Unions add to LNG, costs: Gray

The speed and scale of Australia's liquefied natural gas boom are big reasons for the industry's growing cost pressures, Resources Minister Gary Gray says, while conceding that "unreasonable" union wage demands are also contributing to the problem.

The speed and scale of Australia's liquefied natural gas boom are big reasons for the industry's growing cost pressures, Resources Minister Gary Gray says, while conceding that "unreasonable" union wage demands are 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 future investment - Mr Gray said the unprecedented boom, with three major gas plants being built in Gladstone, was unforeseen.

"And so some cost pressures grow because of the very large impact of what it is that companies are actually doing," he 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 Australian Petroleum Production and Exploration Association conference in Brisbane on Monday, Mr Gray said militant behaviour by certain 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," he said. "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.

ExxonMobil vice-president Mark Nolan said Australia was an attractive place to invest in but 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. As we consider projects around the world, those sorts of issues drive our decisions."

ExxonMobil is operating the Scarborough gasfield 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.

Other oil and gas industry leaders, including Chevron managing director Roy Krzywosinski and APPEA chief executive David Byers, warned that government inaction on rising costs could cost the economy $100 billion in projects.

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

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

But opposition resources spokesman Ian Macfarlane said 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, which is concerned that soaring gas prices and a looming east coast gas crisis will exacerbate 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 government did not agree that a domestic gas reservation would keep gas prices down or put more gas into the local market. "In our view it would create uncertainty and deter investment in new gas supply," Mr Gray said.

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