Home > Wages not to blame for Gorgon LNG delays

Wages not to blame for Gorgon LNG delays

Editorial
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Workers are not solely to blame for the chronic delays and cost blowouts of the Gorgon Project, according to a report released by the University of Sydney Business School today.

The preliminary report to the International Transport Workers’ federation was funded by the Maritime Union of Australia, and has been presented at an investor briefing with United States Stock Exchange analysts in New York to explain why energy giant Chevron’s Gorgon project in north-western Australia is over-budget and delayed.

The MUA have said that local company management and business lobby groups have unfairly blamed the union for problems on the Gorgon project, a position to be used by Chevron and construction contractor Leighton as a bargaining platform when negotiating the new Enterprise Bargaining Agreement for maritime workers.

Written by employment relations professor Bradon Ellem, the report finds that wages are a small factor in the range of issues that contribute to Gorgon’s construction cost blowout, now up to $54 billion from the original quote of $37 billion, and that the additional costs have been caused mainly by logistical blunders.

Among the list of identified causes of construction delays and increased costs are several “big ticket” items identified in the press, as well as a number of anecdotal examples of mismanagement at the workfront.

The big ticket items are as follows:

  • The two-kilometre long Barrow Island jetty was first estimated to cost $800 million, but instead cost $1.85 billion, attributed to difficulties with fabrication and transportation and “weather difficulties”.
  • The vessel Combi-Dock III accidentally struck the navy submarine HMAS Shean, which caused $13 million in damage, $10 million of which was paid by Chevron and insurance, and resulted in the offending vessel being impounded for two months.
  • Sustained delays at sea, sometimes up to five weeks of vessel inactivity, due to lack of space in docks and lay-down yards.

In addition the report draws on first-hand accounts from workers about gross inefficiencies on site.

Delays were largely attributed to safety policies were attributed, from the use of safety rules for sacking employees, to the use of tighter safety standards than necessary.

It was reported that cranes on site were limited by procedure to use in winds up to 10 metres per second, despite faster manufacturer ratings.

Another story detailed that a worker managed to set their clothes on fire while using an angle grinder to cut steel, which resulted in the banning of cutting discs, and boilermakers, pipefitters and welders were forced to use hacksaws to perform routine tasks like cutting the bullets out of pipe fit-ups.

Barges were also delayed while being quarantined for cleaning due to having too much bird dropping contamination, in order to protect Barrow Island as a nature reserve.

ITF President and MUA national secretary Paddy Crumlin said that up until this report the commentary surrounding Gorgon's problems were focussed primarily around labour law, labour unions, labour costs or labour effort.

“Yet when you actually conduct some in-depth research on the topic the findings bear little resemblance to these reports,” Crumlin said.

“The unsurprising reality is that workers on the Gorgon project want it to succeed every bit as much as management.

“When you start interviewing them you find out that they are just as frustrated with many of the delays - delays they believe could have been avoided had management consulted with them in a cooperative manner, instead of using them as scapegoats.

Crumlin said the report concludes that these inefficiencies could be prevented by greater engagement between workers and management.

“There is a lesson in this not just for Chevron, but also media commentators pushing for IR deregulation as some sort of economic panacea,” he said.

“The real key to unlocking workplace productivity is through engagement and consolation between management and workers - not screwing down wages and conditions in an adversarial environment.

“Chevron should sit down with the unions to develop a sustainable and functional relationship with its workforce.”

Gorgon Quick Facts (from MUA website)

  • The Gorgon project is the single largest foreign resource project in Australia.
  • For Chevron it is one of the largest LNG projects ever.
  • At present it is the company's single largest upstream project and could add somewhere between $40-60 billion US a year in revenue.
  • Chevron is releasing information that first gas will be on target for the middle of 2015.
  • In each of the past two Decembers, Chevron has released new information about Gorgon increasing the projected cost of the project and delaying the timing of first gas delivery.
  • Originally costed at USD37 billion, the budget is now running at USD54 billion.
  • Originally scheduled to have ‘first gas’ in 2014, there are growing concerns about delay, with 2015 the most optimistic start-up date.
  • Shell, one of the project’s joint venture partners, believes the date could be at least 2016 and as late as 2018. 

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