By Andrew Hobbs, Group Editor
“PRIOR to the start of the LNG development boom the question was where the labour could possibly come from,” consultancy Energy Quest’s March 2015 Energy Quarterly said.
“Now the question is where they will all go, particularly as other sectors of the economy have not picked up.”
Prepared as a meticulous snapshot of the oil and gas industry in Australia and overseas, the Energy Quarterly found that the anticipated drop off of employee numbers was exacerbated by falls in the oil price.
The study suggested between 600 and 700 jobs would be lost at Santos in the near future, noting the company had around 3,000 employees after cutting 520 positions recently.
This compared to its 2,100 employees at the end of 2009 – just prior to the final investment decision on the Gladstone LNG project (GLNG).
More broadly, the report predicted employee numbers on the three Curtis Island projects – GLNG, BG’s Queensland Curtis LNG project (QCLNG) and Origin Energy-run Australia Pacific LNG project (APLNG) – would see the most job losses as the six LNG trains on the projects were completed.
This would fall from a high of 14,000 down to a few hundred across 2015 and 2016, the report said, with cuts also happening at projects run by Woodside and Chevron.
“There are 8,000 people on Barrow Island working on Gorgon. Some of these will carry on with Wheatstone (with a peak workforce of 7,000) but most of those from both projects will ultimately go,” the report said.
Further to this, a number of Australian companies had announced cuts to capital expenditure – which the report said was often in the range of 20% to 25%.
“This will affect all future production growth,” the report said.
“The fall in the oil price reduces the capacity of smaller companies to invest in domestic gas projects, even though domestic gas prices have been increasing.”
Of course, what it also means is less work in the Australian market for workers who were recently made redundant to pursue.
Further to this was the fact that Australian wage inflation has fallen to a record low, with the rate in Western Australia now half of what it was in 2012.
Nonetheless, while falling, Australia’s salaries and contractor rates are still the highest globally for the sector, with the average Australian oil and gas salary at US$131,954 in 2014, according to Hays.
Oil & Gas Australia details elsewhere in this magazine some company moves to reduce the amount it spends on staff and contractors in recent months – and it is fair to say that the companies named will be far from the only ones employing this course of action.
So, faced with a tightening of the market, a cut in pay and substantially more competition for roles, where next for these workers in that segment of industry?
In the past, much has been made of the fact that the niche skills that Australians have developed in working on these projects are transferrable to similar industry projects anywhere in the world.
However at this point, with the oil price where it is, workers might be looking all over the world to find it.
Moreover, even if a job opening at such a project is found, it will be highly unlikely that the pay and conditions could ever reflect what was on offer in Australia recently.
That also fails to take into consideration the cost, financial and otherwise, of moving not only the worker but their families to another country.
In addition, the rise in popularity of Floating LNG facilities will no doubt mean fewer onshore developments around the world than would otherwise be the case.
These facilities are already being touted as the development solutions for the ExxonMobil operated Scarborough project and Woodside’s Browse project – while it is also a possibility for PTTEP’s Cash-Maple project.
At present, the only example we have of such a project in action is Shell’s Prelude FLNG, which is discussed in depth in our AOG Review.
The company’s local content requirements and standards are worthy of praise – with the project creating jobs for Australian contractors and the many personnel who are currently coming to grips with the Prelude facility, still under construction in Korea.
It is an opportunity that these workers would be wise to exploit – but this course of action depends largely on their ability, and means, to adapt their training to this new challenge.
It may take a long time, and a lot of effort, to do so.