspires him. He can juggle so much at once: he's looking at four monitors, he's cutting the film together as we go, he knows so much already about what he'll need and what he won't need on the day. "I'm always knocking on the door of his tent. He thinks I'm being neurotic about some take we've done but I just want to see what he's doing in there. I might be annoying him but I like to hang around and watch him work."

While shooting Alien: Covenant, the four-time Oscar nominee was also producing and executive producing other film and television projects including the sequel Blade Runner 2049, which stars Harrison Ford and Ryan Gosling. "If you really want a franchise, I can keep cranking it for another six," he says. "I'm not going to close it down again. No way." Having nearly filmed The Martian in Australia before heading to Hungary, Scott came to shoot here after meeting foreign minister Julie Bishop in New York. That was the spark for the federal government to make top-up grants that attracted both Alien: Covenant and Thor: Ragnarok to Australia. "We couldn't get studio space because England is full," Scott says. "And other places we couldn't get in either so we came here. The tax rebate was a bit low but they came up to speed and here we are, filling the studio and bringing in a lot of personnel, a lot of employment." While there will be chills, Scott believes Alien: Covenant will be a "relatively intelligent" film as well.

"There's some good stuff in it," he says. "It talks about evolution really. But that said, it's pretty scary." Fassbender says the chance to work with Scott for the third time after Prometheus and The Counselor was one of the attractions of Alien: Covenant, along with taking David further into the sci-fi universe. He's also playing a doppelganger android named Walter. "They've gone back to the Alien mood in terms of the thriller-horror aspect of it but we have the scale of Prometheus still at play," he says. "We come off the ship again and introduce a new world. "In that respect, it's different to Alien which is, of course, very claustrophobic. But it has those horror elements of the original for sure." Fassbender says the original Alien has stayed with him since seeing it at a very young age – he thinks he was about 10 years old.

"The scene with John Hurt in the mess area is obviously burnt into my memory. Then I watched it again on the way to shooting Alien: Covenant and it's just such a sophisticated movie. Just the design elements. The way Ridley basically harnessed that suspense and the beautiful design of the alien itself, it still stands up to the test today." As well as enjoying the shoot in Sydney – getting out to surf sometimes twice a day – Fassbender has relished teaming up with Scott again. "Having shot so many commercials himself then getting behind the camera on Alien, he understands all the ins and outs of making a movie," he says. "He's just got a ferocious appetite for the work and that energy is palpable from his tent. "Then as he comes out and moves around the set, he's just this huge ball of energy. He gets people going and inspires them. It's a pretty special environment because they know they're getting to work on a Ridley Scott film." The director says Waterston, who plays Daniels, has a lot in common with Sigourney Weaver: they play strong, gutsy characters and are both tall and athletic.

"She's got a lot of theatre in her veins, as does Billy Crudup," he says. "That always helps because they can dig deep with their experience" For her part, Waterston says Alien: Covenant has been "so much fun" to shoot. "He's always trying to get my stunt double to do stuff but I'm like 'come on. This is great.' "Obviously he doesn't want to me break any bones. But being an actor is a kind of sickness: the things I consider fun are maybe a little bit twisted. They're beating me up and I want more." Waterston hasn't felt the need to look as muscled-up as Ripley. "I actually thought about this physical thing quite a lot because I had this image of her in my mind," she says. "But actually in the first film it's not so much. It was only later that she got really pumped up.

"I like that for the journey of the reluctant hero. At the beginning she's just a person who has really good instincts and good fortune because everybody else is doing their best to stay alive too and it doesn't work out for them. So I wanted to be fit to handle anything Ridley threw at me but not aesthetically because she's not a soldier. She's a terraformist." Fassbender, who had previously acted opposite Waterston in Steve Jobs, notes that she continues long tradition of strong female roles in Scott's movies. "She's a strong, quirky, independently minded lead in the movie," he says. "It's quite poignant that Ridley introduced Ripley to us more than 35 years ago. In an era where we're talking about equality of roles in Hollywood, he's continuing in that vein he has always had – very strong female characters that have their own objective and their journey isn't dependant on the male opposite's journey." While Scott has made two sci-fi classics in Alien and Blade Runner then returned to it with gusto with Prometheus, The Martian, Alien: Covenant and Blade Runner 2049, it is not because it's his favourite genre. "I decided to get back onto the merry-go-round because sci-fi enables you to dream a little more because it's fundamentally fiction," he says. "Sometimes it's nearly a fantasy. It really depends on the script but it enables you to stretch the envelope."

While working on Alien: Covenant, he had the next instalment written so he is ready to keep advancing the saga. Loading "You've got to assume to a certain extent success and from that you'd better be ready," he says. "You don't want a two-year gap. So I'll be ready to go again next year." Alien: Covenant opens on May 18.