By Andrew Wilson, of Dupont Sustainable Solutions
SEVEN of the 12 largest LNG projects in the world, either under way or being planned, are in Australia, and three of those projects are located on Curtis Island, Queensland.
The projects are being delivered in the context of some widely reported cost overruns – Australian projects are now between 20 per cent and 30% higher than the costs for competing projects in North America and East Africa and it is estimated that Australian costs for delivering LNG to Japan can be up to 30% higher than in Canada and Mozambique.
The cost pressures are compounded by the competition between the projects for skilled workers and lower than expected labour productivity.
A global study by Independent Project Analysis also found that 65% of megaprojects (those worth more than $500 million) run more than 25% over budget and 25% behind schedule.
To avoid being among this 65%, DuPont believes that companies need to build a ‘productivity’ culture that understands this work cycle in the short-term and in the long-term.
Much has been written about the reasons behind the cost overruns and productivity gap including labour relations and the need for the key players within the Australian LNG sector to work together more, for example through joint qualification of vendors to reduce tendering timeframes. But what about within the companies themselves?
Every site is different, so there is not a cookie cutter approach that can be taken. Having said that, there are some essentials that are non-negotiable.
It is important to have robust systems that focus on what really matters, cover the right people and manage performance.
During transition from project to operations, actions that should be taken to achieve this include the implementation of an integrated system for continuous improvement, adaptability and risk management.
The system needs to be supported by tools and best practices to solve root level problems.
However, systems alone won’t do the job. The best system in the world, poorly executed, is worthless.
It is essential to have a thoughtful leadership team that not only sets clear priorities but aligns the workforce so that they understand their contribution to achieving these priorities and empowers them to have control over their working environment.
It also requires leadership practices that focus on fully developing people to utilise the assets to maximum effect.
The current LNG projects are more complex and on a larger scale than what many of the workforce will have experienced before.
They are hazardous to build and operate and if you make a mistake it can quickly turn into something much bigger.
The projects are typically delivered by a consortium of organisations and the number of projects has naturally led to a high demand for skilled and non-skilled contract workers.
The focus on productivity and costs can often lead owner companies to create either explicit or implied pressure on contractors to avoid delays and associated increase in costs.
Such pressure can result in unintended consequences of shortcuts being taken or work being executed at all costs, resulting in incidents and injuries.
As a result, not only is the injury to workers significant, there are also impacts to project overrun, production and reputational damage.
Project owners need to invest in a contractor management model that is integrated into the systems, structures, procedures, and monitoring systems to ensure contractors aren’t the reason they suffer a massive cost blowout.
Many of the LNG operations are built in remote geographical locations so it is important to develop and implement a coherent strategy for ensuring that all personnel have the knowledge, the capability and mindset before start-up to operate the facility in a manner that is consistent with the expectations of all stakeholders, shareholders, communities and governments.
The project owner must develop a robust system for monitoring output, and have already defined this program within the context of the contract before a worker starts.
Effective monitoring calls for a partnership with the contractor rather than an adversarial relationship.
Culture is the Key
Having the right people that are motivated and empowered is critical in having a workforce in which people want to stay.
A company must be able to retain and attract on culture, not on price.
This is about survival of the fittest and if you want to survive, culture and your people should not be an afterthought.
In our experience, the most significant gains in capability development occur beyond the class room, by learning through doing.
This inherently involves learning from line managers and supervisors which also supports cultural alignment – the mindsets and behaviours where people instinctively do the right things, the right way, every time.
For example, at DuPont’s own hazardous facilities, Leaders Standard Work (LSW) is used to ensure that leaders are setting an example and demonstrating their willingness and ability to make changes themselves in order to be more effective in their work.
This sends a clear message to everyone that “we are all in this together”.
Apprenticeship programs, when carefully managed, are a safe and effective method to train reliable workers and build capability.
Bechtel Corporation’s LNG projects on Curtis Island will intake 400 adult apprentices through the national apprenticeships program (NAP) to work across three projects.
A scheme that trains workers with workplace skills whilst on the job can create a positive culture of mutual benefit and reward as well as training skilled workers that can then progress through the company in the future, without the need for expensive recruitment drives and candidate poaching.
Creating and sustaining a local community spirit that recognises the benefits of nearby LNG operations will help to install a positive identity in the minds of the community, reducing likelihood of opposition towards site expansion as well as establishing Gladstone as a great place to work for future employees.