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BIS Shrapnel research, released today, has discredited the report used by the Australian Mines and Metals Association to argue that wage growth is threatening the viability of the offshore oil and gas sector, saying it had “misrepresented, misinterpreted, or completely omitted relevant information to reach its conclusions.”
The AMMA-commissioned Deloitte Access Economics report, released last month, claimed increasing labour and operating costs were having a significant impact on the international competitiveness of the industry, which in turn was being used to argue against a 6 per cent pay rise for workers in the sector.
The Maritime Union of Australia said the flawed research highlights the need for the incoming Abbott Government to ensure truthfulness from management and industry groups representing the resource sector, given its critical importance to the nation’s economy.
“Shareholders, workers, decision makers and the community deserve an end to the deception, blame shifting and dishonesty being used by some in the resource sector to argue against Australian workers receiving their fair share of the benefits of these major projects,” MUA national secretary Paddy Crumlin said.
“This sector of the economy is too important to our nation’s future to be driven by misinformation, which is why we are calling on the Abbott Government to stand up to the industry groups, tell them to end the blame shifting, and demanding a new era of honesty in industrial relations negotiations.”
“Implications of Wage Costs on the Offshore Oil and Gas Marine Support Sector”, produced by BIS Shrapnel and commissioned by the MUA, debunked the DAE report thorough analysis of publicly released data, including annual reports and official financial statements of companies in the sector, finding:
‣ between 2007 and 2012 companies engaged in the sector actually enjoyed revenue growth of over 200 per cent, according to their annual reports and official financial statements, with EBITDA averaging 13.2 per cent compound annual growth rate;
‣ wages grew by just 32 per cent over the same period; [*please see correction footnote below]
‣ wage growth for integrated rating workers (those carrying out berthing and un-berthing, securing cargo, maintenance and other general duties) had lagged behind construction and mining wage index growth over the period 2005 to 2013;
‣ claims that cooks working in the sector are paid $230,000 per year were highly exaggerated, by up to 40 per cent;
‣ the integrated rating wage cost for the $52 billion Gorgon project is approximately 0.25% of the total project cost, meaning wage growth is unlikely to present any material threat to viability;
‣ the DAE report had failed to meet accepted standards of survey methodology, relying on a survey of just 5 out of 19 vessel operators, all of whom were AMMA members; and
‣ the competitive gap between Australian-sourced LNG projects and international competitors would be essentially eliminated over the next five years, as the Australian dollar is predicted to drop to approximately $US0.80.
Mr Crumlin said the detailed independent research had exposed as a myth claims that wages growth is leading to the Australian resource sector becoming uncompetitive.
“It’s time the industry moved away from this subjective, survey-driven, deeply-flawed research commissioned by the AMMA, and instead looked at the facts on the public record to examine the real situation facing our sector,” Mr Crumlin said.
“While there are some in the industry actively trying to talk down Australian projects, claiming we are uncompetitive and work will be lost to Canada and African nations, the facts clearly show employers in the sector have enjoyed five years of double-digit profit growth.
“When the AMMA released the DAE report last month, CEO Steve Knott said it was critical to ‘build a factual basis’ for discussion around the economic conditions in Australia’s offshore oil and gas marine support sector.
“The MUA couldn’t agree more, but to allow for an intelligent debate between the two sides it requires the mouthpiece of the oil and gas sector to stick to the truth, which the BIS Shrapnel has clearly demonstrated that they have not been.”
The union highlighted the situation facing Chevron’s $52 billion Gorgon project, which has been beset with cost blowouts, with the report finding the 6 per cent wage increase sought in the current round of bargaining throughout the industry would be a tiny factor in costs.
“On the Gorgon project the wage cost for the 2,500 workers in oil and gas marine support sector — even using the AMMA’s inflated wage figures — is just $575 million, with the 6 per cent wage increase adding just $15 million to that this year,” Mr Crumlin said.
“Chevron reported a $26.8 billion profit in 2012, making it one of the world’s most profitable companies, yet the AMMA is attempting to claim that a wage rise that accounts for 0.03 per cent of a project’s cost is somehow unaffordable.
“The reality is that the wages of hard-working MUA members are not driving the rise in costs in the oil and gas sector, and are certainly not to blame for the staggering cost blow-out of the Gorgon project.
“Our union does not shy away from a genuine debate about rising costs in the resource sector, but to do that it is essential the fundamental problems caused by mismanagement, poor decision-making and other non-wage factors are examined.
“The AMMA and other industry groups are doing a great disservice to Australia and the offshore oil and gas industry by continuing to drive this disinformation campaign.”
Full BIS Shrapnel report: Click here
A summary is available: Click here
* An error in editing was identified in the final version of the report, which carried over to the original press release. On Page 11, of the originally released report, in the bullet point regarding the DAE claim that wage growth is outpacing revenue growth in the marine vessel sector, the differential BIS identified was stated as 50% wage growth compared to 200% revenue growth. The 50% figure should have been 32%. This clearly strengthens the argument made by BIS Shrapnel supporting the MUA’s position regarding revenue growth far outpacing wage growth. The final report and this version of the press release have been corrected to reflect the accurate information.