Wages not to blame for Gorgon LNG delays

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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