Bechtel-Union Discord Raises Australian LNG Plant Delay Risk

Bechtel Group Inc., the contractor building more than $60 billion of natural gas export projects in Australia for companies including BG Group Plc (BG/), faces a dispute with unions that’s raised concern of startup delays.

BG, Santos Ltd. (STO) and a ConocoPhillips-Origin Energy Ltd. (ORG) venture are building three liquefied natural gas projects in Queensland state to tap rising Asian demand. The labor conflict may escalate and lead to a slower-than-expected start at BG’s development, according to Credit Suisse Group AG.

“We’re hoping that doesn’t happen,” Kevin Berg, Bechtel’s Gladstone, Queensland-based general manager, said today by phone. “Obviously if we were to lose a large percentage of our workforce that of course would have an impact, and that would be different from the situation we’re in now.”

As many as 148 Construction, Forestry, Mining and Energy Union members may stop work on the Curtis Island gas projects after a vote this week, with three more unions due to consider similar action next month over rosters, according to San Francisco-based Bechtel.

It’s too early to speculate on whether any work will stop and what impact it could have, BG’s Australian unit said today in an e-mailed response to questions. The company said it hasn’t changed its fourth-quarter target.

Bechtel isn’t yet experiencing any delays related to the dispute and is hoping the union members next month vote against taking protected industrial action, Berg said.

‘Material’ Impact

Credit Suisse views the discord as potentially “really material” and doubts BG’s Queensland Curtis LNG project will start in the fourth quarter of this year as planned, Mark Samter, its oil and gas analyst in Sydney, said by phone.

“You can argue it’s already having an impact,” according to Samter. “Even without strike action, you’ve got to question what productivity is like.”

Adelaide-based Santos dropped 0.4 percent to A$14.15 in Sydney trading, while Australia’s benchmark index rose 0.2 percent. Sydney-based Origin gained 0.4 percent to A$14.25.

Some union members are seeking to work three weeks instead of four before getting a week off, Bechtel said. While the contractor said it’s willing to make that change for future projects, doing that now isn’t negotiable.

“It would impact detrimentally every single aspect of the project to make a change midstream, we’re not in a position where we can do it,” Berg said.

The CFMEU workers must give three days notice and have 30 days to carry out industrial action, Kerry Heldon, a Bechtel spokeswoman in Queensland, said yesterday. Bechtel employs about 8,000 people at the LNG projects. A message left at the CFMEU’s office in Queensland today wasn’t returned.

To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Keith Gosman, Madelene Pearson

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