Australia Oil, Gas Sector Braces for Strike Action

SYDNEY (Dow Jones), Nov. 13, 2009

Australia's oil and gas sector is bracing for industrial action against shipping companies servicing its offshore drill and production sites that could quickly cost the sector tens of millions of dollars.

Woodside Petroleum Ltd. said Friday it is disappointed with a planned 48-hour strike by members of the Maritime Union of Australia, which has the potential to hurt its business.

The strike highlights the increasing power of labor unions in the country's resources sector, where a host of multi-billion-dollar projects and expansions are rapidly moving forward and are likely to strain limited human resources.

In the liquefied natural gas sector, analysts tip projects in excess of A$140 billion to take shape from now to 2016. The Chevron Corp.  operated Gorgon LNG project alone is set to cost A$43 billion.

The MUA is seeking increases in allowances and wages, and plans to embark on a series of strikes at 12 shipping companies servicing the offshore oil and gas sector.

The first is set to start at midnight Monday at Farstad Shipping ASA, one of the largest suppliers of offshore support vessels to drill rigs as well as producing platforms.

"Industrial action is planned to get underway midnight Monday. Discussions are continuing, and we're open for a settlement," MUA Deputy National Secretary Mick Doleman told Dow Jones Newswires.

"We're seeking parity with oil and gas workers. Maritime workers have slipped behind," Doleman said.

Central to the union's demands is a 30% pay increase over three years, as well as a contentious construction allowance designed to close a pay gap between maritime and construction workers on offshore projects.

While both parties are close to agreeing on a pay rise, operators have baulked at the allowance as well as a demand for an A$45-a-day payment for each member to be paid into a training fund.

The Australian Mines and Metals Association said pay parity would mean oil and gas vessel operators would pay an allowance of up to A$500 a day for each worker on offshore construction projects, a claim the union rejects.

"We are happy to have a phased approach over two or three years," said Doleman.

Talks are scheduled to resume early next week.

"Industrial action taken against Farstad or any other maritime service provider has the potential to negatively impact our business activities and damage the broader reputation of the Australian LNG industry," a spokeswoman for Woodside said.

Apache Energy Ltd., a unit of Apache Corp. that operates the Varanus Island hub as well as a host of drilling projects, said the escalation was of great concern to the company, and it is monitoring the situation closely.

Farstad is one of Woodside's key maritime service contractors.

"We are surprised at the scale of the outstanding enterprise bargaining claims that are being pursued by the MUA," the Woodside spokeswoman said.

Farstad operates 20 vessels in Australia and 17 will be affected by the strike.

The Norway-based company overnight issued a notice to the Oslo Exchange, warning shareholders of the potential negative impact.

"Strike action will cost Farstad A$750,000 a day. This is a fraction of what our clients would lose," said Joseph Homsey, Farstad's managing director in Australia, labeling the union's claims "outrageous".

Copyright (c) 2009 Dow Jones & Company, Inc.