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Shell Prelude’s two-month $500m strike delays major maintenance

The Sydney Morning Herald

Shell Prelude’s two-month $500m strike delays major maintenance

By Peter Milne

Shell has delayed major maintenance on its troubled Prelude floating gas facility after negotiations over the weekend failed to end two months of industrial action.

The delay is another setback for Shell, which spent about $US17 billion ($24 billion) to build the world’s largest vessel that has suffered a multitude of production outages and serious safety issues since it arrived in West Australian waters five years ago.

The Offshore Alliance began protected industrial action two months ago to secure higher pay and protection against its members’ positions being moved from Shell to subcontractors where they could lose negotiated conditions.

Shell asset manager for Prelude Peter Norman told employees on Monday that despite an “extraordinary effort” to prepare for a planned shutdown starting in September the work would now be delayed until 2023.

In the message obtained by this masthead, Norman said the shutdown had to be conducted when workers could focus on safety and not be distracted by the strike or the encroaching cyclone season.

Shell had contracted the 500-bed Floatel Triumph vessel for three to four months to accommodate the workers for the shutdown. After the cyclone season it will not be available until July 2023 as it is contracted to work on Woodside’s Pluto project.

Norman said Shell had begun to consult with the offshore safety regulator NOPSEMA to determine what had to be done to keep the Prelude safe until the delayed maintenance could be done.

A NOPSEMA spokesman said it had told Shell it must continue to satisfactorily manage risks on the Prelude.

“NOPSEMA will continue to monitor the situation and ensure Shell manage risk and comply with their regulatory obligations,” he said.

NOPSEMA inspectors are visiting the Prelude this week, according to a plan obtained by this masthead, when they will check if Shell has completed safety work previous promised to the regulator and investigate recent incidents including a release of gas when an LNG carrier was being loaded.

Mediation by the Fair Work Commission over the weekend reduced the number of issues in dispute between Shell and the Offshore Alliance of the Australian Workers Union and the Maritime Union.

A major remaining difference is the unions’ desire to stop Shell moving the more than 200 operational positions covered by the dispute from direct hire by Shell to a subcontractor where their negotiated conditions may not apply.

In May Japan’s Inpex agreed to a similar job security provision for its two Ichthys offshore facilities near the Prelude that forbade it from engaging any contractor “with the intent of eroding the permanence of employment for its direct hire workforce.”

The Prelude last exported liquified natural gas on July 8 and estimates of lost revenue from the strike vary between $500 million and $1.1 billion.

It is understood that Shell estimates the union’s demands would cost it $40 million a year, meaning it would take the London-based company 12 years to recoup its losses if the action was resolved immediately in its favour.

This seems unlikely with the union’s Facebook site regularly taunting Shell with the slogan “one day longer and one day stronger”.

It is understood that the workers taking industrial action – which is a series of bans on particular activities rather than a complete cessation of work – are receiving about half their normal pay.



How Shell lost control of its $24b Prelude floating gas factory

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