07/04/2014 - 16:04

Gas industry wants more reform

07/04/2014 - 16:04

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Gas industry leaders lined up today to call for more supportive government policies on workplace relations, taxation and skilled migration, saying these changes were crucial if the sector was to maximise growth opportunities.

Gas industry wants more reform
Woodside Petroleum chairman Michael Chaney at the APPEA conference in Perth today. Photo: Attila Csaszar

Gas industry leaders lined up today to call for more supportive government policies on workplace relations, taxation and skilled migration, saying these changes were crucial if the sector was to maximise growth opportunities.

Addressing the Australian Petroleum Production & Exploration Association conference, which has attracted 3,500 delegates to Perth, Woodside chairman Michael Chaney urged the federal government to push harder on workplace relations reform, saying proposals released in recent months do not go far enough.

Chevron Australia managing director Roy Krzywosinski said the cost of locally supplied goods and services had risen dramatically.

He said “this weighs heavily” on Chevron and its partners as they considered a possible expansion of the Gorgon gas project.

“While the main focus remains on the construction of the foundation project, we remain supportive of a Gorgon expansion provided the cost settings are corrected,” Mr Krzywosinski said.

APPEA chairman and Woodside director Rob Cole said there were many policy issues facing the sector, but most importantly it was time to address the workplace relations framework.

“The time has come for a more mature discussion,” he said.

Speaking this morning, Mr Chaney described changes to workplace laws introduced by the Rudd government as a “hugely retrograde” step.

He highlighted the abolition of individual workplace agreements, the reinsertion of the union between employer and employee in employment negotiations, and the increase in unions’ rights of entry as adverse changes.

“Amendments to the Act contained in the new government’s recently-tabled bill address certain right of entry issues but, in our view, do not go far enough; and the same applies to the government’s proposed Greenfield Determination changes,” Mr Chaney said.

“We do look forward to the new federal government’s proposed reinstatement of the Australian Building and Construction Commission which, before its abolition, had proved to be the only effective body in the battle against union lawlessness on construction worksites.”

Mr Chaney said a looming risk for the industry was finding sufficient skilled and experienced labour to operate new LNG facilities.

“This rapid growth will impact the sector’s ability to source skilled workers, as will international competition for experienced and skilled technicians,” he said.

“Industry has also identified a shortage of suitably experienced supervisors. This may have a very real impact on productivity.

“Tackling those challenges will require clear government policies on immigration and the use of imported labour.

“We welcome the flexibility shown by government in this area over recent years, but we must ensure that fundamentally sound policies like the 457 visa arrangements are not neutered by the imposition of over-burdensome regulation.”

Mr Krzywosinski said government reforms to improve productivity and drive down high costs “are certainly a positive step in the right direction”.

They include measures aimed at simplifying approvals, removing unnecessary red tape, changes to the Fair Work Act and restoring the Australian Building and Construction Commission.

“That said, we stand ready to work together for further positive change,” Mr Krzywosinski said.

“For example, on taxation, industry needs greater certainty, predictability and a system that attracts and encourages investment.

“On industrial relations, reforms are needed to the Fair Work Act, most urgently on right-of-entry provisions.’’

Mr Krzywosinski said that, since 2009, the project had been subject to almost 1,000 disruptive right-of-entry claims from unions.

On Sunday, APPEA chief executive David Byers said the current amendments to the Fair Work Act didn't go far enough.

"Reform is urgently needed or we risk losing the next wave of LNG investment that could create 150,000 Australian jobs," Mr Byers said on Sunday.

"The clock is ticking.

"The global LNG landscape is changing rapidly. Our competitors in Canada, the US and Africa are looking to secure market share in Australia's key markets."

APPEA estimates that Australia could attract as much as $180 billion in LNG-related investment during the next 20 years if it can address cost and productivity challenges and face growing international competition.

Mr Byers said further legislative changes to the Fair Work Act were necessary to keep union negotiations from threatening Australia's ability to expand or attract new LNG projects.

The recommendation is one of several APPEA has strung together in a report entitled 'Improving labour productivity: a regulatory reform agenda'.

It includes calls to introduce a new category of agreements that would apply specifically to employment agreements and negotiations at major capital projects such as LNG projects.

As part of new labour agreements, it suggests conditions and wages be set for the life of a project, rather than be renegotiated after four years, often at a crucial time in construction.

The report also recommends wages and conditions become more responsive to economic conditions or changes in the labour market.

"The problem that you have with legislation ... is that it creates a situation where the labour market has no flexibility in it. Once the labour market gets set at this point it only is ever going to go higher. It never responds to what's happening to the broader supply and demand," Mr Byers said.

He said APPEA was not calling for a renegotiation of base wages, but that some project and site allowances were excessive.

Using the example of Chevron's Gorgon LNG project, Mr Byers said workers continued to receive an accommodation allowance, initially negotiated to compensate for a lack of facilities at the beginning of the project, despite facilities since having been brought up to standard.

"As an industry we understand you've got to offer attractive wages to get the right people, there's no argument about that. But the issue is that when we start to get a system so far out of kilter that we can't become competitive, then we really do need to look at some changes," he said.

The report said unrestricted union entry to projects was reducing productivity, citing Woodside's Pluto LNG project, which received 450 site visits between July 2009 and May 2010.

Mr Byers said APPEA's recommendations aimed to provide greater certainty at the outset of the project about what its total costs would be.

"At the moment we face the risk that partway through the project there's going to have to be a renegotiation of the terms and conditions and it's almost impossible to pinpoint what that's going to be," he said.

APPEA's other recommendations include creating a coordinated social and economic infrastructure plan for Northern Australia, less stringent 457 visa requirements, and abolishing the additional regulatory obligations placed on project developers introduced as part of the Australian Jobs Act.

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