The job that pays $2000 a day

Resources companies warn that a wages explosion risks putting the brakes on the nation’s minerals boom.

Unions have taken advantage of the tight labour market, recently negotiating pay deals that deliver average welders as much as $2000 a day, causing employers to reassess the viability of future projects.

Several resources company executives told The Australian that unions had them “over a barrel” on pay negotiations because industrial relations laws had no provision for arbitration of disputes on offshore rig construction projects, which were classified as greenfield worksites.

It was impossible to fight the claims, the executives said, because this would expose them to massive holding costs and delays with no prospect of resolution.

Resources Minister Martin Ferguson yesterday confirmed mining executives had expressed concern about the problem and asked the government to review the laws.

The Australian Workers Union blamed employers for the arbitration issue, saying they opposed the inclusion of arbitration when the law was being framed but later shifted ground.

“I make no apology,” AWU national secretary Paul Howes said yesterday. “We are a union, and our job is to secure good wages and conditions for our members. If we know we can get it, we will get it.”

Industrial Relations Minister Chris Evans said through a spokesman that when the Prime Minister was drafting the Fair Work Act, she did not receive any submissions calling for arbitration of greenfields construction agreements.

Resources companies have sections of new oil rigs built overseas but negotiate with Australian unions over wages and conditions for the short-term construction projects necessary for installation.

It is understood the recently finalised agreement for construction of rigs on the Kipper Tuna Turrum project, in Bass Strait, included pay levels 30 per cent higher than last year’s.

The cost of the oil and gas project, a joint venture between ExxonMobil and BHP Billiton, is understood to have blown out by $160 million because of the deal.

The deal is understood to have included a $90-a-day allowance because workers, who sleep in derrick barges, have to share toilet and bathroom facilities. Sources said the agreement, yet to be made public, included generous allowances but unions did not offer any productivity gains in return.

ExxonMobil refused to confirm details of the agreement. But last month, similar agreements were reached for the demolition of the West Atlas PTTEP Australasia rig, which caught fire off Western Australia last November.

Contractors running the demolition have to pay workers $60 a day because they do not have personal cabins on their accommodation barges, plus an extra $30 a day “where an employee is required to share an en-suite cabin ablution facilities” with other personnel.

The agreement provides a base rate of $50 an hour for workers, an $88-a-day remote area allowance, $500 in allowance to travel to the point at which they are picked up and taken to work and $1000 a week for the “unique and special work requirements” involved.

The agreements included a bonus worth 15 per cent of gross earnings on completion and a “redundancy accrual” payment at the end of the job worth an extra $170 a day for each day worker.

Workers get a 17.5 per cent shift allowance between Monday and Friday, an extra $1.80 an hour for electricians plus 11 per cent superannuation, income protection insurance and accident make-up pay.

Industry sources conceded the demolition was more challenging and dangerous than standard construction work, but pointed to the agreements as evidence of what they described as the excess being pursued by unions on offshore construction projects.

They said unions had sought similar pay and conditions in negotiations in a recently completed but yet-to-be-published agreement for the construction of US company Apache’s Reindeer project off Western Australia.

A spokesman for oil and gas company Woodside said the past 12 months had seen “a significant and unsustainable escalation” in offshore construction pay rates.

“That escalation follows recent excessive outcomes in the offshore maritime sector,” the spokesman said. “Excessive wage outcomes not linked to productivity increases represent a considerable concern to the oil and gas industry.”

Executives told The Australian they feared the generous conditions would create a new base level for negotiations, with the spiral set to make future projects uneconomical.

“They use the last big claim as the starting point for the next negotiation – they will never accept anything less,” said one executive.

He said he had worked in the industry around the world and not encountered an industrial relations environment like Australia’s. “In the interest of our shareholders, when it comes to projects in the future we are now looking at Australia from an affordability perspective,” he said.

Mr Ferguson said executives had told him many projects were at the “no turning back” stage but excessive wage bills could affect the viability of future projects.

Article from The Australian, October 11, 2010.