The West

Minister says unions forced LNG offshore

Federal Industry Minister Ian Macfarlane has cast doubt on whether there will be an expansion of an existing LNG plant in the next 10 years because of cost pressures in Australia.

And he warned construction workers and their unions enjoying high wages and conditions they would soon realise they had priced themselves out of a market, to the advantage of the floating LNG revolution.

With the cost focus firmly on the Chevron-led Gorgon project, whose budget has blown out from $US37 billion to $US54 billion ahead of its proposed completion date mid next year, more oil and gas companies are responding to the high-cost environment by pursuing offshore processing.

The cost environment has dominated discussion at the Australian Petroleum Production & Exploration Association conference in Perth.

"What can we do," Mr Macfarlane said yesterday on the sidelines of the conference when asked about the Government's ability to rein in costs.

"Well, I guess in the end market forces will sort this out a lot faster than Government.

"And for people on Gorgon who stand there and watch Prelude arrive, that will be their moment of realisation that they have priced themselves out of the marker and they will be unemployed."

Mr Macfarlane's comments will not surprise union leaders but further inflate relations between the oil and gas sector and the likes of the Maritime Union of Australia, which used this week's conference to protest against Chevron's stewardship of the Gorgon development.

The MUA argues its members' wages make up less than one per cent of Gorgon's budget.

Mr Macfarlane yesterday said the issue was more about the attached pay conditions.

"Two years ago I said there wouldn't be another greenfields LNG project in Australia," the Minister said. "I am starting to wonder if there will be brownfields (project) in the next decade.

"As people realise that we can't just lose opportunities to expand Gorgon and Wheatstone and Darwin and Gladstone, those costs will (hopefully) readjust and that's going to be, as I say, really an effect of the market.

"In the end you are better off having a job than earning a fortune for six month or 12 months.

"There can be long-term job in the LNG construction industry if people are sensible about it."

The West Australian

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