The Definition of Insanity:

Transcription

1 The Definition of Insanity: Doing the Same Thing Over and Over and Expecting to Get Different and Better Results! Level 2, 677 Murray Street West Perth WA 6005 T: F: E: shrinfo@shr.com.au

2 CONTENTS: 1. About SHR and Colin Gibson 2. The history of oil and gas industrial relations in WA Operations Onshore Offshore Construction Onshore Offshore 3. The Present Day 4. Where to from here? Operations Construction 5. Questions

3 About SHR and me: SHR WA based IR & HR Consultancy Specialising in resources industry particularly oil and gas sector Perth Melbourne - Brisbane Largest independent IR consultancy IR, ER, HR, Labour reporting/modelling, Business Migration, Payroll Extensive client list all levels COLIN GIBSON Public service in Tasmania and Melbourne Waterfront Contractor for 9 years United Construction 7 mths Entered construction and IR in 1975 Woodside operations and construction for 11 years (IR Manager for 6 years) Strategic Human Resources - 19 years Involved on most WA O&G projects Been there, done that...

4 HISTORY ONSHORE OPERATIONS: 1. WAPET Barrow Island 2. Dongara Woodada 3. Woodside NWSV - Burrup 4. Apache Varanus Island 5. Woodside Pluto 6. Apache - Devil Creek 7. BHP - Billiton Macedon

5 HISTORY OFFSHORE OPERATIONS: 1. North Rankin A Platform 2. Bond Corporation now Apache (numerous wellhead platforms) 3. FPSOs BHP Petroleum (Timor Sea, Griffin) Woodside (Cossack Pioneer, Northern Endeavour, etc) Others 4. Goodwyn A Platform 5. Wandoo B 6. Stag 7. Woodside Pluto

6 HISTORY OPERATIONS: North West Shelf Project - IR Architecture Development 1. Maritime Continuity of Operations Agreement Outside of legislative IR systems own private arbitrator Covered support vessels, tugs and Australian crewed LNG carriers Initially Mermaid Sound Port & Marine Services (MSPMS) ran support vessels and tugs unregistered agreement Federal IR system for third party vessels Later Woodside outsourced the support vessels and tugs away from MSPMS Industry vessel operators now provide support vessel services under the industry agreements Tugs are operated by a specialist towage company

7 HISTORY OPERATIONS: North West Shelf Project - IR Architecture Development (Cont.) 2. Operations and Maintenance Workforces Hydrocarbons and Gas Industry Award Different parts covered operations, maintenance, drilling and others Covered onshore and offshore, operations, maintenance & supply base Woodside own agreement operated over and above the award with AMWU, AWU & ETU respondents Woodside pursued its own award in early 1990s Federal legislation changes allowed for Enterprise Flexibility Agreement (EFA) Transition of all Woodside operations to a new EFA mid 1990s Simple enabling agreement Allows the application of Woodside remuneration policy and personnel policies for management of T&Cs EFA remains on foot

8 HISTORY OPERATIONS: North West Shelf Project - Key IR Events 1. Continuity of Operations Agreement with Maritime Unions North Rankin A The Great Sit-in Dispute Started over a drilling issue Workforce virtually took over the platform and construction barge alongside under Bruce Wilson (AWU) leadership WA Government issued special regulations with $10K fine Result was the Continuity of Supply Agreement (CoS) covering all Woodside offshore agreement covered personnel and offshore contractor employees Continuity of Supply Agreement replicated by negotiated outcome covering all onshore personnel CoS requirements and obligations enveloped any potential or actual dispute for the next 10+ years 3. Woodside EFA

9 HISTORY ONSHORE CONSTRUCTION: 1. North West Shelf Project Domgas; North Rankin Modules; LNG Phase 2; Goodwyn Modules; LNG Phase 3; LPG Project; LNG Train 4; LNG Expansion V 2. Woodside Pluto - Burrup 3. Apache - Devil Creek 4. BHP - Billiton Macedon 5. Gorgon Wheatstone 6. Ichthys

10 HISTORY ONSHORE CONSTRUCTION: NORTH WEST SHELF PROJECT 1. North Rankin Modules and Domgas Largely WA State IR system, awards & agreements Industrially volatile - lost time rates of up to 10% of available hours Merriman arbitrated decision for Domgas CCI IR Management model 2. LNG Phase 2 LNG Trains 1 & 2 Same IR architecture Extended 1987 dispute innovative outcomes (SCEP & LAHA) Lost time of 5% of available hours 4,500 on site workforce Karratha/Dampier bulged at the seams

11 HISTORY ONSHORE CONSTRUCTION: NORTH WEST SHELF PROJECT (cont.) 3. Phase 3 (LNG Train 3) and Goodwyn Same IR architecture Goodwyn Undertakings Arose out of all international contract awards NWSP ultimately redirected some contract awards to Australian sites Trades & Labour Council of WA + some 17 different unions Commitments regarding dispute settlement Agreed methods of escalating T&Cs for both onshore and offshore construction Peace in our time? well almost! Jervoise Bay modules - lost time of 2% of available hours Burrup (Train 3 + Goodwyn onshore) - lost time of <1% CCI IR Management model

12 HISTORY ONSHORE CONSTRUCTION: NORTH WEST SHELF PROJECT (cont.) 4. LPG Project Radical change to IR architecture New Federal IR legislation created opportunities Totally new agreement and respondency arrangement 2 union parties (AMWU & AWU) 2 unions were excluded (ETU & CFMEU) At risk wages component Expanded SCEP Engaged workforce No lost time Project completed 5% under budget Project completed 6 months ahead of standard schedule for like LPG projects 3 months ahead of stretch target

