Protecting a sustainable future for the oil and gas sector

Steve Knott, Chief Executive Officer, Australian Mines and Metals Association.

Steve Knott, Chief Executive Officer, Australian Mines and Metals Association.

Many readers of Gas Today and attendees of the 2014 APPEA Conference will be aware that 21 vessel operator employers, all of whom provide critical maritime support services to Australia’s offshore oil and gas sector, remain locked in robust negotiations with the Maritime Union of Australia for new enterprise agreements covering approximately 2,500 workers.

The Australian Mines and Metals Association (AMMA) has been collectively representing the maritime industry in these negotiations with the Maritime Union of Australia (MUA) for more than 12 months now. While workplace bargaining of this scale involves a great deal of industrial relations and legal complexity, the ongoing delay in finalising this matter simply comes down to the union’s conduct and approach.

After all this time, the union is still yet to clarify its position, and is more interested in threatening strike action and pursuing an idealistic agenda, rather than reaching a sustainable and positive outcome for our industry.

Recently, AMMA and its vessel operator members received some much welcome support from well-respected former Labor minister and now Chairman of Australian Petroleum Production and Exploration Association (APPEA)’s advisory board, Martin Ferguson.

In a widely publicised speech, Mr Ferguson warned the union that its behaviour is threatening the economic prospects of its members and the industry. He rightly said the MUA should instead work with employers towards making a realistic agreement that will set resource operations and seafarers up for sustained and sustainable future prosperity.

The ALP stalwart was criticised by some of the more close-minded members of the union movement, but look at the figures and it is clear he is right on the money.

Last year when negotiations began to ramp up, AMMA commissioned Deloitte Access Economics to produce an independent analysis of the economic pressures facing Australia’s offshore oil and gas marine support sector.

Unsurprisingly to all of us involved in the gas industry, the Deloitte report found increasing labour and operating costs, productivity concerns and macroeconomic challenges are significantly impacting the industry’s international competitiveness.

The evidence shows the high cost, low productivity operating environment for Australia’s resource industry is presenting very real challenges for support companies that are critical to the project supply chain:

  • On a ‘per vessel’ basis, wages and total expenses have increased by around 40 per cent since 2007–08, while revenue has increased by only eight per cent.
  • Between 2008–09 and 2009–10,the sector’s profits fell by 27 per cent, while at the same time wage costs grew by around 19 per cent.
  • As an example, wages have almost doubled over ten years for schedule 1 integrated ratings (general seafarers now earning in excess of $170,000 per year); and increased by more than 70 per cent for schedule 8 roles (more specialised roles earning about $240,000 per year).
  • Profit per vessel in 2011–12 was half the level recorded in 2007–08.
  • Since 2007–08, wages and total expenses have doubled while revenue increased just 50 per cent.

Deloitte found that “the pace of wage growth in the sector has clearly been disproportionate to wage and price growth in the Australian economy overall…the offshore oil and gas marine support sector is in a position where any significant, sustained growth in wages could threaten its ongoing viability”.

This report was commissioned simply to build a factual basis for discussion amid shifting economic conditions in our industry. What it told us is that our industry must avoid an outcome similar to that of 2010, when the previous round of collective enterprise bargaining agreement negotiations took place.

Four years ago, the MUA used a series of destructive strikes to extract exorbitant wage increases. Some vessel operators – mostly medium-sized employers based in Perth – were losing $750,000 per day to strike action, forcing them to agree to 30 per cent pay increases.

This wage outcome has since proven a major contributor to the decline in the competitiveness of Australia’s oil and gas sector, and we must ensure wage outcomes in 2014 help – rather than hinder – Australia becoming a more attractive place to invest in new oil and gas projects.

In this round of negotiations, the MUA has rejected an offer that would have secured their members a very generous 16.5 per cent pay rise, and also satisfied what they claimed were their key concerns.

The result of this rejection is that vessel operators are left with a long list of unrealistic claims and no signals as to how to resolve this process. If agreed, these claims would increase total labour costs by at least 30 per cent on the vessels, impose massive productivity impediments, and restrict the employers from properly servicing their clients.

The MUA has asserted that the industry’s position of not caving in to their demands is an attack on Australian seafarers. This couldn’t be further from the truth.

Australia’s seafarers undertake critical roles in challenging environments, but they are also among the highest paid maritime workers in the world. With the average starting salary at about $170,000 for working just six months of each year, this is an industry with some of the most generous remuneration and leave arrangements in the country.

It cannot be disputed that Australian seafarers spend far more time at home with their families and earn multiple times that of nurses, doctors, teachers and other important occupations in our society. The industry also actively assists and supports the wellbeing of all those away from their families at sea.

Moreover, the vessel companies are dedicated to hiring and training Australian seafarers. Any mention of the threat of foreign labour is a blatant scare campaign from the union, without reason.

If our nation can take one critical lesson from the recent demise of some iconic Australian manufacturers, it is that employers won’t survive if they allow unions to impose restrictive work practices, outlandish allowances and unsustainable wage increases.

For a union that purports to fight for the job security of Australian seafarers, the MUA is going a strange way about it.

On behalf of our vessel operator members, the operators and investors that bring new projects to our country and the entire oil and gas industry, AMMA will continue to work towards an outcome that will see our industry continue to deliver long-term economic benefits for our nation, and sustainable employment opportunities for the Australian community.

We just need the union to take a reality check and come to the negotiating table with the long-term interests of the industry, the MUA members, and their families in mind.

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