www.shr.com.au
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: +61 8 9485 4200 F: +61 8 9485 4222
E: [email protected] www.shr.com.au
www.shr.com.au
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
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
www.shr.com.au
About SHR and me:
SHR
COLIN GIBSON
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
WA based IR & HR Consultancy Largest independent IR consultancy
Specialising in resources industry
particularly oil and gas sector
IR, ER, HR, Labour reporting/modelling,
Business Migration, Payroll
Perth – Melbourne - Brisbane Extensive client list – all levels
Public service in Tasmania and
Melbourne Waterfront
Entered construction and IR in 1975
Contractor for 9 years Woodside operations and construction for
11 years (IR Manager for 6 years)
United Construction – 7 mths Strategic Human Resources - 19 years
Involved on most WA O&G projects Been there, done that....
www.shr.com.au
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
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
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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
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
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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
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
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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
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
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HISTORY –OPERATIONS:
North West Shelf Project - Key IR Events
1. Continuity of Operations Agreement with Maritime Unions - 1984
2. North Rankin A – The Great Sit-in Dispute - 1986
• 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 - 1995
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
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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
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
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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
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
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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
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
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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
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
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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
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
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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)
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
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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
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
www.shr.com.au
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)
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
www.shr.com.au
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 - 2003
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
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
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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
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
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THE PRESENT DAY
• The Legislative Landscape
Fair Work Act 2009
National Employment Standards (NES)
o These are OK for Monday to Friday and some manufacturing roles
o Most cause problems to the Oil & Gas Industry – force fits required
Modern Awards
o Ultra-excessive mumbo jumbo – try reading and understanding the classification
structures
o Too complex and some content is counter-intuitive
Migration Act 1958
Migration Amendment (Offshore Resources Activity) Act 2013
o Politicisation of the visa requirements is a disgrace
o Uncertainty pervades the offshore construction business
o AMMA role and utterances is baffling – who’s really calling the shots?
Canberra has no idea of the Oil & Gas Industry requirements
o Operators dominate the debate and lobbying
o 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
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
www.shr.com.au
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
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
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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?
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
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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?
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
www.shr.com.au
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
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
www.shr.com.au
WHERE TO FROM HERE?
PRODUCTIVITY
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
Used with the permission of People Solutions
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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!
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!
www.shr.com.au
QUESTIONS
The Definition of Insanity: Doing the same thing over and over and expecting to get different and better results!