BC Business
LNG ship Australia | BCBusinessAn LNG ship off the coast of Australia
The $11 beer and $131,000 Ford pick-up trucks are the new reality in Australia’s LNG patch—a dramatic example of how the soaring cost of doing business has left a toll on the industry Down Under, and a cautionary tale for British Columbians dreaming of LNG riches.
“Our labour rates are high. We have issues with productivity and big industrial relations issues,” said Peter Dyball, founder of Pit Crew Management Consulting Services, which provides engineering and construction support to Australia’s LNG sector, at Vancouver’s LNG in B.C. Conference on Thursday. “Australia is not a cheap place to do business and it’s more expensive now than it was 10 years ago.”
Western Australia and Queensland experienced labour shortages that B.C.’s west coast will face when LNG facilities begin construction, Dyball told the audience. And while the B.C. government has extolled the booming benefits of LNG, Dyball and others at the conference warned about the busts that have already occurred in Australia, where the LNG industry is 15 years ahead.
Dyball said that labour shortages have taken a toll on the Australian industry. A project that would have taken 10 million man hours a decade ago and cost $440 million in labour costs will today take 20 million man hours and $1.5 billion for the labour.
Part of the soaring labour costs comes from job hopping and unrealistic expectations, as well as quick exits from the sector by qualified tradespeople. And don’t expect temporary foreign workers to be the solution: Dyball said those entering Australia on temporary visas are primarily in the hospitality, health care and IT sectors. The need for welders is huge in the LNG sector, but Dyball says only 750 welders out of 51,000 visas issued were for that trade.
“It’s an emotive issue. The ones coming in are the highly skilled workers that can then mentor and approach and train our workers so the temporary foreign worker can leave a skilled Australian workforce behind,” he said. “A number of Chinese companies tried to set up operations using Chinese workers and did not become aware of the industrial and labour environment. Their plans changed quickly once they understood what the local market really was.”
BC Federation of Labour president Jim Sinclair, responding to Dyball’s presentation, said that Australia has depended on temporary foreign workers for 50 per cent of its workforce and that’s not acceptable. “The lowest possible number is what’s acceptable. I don’t want to say 10 per cent or 25 per cent. It’s the lowest number possible. That’s what it should be,” he said. Sinclair added that Australia’s high labour costs do provide lessons for B.C.—specifically, that the government should be funding more apprenticeship positions and training for First Nations communities.
All of this, of course, comes before any company has made a final investment decision on building an LNG export terminal in B.C. Malaysian oil-and-gas giant Petronas is thought to be the leading candidate to strike first in B.C., with a final decision on whether to build a $36-billion LNG plant near Prince Rupert expected by the end of 2014.
In his keynote address at the conference on Wednesday, Petronas CEO Tan Sri Dato’ Shamsul Azhar Abbas warned B.C. to temper its expectations and not to make the same mistakes as Australia, where the “boom fizzled before it even took off.”
“Let’s not slaughter the goose before it even has a chance to hatch the golden egg.”