The differences include its ambitious 890km submarine pipeline linking offshore gas fields with the onshore processing facility, while the floating production vessel is also a first for Australian LNG.
The common features include a boringly predictable cost overrun and budget blow-out, and what appears to be the start of an equally predictable union attack designed to blackmail the owners into paying higher wages to already highly paid construction workers.
Two separate events last Friday demonstrated the positive and negative aspects of what’s happening at Ichthys.
First came news that a 100 tonne Christmas Tree for installation on the project’s 12 trillion cubic foot gasfields off the northern coast of WA had arrived in Australia from a Scottish manufacturing facility.
Then came news that a union leader claimed that up to 1000 construction workers were about to lose their jobs just before Christmas, a classic union claim designed to blacken the reputation of an employer.
According to a report carried by ABC radio, Paul Kirby from the Electrical Trades Union reckoned that between 500 and 1000 workers would be told on Friday that they were out of a job because of the late arrival of project modules.
By the close of business on Friday no such notice appears to have been served on the workforce, though a company spokesman repeated a comment that jobs would come and go as construction shifted from a civil engineering focus to technical engineering work.
The Slug has heard talk like that before and suspects that the union comments were a warm up for what comes next.
Having blackened the employer as uncaring, a demand for a job-loss severance bonus will be made – no matter what was agreed before the work started, and even knowing that all construction projects come to a natural end.
If management at Ichthys isn’t ready for a spot of union blackmail then they really have been asleep at the wheel because it’s such a bog standard union trick.
Unfortunately, there is a chance that the people at Ichthys are no better (and no worse) than the people who have developed every other Australian LNG project where union relationships always go pear-shaped at critical times during construction, such as just before completion, and where costs and the timetable always blow-out.
That leads to a very simple, one-word, question: why?
Why is it that some of the best and brightest brains in the oil and gas field just can’t get it right. Why is Gorgon costing $US20 billion (or is it $30 billion) more than the original budget? Why did it also happen to the Pluto project and why does it appear to be happening at the Queensland LNG projects.
The only plausible explanations are:
- 1. The original budget and timetable was hopelessly optimistic, or
- 2. The management team in charge of the project was hopelessly incompetent, or made so many changes to the design and fabrication schedule, that the inevitable blow-out happened.
If No. 1 is the answer, and the original costing and timetable were wrong, then it’s little wonder that the next crop of potential LNG projects are struggling to get bank or investor support because over-promising and under-delivering is a guaranteed way to annoy financial markets.
If No. 2 is the answer, then management ought to have a hard look at itself and ask whether simply designing a structure of great beauty is not the single most important issue in oilfield development, workforce management is the critical element – and it is often overlooked.
The cost/time blow-out issue at Gorgon, Pluto and apparently now at Ichthys (which seems likely to have a final cost of $44 billion v the budget of $34 billion) leads to a final observation from The Slug: Everyone makes mistakes, only a fool repeat them.
Those final eight words a probably not part of design, or project management training, but given what’s happened over the past 20 years in the Australian LNG industry it might not be a bad idea to include them in all training manuals.
Slugcatcher is a regular columnist with affiliated publication Energy News
