Chevron Corp.’s $40 billion Australian natural gas project will drive a global hunt for construction workers and has prompted calls to ease immigration rules to prevent labor shortages and cost overruns at energy and mining projects fueling the country’s economy.
Contractors for Chevron and partners Exxon Mobil Corp. and Royal Dutch Shell Plc in the Gorgon liquefied natural gas plant plan to pay premiums of as much as 40 percent for welders, pipe fitters, project managers and engineers, recruiters said. They expect to hire in the Middle East, Latin America and Europe.
Gorgon is the largest of more than a dozen LNG ventures in Australia targeting Asian demand for cleaner-burning fuels. It will compete for staff with Woodside Petroleum Ltd., which said Nov. 20 the cost of its $12 billion Pluto LNG project may surge by as much as $1 billion, partly because of labor expenses.
“This doesn’t bode well for Australia’s mega projects,” Woodside Chief Executive Officer Don Voelte said in a Nov. 25 interview at the Perth headquarters of the country’s second- largest oil and gas producer. “It’s going to be a stretch when more than one company is trying to build these things.”
The Chevron and Woodside investments are among more than $90 billion of resources projects expected to generate about 40,000 construction jobs in Western Australia alone, a state government report shows. Voelte wants the federal government to relax immigration regulations for overseas workers and has started an equity incentive plan to retain staff.
“For Woodside we believe it is a race to capture or not lose the workforce to Chevron, a significant risk for Woodside’s growth plans,” JPMorgan Chase & Co. analyst Mark Greenwood wrote in a Nov. 25 report.
About 80 natural resource ventures to be built in the next decade may increase demand for skilled workers by as much as 70 percent, Energy Minister Martin Ferguson said in a Nov. 30 speech in Perth to mark the start of construction of Gorgon on Barrow Island, a nature reserve about 50 kilometers (31 miles) off the northwestern coast.
Prime Minister Kevin Rudd has tasked a group of government, immigration and industry officials to help companies such as Chevron and BHP Billiton Ltd. find 70,000 workers in the next decade, making Gorgon its top priority.
“A series of cost overruns could discourage future investments,” Gary Gray, chairman of the Rudd-appointed group and Parliamentary Secretary for Western and Northern Australia, said by phone. “The urgency is to ensure as best as we can the adequacy of labor to deliver projects on time and on budget.”
About 80 percent of oil and gas industry employers in Australia said in a survey they intend to increase salaries in the next 12 months, Matt Underhill, managing director at recruiting firm Hays, said from Sydney. Professionals in the pipeline industry currently earn $191,000 annually on average in Australia, he said.
“The expertise is specialized, so there’s going to be a premium paid for that type of labor,” said John Hirjee, an analyst at Deutsche Bank AG in Melbourne same day payday loans. Labor may account for 10 to 20 percent of costs at Australian LNG projects, he said.
Contractors may offer workers as much as 40 percent more than they could earn in Sydney to entice them to Barrow Island, said John Downing of Downing Teal Pty. The company and other recruiting firms hiring for ventures including Gorgon will extend their search to the Middle East and Latin America, he said.
Leighton Holdings Ltd., whose units have won A$1.3 billion of Gorgon work, has in the past hired electricians in Serbia and welders in South Korea, said spokesman Justin Grogan.
Officials with Western Australia’s Department of Training and Workforce Development have met with Chevron to discuss labor needs, Simon Walker, an executive director at the department, said in e-mailed comments.
The department is working on a proposal to tackle the looming shortage and “strategic immigration will be a key consideration factored into the plan,” he wrote.
“Capacity constraints can lead to escalating labor costs, increasing prices and ultimately, they can threaten the viability of enterprises, which negatively affects economic growth and the well-being of the population,” Walker said.
A Chevron advertising campaign to tout Gorgon includes a television commercial with the line “creating thousands of jobs and providing opportunities for generations to come.”
It’s a “sexy project” that should have an advantage in securing labor, Colin Beckett, the venture’s general manager, said on Barrow Island in October. A thousand applicants have chased 30 or 40 positions in some cases, he said. Welders and instrument technicians will prove harder to find.
Conditions for those living on Barrow Island, where average temperatures reach as high as 34 degrees Celsius (93 Fahrenheit), will be improved by access to the Internet, cable television, gyms, swimming pools and a golf driving range.
“We think Barrow Island will be attractive to a lot of people,” Beckett said.
One Gorgon contractor is offering A$300,000 ($280,000) for a manager to assess risk and as much as A$135,000 for a contracts administrator, according to advertisements placed by Downing Teal. Engineers will earn “well into six figures,” John Downing said.
A labor shortage that confronted Australian mining and energy during a previous boom is set to return BHP Chief Executive Officer Marius Kloppers said last month. “Just two short years ago there was a massive talent gap in the resources industry,” he said in a Nov. 18 speech. “I believe this gap will return along with demand.”
Gas project developers have built the risk of rising labor bills into their plans and are having LNG processing units built in lower-cost Asian countries and reassembled in Australia to cut expenses, Deutsche Bank’s Hirjee said.
“That’s not to say these cost blow-outs may not happen,” he said. “They could.”