13 HISTORY ONSHORE CONSTRUCTION: NORTH WEST SHELF PROJECT (cont.) 5. Post - LPG Project All subsequent agreements are effectively a hybrid of LPG Some variants have occurred: Union respondency on NWSP Train 4 (included were AMWU, ETU & AWU with CFMEU excluded) significant disputation - - lost time of 2% LNG Expansion V agreements rewritten but concepts remained Non-union collective agreements at Pluto LNG Incorporation of modern award classifications at Gorgon Exception is Darwin LNG ProjectS Based on Queensland agreements structures Queensland unions Lower T&Cs

14 HISTORY OFFSHORE CONSTRUCTION: 1. North Rankin A 2. Chain of Pearls small wellhead platforms 3. FPSOs First Subsea Installations 4. Goodwyn A 5. Wandoo B 6. Stag 7. Multiple FPSOs 8. Multiple Platforms (Angel, Pluto, North Rankin B)

15 HISTORY OFFSHORE CONSTRUCTION: What Makes Up An Offshore Project? Seismic gathering and data processing Drilling exploration and production Platforms Jacket Installation Topsides Installation Pipeline Installation Hook Up and Commissioning Floating Production, Storage and Offtake Facilities (FPSOs) Subsea Equipment Installation (umbilicals, risers, flowlines) Mooring Installation FPSO Tow or Saildown FPSO Hook Up to Riser and Moorings Hook Up and Commissioning of FPSO

16 HISTORY OFFSHORE CONSTRUCTION: NORTH WEST SHELF PROJECT 1. North Rankin A IR architecture largely replicated Bass Strait in concepts Maritime and diving in Federal IR system WA State IR system for construction Common Rule Awards + Agreements Separate agreements for offshore construction and platform HUC with differing remuneration outcomes Significant lost time on all 3 phases 2. Goodwyn A Same IR architecture Goodwyn Undertakings successfully achieved low lost time (except for HUC where 2% lost)

17 HISTORY OFFSHORE CONSTRUCTION: POST GOODWYN Wandoo B/Stag late 1990s All disciplines now in Federal IR system Some construction T&Cs underwent changes No significant lost time despite almost losing the tow on the Wandoo CGS and the installation vessel almost sinking at Stag Trunkline System Expansion Project Construction T&Cs significantly influenced by dispute/claims emanating out of Bass Strait First Construction Term Agreement 2004 (Clough) Previously all construction agreements were project by project Clough agreement went for 30 months from February 2004 Maritime had always been term agreements and industry based

18 HISTORY OFFSHORE CONSTRUCTION: POST GOODWYN (Cont.) Second Generation Construction Term Agreement 2006 Brunel - recognition of the emerged role of manning agents Reinforced Clough approach for an additional 3 years A time of turmoil 2010/2011 Construction T&Cs underwent major increases: 40% in 12 months through project by project negotiations Maritime industry agreements also exploded with 40% labour cost increases No lost time except for a little in the maritime but huge labour cost changes Third Generation Construction Term Agreements 2012 Construction T&Cs went back to a period of stability Current maritime industry based agreements expired at end July 2013 and being renegotiated

19 THE PRESENT DAY The Legislative Landscape Fair Work Act 2009 National Employment Standards (NES) o o These are OK for Monday to Friday and some manufacturing roles Most cause problems to the Oil & Gas Industry force fits required Modern Awards o o Ultra-excessive mumbo jumbo try reading and understanding the classification structures Too complex and some content is counter-intuitive Migration Act 1958 Migration Amendment (Offshore Resources Activity) Act 2013 o o o Politicisation of the visa requirements is a disgrace Uncertainty pervades the offshore construction business AMMA role and utterances is baffling who s really calling the shots? Canberra has no idea of the Oil & Gas Industry requirements o o Operators dominate the debate and lobbying Vast majority of industry players will be negatively impacted Loss of revenue WA & Federal Governments (payroll tax; stamp duties on insurances; PAYE tax; Company tax) and generally the multiplier effect

20 THE PRESENT DAY (Cont.) Maritime Agreements Lack of stability troubling since end July 2013 Protracted negotiation No real end in sight Litigation levels - only winners appear to be the legal fraternity Offshore Construction Current T&Cs are ridiculous Encourages industry to do things differently Onshore Construction Are we seeing the construction of the last of the onshore LNG facilities? Labour costs will affect future decisions on constructing onshore facilities Contracting Relationships There is no longer any trust between Clients and Contractors Governance issues and the blind focus on bottom line accounting Contract specialists have been the growth occupation in construction

21 WHERE TO FROM HERE? OPERATIONS New operations coming on line Gorgon Wheatstone Ichthys Significant expansion of the services sector Vessels Maintenance support routine and campaign Decommissioning of redundant infrastructure Knock-on effect Industrial Instruments Many new ones Replication of what has preceded them?

22 WHERE TO FROM HERE? CONSTRUCTION Onshore T&Cs Hours of Work Rosters Offshore Agreements Expiry in August 2015 Mid-project for some contractors Future direction of the agreements Need for a Different Contracting Model Old system is no longer working Existing T&Cs structure require revamping to meet new industry and workforce needs The old CCI model is dead Maritime Agreements When will it all be over?

23 WHERE TO FROM HERE? PRODUCTIVITY Much has been said about the need to increase productivity Some Observations: Those who complain the most often represent the biggest obstacles to productivity improvement Government red tape can be a problem but Company red tape is more often the culprit Current corporate governance and bottom line driven business culture has more negative effects on productivity than labour Good safety is good business agreed, but the safety industry is out of control Productivity is not just about labour and effort

24 WHERE TO FROM HERE? PRODUCTIVITY Used with the permission of People Solutions

25 WHERE TO FROM HERE? Things need to change Without change then... The Definition of Insanity: Doing the same thing over and over... Expecting to get different and better results!

26 QUESTIONS