From the ever-informative Upstream Online we get this report of the potential problems the planned Australian LNG projects are likely to face:
“Securing access to resources necessary to develop Australia’s growing LNG industry will not be easy,” Reuters quoted Adi Karev, global leader of oil and gas at consultancy Deloitte Touche Tomahtsu, telling an industry conference in Brisbane.
“Competition for engineers, project managers will be heightened and project finance and raw materials will be strained given the competition for other LNG and large-scale infrastructure projects.”
According to a forecast by the Chamber of Minerals & Energy of Western Australia, even under its most pessimistic forecast, the state needs to recruit some 10,000 extra workers through 2011, rising to 37,000 by 2012 when LNG construction reaches it peak.
“With a skills shortage widely recognised throughout the industry, LNG projects that come in at a later date risk facing much higher costs,” Karev said.
I have long maintained, uncontroversially I might add, that the greatest restrictions to oil and gas developments are not technological or geological but political. The Australian projects are no different, and there have long been complaints about Australia’s lethargy in getting its projects going forward in the face of umpteen, ever-changing environmental issues, indigenous claims, and daft political ideas like slapping a 40% tax on coalbed methane projects at the 11th hour.
And I fear it is politics which is standing in the way of owners of Australian projects addressing the enormous manpower shortages they will certainly face, as highlighted in the quoted article above. As somebody unemployed in the oil and gas job market, naturally I have considered Australia as a good place to look what with several huge LNG projects on the horizon, and indeed there are hundreds of jobs being offered across dozens of positions. However, following several applications, I have had a number of phone calls from recruiters in Australia all asking much the same question:
“I don’t suppose you have residency rights in Australia, do you?”
To which the answer is no, I don’t. But I am perfectly willing to relocate and become a full tax-paying resident of Australia if a company is willing to sponsor me (actually, I’m contemplating going unsponsored, but that’s another story). Unfortunately, all the recruiters give the same response: they are not yet allowed to sponsor foreigners to come and work; they have been told to recruit only those who already have working rights in Australia.
On the face of it, this might sound sensible: give jobs to the unemployed in Australia first and then bring in foreigners to fill the positions that are left. However, on deeper inspection this policy is pretty damned stupid. Firstly, from what the recruiters are telling me, they do not have enough suitable Australians to fill these positions right now, which is why they are calling me up in the vain hope I’ve negelected to mention I have Australian work rights. Secondly, unemployment in Australia appears to be regional, mainly because people from Sydney or Melbourne are generally not prepared to up and move to the barren coasts of Western Australia. The oil towns themselves have very little unemployment, and those that are unemployed in such places, as in Sakhalin, are usually in that predicament for good reason. What the projects are facing is not a shortage of people in Australia, but a shortage of suitable people who are willing to relocate to Perth or one of the remote oil towns. Thirdly, oil and gas requires not just anybody but people with certain skills and experience. It is all very well pointing to the unemployed of Sydney or Melbourne, but unless they have the necessary skills and experience to get stuck into an oil and gas project, they are not much use unless as an apprentice somewhere. And it is this third problem which is the biggest that Australia faces: even if all their expatriate workers came home and started happily paying tax as Australian residents, they would still be facing massive shortages in a year’s time. Australia does not have a big population anyway, and they simply do not have the numbers to man up the projects without bringing in foreigners.
Now, all the recruiters recognise that at some point the Australian government is going to have to relent and let the project operators sponsor foreign workers, and I’m sure that will happen in a year or so. But the Australians are going to make the same mistake almost all the oil industry does with tedious, cyclical regularity: wait until the market is booming and the very last minute before launching and all-out, desperate, recruitment drive in order to get the project staffed properly. The likely result? Twice the price for the wrong people who stick around only half as long. With the way the oil price is going, and with other large projects creeping into view, conditions in the job market are improving rapidly, and within a year or two there are likely to be good times again, especially once the numbers of those retiring or already retired are properly felt in the market.
Currently, most people in the oil and gas business are employed in one way or another, albeit often with shoddy outfits. People who lost their jobs during the last oil price crash and found themselves working in companies like this are often far from happy and would leap at the chance to move to a more competent outfit with brighter prospects and not managed by somebody who, for instance, probably should have stayed playing Hooray-Henry in the officers’ mess.
Now is the time for Australian operators to recruit the extra bodies they will need to man their projects, while rates are relatively low, availability is relatively high, and they are in the position to offer longevity and stability to potential employees. By the time they relax the laws to allow foreigners in they might find the overseas labour market a very different place, and it won’t have changed in their favour.