Australia Drags Its Feet

Back in May of this year I wrote a post about the shortage of manpower the Australian oil and gas projects are going to face in the near future, and predicted that:

[A]t 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.

It seems that the Australian government has foolishly been too wrapped up in getting re-elected and forming coalitions to read my blog and heed the warnings, as this article in Upstream Online tells us:

In a recent report, advisory company KPMG said Australia was already facing a shortage of skilled labour due to its ageing population.

“We’re actually going to see a natural decline in the Australian workforce in the next 30 years or so because of less people coming into the workforce,” said Jason Berry, a migration services partner with KPMG, which recommends that LNG developers recruit abroad and take extra measures to retain workers.

Unless large projects are staggered, labour costs could soar up to 40% as companies compete for labour, Berry told Reuters.

“If everyone wants to do the key part of the project at the same time, contractors will just pay what the market demands. It will become a merry-go-round of salary increases.”

A merry-go-round of salary increases.  Yes, that’s pretty much what I was on about.  But what are the government doing about it?

The growing demand for workers has led some analysts to believe Australia will have to consider easing migration laws and look overseas to fill the labour gap.

However, Australian Prime Minister Julia Gillard’s minority Labor party government has advocated a decrease in immigration, despite granting an exception for “enterprise migration agreements” that allow foreign workers to migrate for mega resource projects.

But Reuters quoted one analyst as saying the Labor government was unlikely to change migration policy dramatically and risk its relationship with Australian unions.

Ah.  So a merry-go-round of salary increases seems to be pretty much what the government, or at least their supporters, want.  And how’s that unionised industry working out so far?

Woodside Petroleum’s A$13 billion (US$13.2 billion) Pluto project has already been dogged by several strikes over demand for higher pay and improved working conditions.

In August Woodside delayed the expansion of the gas project saying it would give it extra time to develop its own exploration program.

Sounds great.  Looks as though the Australian government is all over this problem.

In entirely unrelated news:

Anglo-Dutch supermajor Shell announced that it had sold part of its stake in Australia’s Woodside Petroleum for A$3.3 billion (US$3.3 billion), representing 10% of the total issued shares in the Australian giant.

Shell said it had entered an underwriting agreement with financial services company UBS for the sale of 78.34 million shares, representing 29.18% of its interest in Woodside at a price of A$42.23 per share.

As part of the deal Shell has agreed to hold its remaining 24.27% stake in Woodside for a minimum of one year.

Shell chief executive Peter Voser said the sale was part of the company’s global strategy to improve its capital efficiency.

“We will increasingly focus our investment in Australia through direct interests in assets and joint ventures, rather than indirect stakes,” Voser said.

Which is an interesting development, because:

In 2001 Shell attempted to win control of Woodside but the move was blocked by the Australian government and in September the supermajor quashed rumours of a second takeover attempt.

Somebody told me that the reason Shell’s purchase of Woodside was blocked was because the government feared the Woodside projects would not be given enough prominence by a giant like Shell, and Australia might end up with its best oil and gas prospects undeveloped as Shell pursues grander projects elsewhere.  It is somewhat ironic that Shell is now seemingly pulling out of Woodside preferring to go alone at a time when the Australian government seems committed to ensuring its oil and gas projects are faced with delays, cost overruns, and labour shortages before they’ve even got off the ground.


2 thoughts on “Australia Drags Its Feet

  1. Pingback: White Sun of the Desert » On a Wing and Oprah

  2. Shell were blocked from acquiring Woodside because its left hand didn’t know what its right hand was doing – Downstream aggressively raising the price of gas at the pump and royally pissing off the Australian public at just the crucial time that Upstream was closing in on Woodside. Strange but true.

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