Australian oil drilling industry loses competitiveness due to wage increases

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According to a new report from Deloitte Asia, the traditionally competitive oil and drilling industry in Australia is starting to lose its edge. The reason for this is that economics pressures in Australia have led to an increase in the labour and in the cost of the operations of many oil drilling companies.

The analysis of Deloitte shows that these have significantly impacted the effectiveness and the efficiency of the industry as the current round of enterprise bargaining agreement (EBA) negotiations, that will set wages and conditions for vessels servicing Australia’s offshore resource industry for four years, gets underway. A key finding is that the high cost, low productivity environment of Australia’s resource industry is presenting a very real challenge for support companies that are critical to the project supply chain.

The recent Deloitte report supports the point about the cost and salary pressures hurting the operators within Australia’s resource industry, and the economy more widely. The findings of the report clearly underline the current competitive challenges that are faced by the Australian oil and gas industry. Deloitte Access Economics undertook a survey of vessel operations as part of the research, finding the maritime sector has been tightly squeezed in recent years as the cost of labour rose sharply.

The marine support sector employs 2,500 staff directly to vessels, with another 10,000 staff in affiliated areas. On a per vessel basis, wages and total expenses have increased by around 40% since 2007/2008, while revenue has increased by only 8%. The report also shows that between 2008/2009 and 2009/2010, the sector’s profits fell by 27% while at the same time wage costs grew by around 19% and profit per vessel in 2011/2012 was half the level recorded in 2007/2008.

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