THE head of one of the world's largest engineering and construction companies, KBR, has told US investors he is worried about the expensive labour market in Australia, which has made flying in construction workers for resources projects cheaper than hiring locals.
The KBR chairman and chief executive, William Utt, said there was a ''very high cost situation in Australia'' when it came to liquefied natural gas and that although the nation was blessed with an abundance of natural resources it also faced a number of cost disadvantages that made other regions, such as east Africa, more attractive.
''We do worry about the labour market in Australia, and we can land expats in Australia for about the cost of what we're hiring directly for construction workers,'' Mr Utt said during an earnings briefing.
The downbeat assessment comes as the Reserve Bank last week in its statement on monetary policy said it was concerned about rising labour costs and sagging productivity.
The LNG sector, a booming business for the Texas-based KBR, is one of the engines of Australia's growth, with eight projects around the country under construction valued at more than $175 billion.
KBR's directors include former Telstra chief executive Frank Blount.
Because of the high cost of labour in Australia KBR was forced to diversify its business, which included investing in other regions, he said.
''You get some wonderful resources and so there is some viability there in Australia, but we also want to hedge our bets. We think some of the east Africa LNG reserves that are very prolific will have structural cost advantages … compared to what we're doing in Australia.''
KBR has been involved in the North-West Shelf project, Gorgon, and is looking to participate in Woodside Petroleum's $30 billion Browse LNG project along with further work on its $14.9 billion Pluto project.
Mr Utt said Australia was competing in a global market when it came to developing these energy assets.
''There is a concern of how you best rationalise the resources of gas in Australia, particularly where the broader competitive environment [in] North America and east Africa gas [continues] to develop.''
Rising wages and the cost advantages of other regions is also of concern to the industry peak body, the Australian Petroleum Production and Exploration Association.
In its recent submission to the Fair Work Act review, the association said there was anecdotal evidence of an escalation of cost increases in excess of 35 per cent over one year in some offshore oil and gas construction projects. This could endanger the estimated $330 billion in planned investment in the sector.