Oil and gas sector told to hold-off on projects rather than give into union demands

The Federal Government has suggested oil and gas companies should delay developing multi-billion projects rather than give into over-the-top demands from unions.

Employment Minister Eric Abetz said it was important companies did not give into outlandish demands by the unions but conceded this may cause some “short-term pain”.

The comments come after the coalition government confirmed it had ordered a royal commission into union activities amid claims of wide-spread unlawful conduct.

Speaking to The West Australian, Abetz said oil and gas companies should look to the "long-term consequences of the next project" by taking some "short-term pain".

"Some of the employers do argue that it is very difficult when you've got a stash of capital in the corner which is costing you big, big dollars in interest or forgone dividends when these extravagant wage claims are made," Abetz said.

"They then do an analysis and it's easier and cheaper to give in to the wage demands in comparison to the interest or forgone dividends you are burning. If you look at the long-term picture one might come to the conclusion some short-term pain will in fact be a long-term gain."

When quizzed what was meant by short-term pain, Abetz said:

"It means that a project does not get started as quickly as it otherwise might."

Abetz said the government would step in to allow the Fair Work Commission to make decisions on greenfield projects when negotiations between unions and employers stalled.

Union involvement, high labour costs, and falling productivity have all been cited as a bug bears of the industry, with some sites listing industrial relations issues as a higher business risk than safety.

However the unions say workers on offshore oil and gas rigs should be compensated for challenging working conditions and time spent away from family.

Last year a report commissioned by the Maritime Union of Australia found that wage costs for support ship workers made up 0.25 per cent of the total cost of the Gorgon project.

However with recent demands including iTune cards, Qantas Lounge memberships and a 5.5 per cent pay rise over four years, the industry has often hit out at the unions’ demands, stating it cannot afford them.

Australian Mines and Metals Association policy director Scott Barklamb said the industrial relations system often skewed bargaining in unions' favour.

"What is of concern is when you see possible wage increases doubling in 10 years for some occupations," he told the ABC.

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