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Labour costs twice that of the US, says KBR boss

25 Feb 2013 SYDNEY MORNING HERALD - ELI GREENBLAT


THE boss of one of the world's largest engineering companies, KBR, has for the second time in a year railed against the cost of labour in Australia and its impact on starting major projects, claiming the cost of employing a worker in Australia was double that of an American.

The KBR chairman and chief executive, William Utt, said the future of large Australian energy projects in particular, such as Woodside Petroleum's $40 billion-plus Browse liquefied natural gas project and Gorgon, would rest heavily on these ballooning labour costs with Australia now at a point of "reset".

"In terms of what we see changed in the last six months, I think we've seen a recognition across the space in Australia that the cost to build an LNG project has gotten very expensive," Mr Utt told analysts during KBR's earnings update last week. "And I think Australia is at a point of reset."

Last year, Mr Utt warned US investors of a "very high cost situation in Australia" when it came to liquefied natural gas projects and, although Australia was blessed with natural resources, it also faced a number of cost disadvantages that made other regions, such as East Africa, more attractive to do business in.

Last week, he pushed home that argument, saying Australian workers cost double that of their US peers.

"As we look at the US market, we can get craft labour all in at about $US50 [$48.46] an hour nominally, and that includes the burdens and benefits. And if you look at Australia, that cost is about $US108 an hour.

"So it's more than double what we're seeing for labour. And then when you factor an 85 per cent productivity inefficiency in Australia, the cost of building things gets very, very expensive very quickly relative to the US and relative to other areas."

KBR has roughly 27,000 employees in over 70 countries working across five continents. One of the world's largest engineering, procurement and construction companies, its directors include former Telstra chief Frank Blount.

The company has been involved in the north-west shelf project Gorgon and is seeking to work on Browse, along with further work on the $14.9 billion Pluto project.