the definition of insanity - stategic human resources · the definition of insanity: doing the same...

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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


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....

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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


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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


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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


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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


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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


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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


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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


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NORTH WEST SHELF PROJECT (cont.)

3. Phase 3 (LNG Train 3) and Goodwyn


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


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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


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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


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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)


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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


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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


Goodwyn Undertakings successfully achieved low lost time (except for

HUC where ≈2% lost)


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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


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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


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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


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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


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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?


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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?


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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


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WHERE TO FROM HERE?

PRODUCTIVITY


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!


www.shr.com.au

QUESTIONS


the definition of insanity - stategic human resources · the definition of insanity: doing the same...

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