Rabid unions threat to huge LNG projects, says minister

The sheer speed and scale at which Australia's liquefied natural gas industry has boomed is a major reason for the sector's growing cost pressures, Resources Minister Gary Gray said, while conceding "unreasonable" union wage demands were also contributing to the problem.

The sheer speed and scale at which Australia's liquefied natural gas industry has boomed is a major reason for the sector's growing cost pressures, Resources Minister Gary Gray said, while conceding "unreasonable" union wage demands were also contributing to the problem.

As the oil and gas industry heaps pressure on governments to tackle rising labour and construction costs - or risk losing out on more than $100 billion of investment - Mr Gray said the unprecedented boom which is seeing three major gas plants being built in Gladstone was unforeseen.

"Some cost pressures grow because of the very large impact of what it is that companies are actually doing," Mr Gray said. "Nowhere in the world has anyone attempted the kind of ramp-up in LNG that we have in prospect in Australia."

But speaking to reporters at the APPEA conference in Brisbane on Monday, Mr Gray said militant behaviour from some unions, including the Maritime Union in Western Australia was "unreasonable".

"We do have to be conscious that unreasonable wage demands do place pressures on projects. My observations are not anti-union, my observations are about how prudent that behaviour is."

But the oil and gas industry remains hell-bent on government action, not just on labour cost but other productivity issues such as the removal of perceived duplication in environmental approval processes.

The vice-president of oil giant ExxonMobil, Mark Nolan, said Australia was an attractive place to invest in but it also had "significant disadvantages in labour costs and labour productivity".

"I think the government has a role to help us manage labour relations, there's no question about that, it's a significant factor," Mr Nolan said.

ExxonMobil is operating the Scarborough gas field in a $10 billion joint venture with BHP Billiton. Mr Nolan said it remained a "very challenged" project owing to the dry gas and the shallow, broad nature of the field, requiring expensive horizontal drilling.

Mr Nolan's comments followed that of other oil and gas industry leaders including Chevron managing director Roy Krzywosinski and APPEA chief executive David Byers who warned that government inaction on rising costs could cost the economy $100 billion in future projects.

And Royal Dutch Shell's global chief executive, Peter Voser, told the conference "policy decisions made today will have a profound effect on your economy and society".

The pattern of commentary prompted Infrastructure Minister Anthony Albanese to brand the energy industry as "self-interested".

But opposition resources spokesman Ian Macfarlane told reporters in Brisbane that Mr Albanese was "on his own" if he thought Australian wages were internationally competitive. "A cook on an oil rig gets paid more than Anthony Albanese," Mr Macfarlane said.

"If it's costing twice as much to do a project here as it is somewhere else in the world we're not being competitive."

The government has also come under pressure from the manufacturing sector, with the industry's peak lobby concerned soaring gas prices and a looming east coast gas crisis will exacerbate already widespread job losses.

Amid claims from Manufacturing Australia that 200,000 jobs were at risk, Mr Gray outlined a "comprehensive" government analysis of the domestic gas market. But the federal government did not agree a domestic gas reservation would keep prices down or put more gas into the local market. "In our view it would create uncertainty," Mr Gray said.

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