Chapter 5 Employment issues
The closure of the Kurnell and Clyde refineries will inevitability lead
to the displacement of some workers. This chapter reviews the broad employment
environment for employees in the refining and energy sector, the impacts of
proposed refinery closures and the transition arrangements in place for
A significant feature of the recent and anticipated closures of
Australian refineries is that they are relatively orderly, with a long lead in.
This is important not only to allow the market time to readjust supply chains,
but also to provide displaced workers with time to seek and secure new job
Employment in the domestic energy sector is adjusting to support the changing
needs of industry. According to the Australian Government’s Energy White
Paper 2012 (EWP), the energy industry directly provides more than
100 000 jobs and indirectly supports many more.
It is forecast that jobs in the sector will grow by 3.9 per cent annually,
for the next five years. Employment in oil extraction is forecast to grow at
7.3 per cent.
In general the energy sector’s workforce is more highly skilled than
other industries. This characterisation
holds for petroleum refining and fuel manufacturing industry, according to the
Department of Resources, Energy and Tourism (RET) ‘a large proportion of
workers in the sector are employed in higher skilled occupational groups’.
The most common individual occupation is Chemical, Gas, Petroleum and Power
Generation Plant Operators.
Table 5.1 Main
employing occupations in the Petroleum Refining and Petroleum Fuel
Manufacturing sector, 2011
Employment share of
Chemical, Gas, Petroleum and
Power Generation Plant Operators
Metal Fitters and Machinists
Industrial, Mechanical and
Other Building and Engineering Technicians
Structural Steel Construction
Chemists, and Food and Wine
Engineering Professionals (not
Submission 18, Table 5, p. 19.
The employment prospects in the oil refinery industry diverge from the
wider energy sector’s story of strong growth and buoyant employment. At present
RET has indicated that 5 500 people are directly employed in the sector.
Only 240 workers have joined the sector since 2006 and with the closure of the
Kurnell refinery by mid-2014 this moderate growth in jobs will decline.
In his submission, Mr Velins posited that a range of factors have
contributed to reduced employment in refineries since the 1960s:
Reduction in employment started once protective tariffs were
removed in the early 1960s. The next waves of change came in the late 1960s
when mandatory processing of Gippsland crude oil commenced, as most refiners
then lost the upstream margin from their own fields overseas which had propped
up their downstream (refining, distribution and marketing) operations. Changed
maintenance processes and the move to centralised control rooms, automated
analytical instruments and the use of process control computers in [the] early
1990s resulted in further reductions in staff.
The inquiry has highlighted that the general narrative of the refinery sector
does not necessarily reflect what is happening in practice. It is clear that
employment prospects vary from employer to employer, and from refinery to
refinery. During the hearing Mobil Oil stressed that the sector was viable and
that refining would continue:
A lot of the discussion over the course of today has seemed
to me to be working on the view that there is no future for the refining
industry in Australia. I do not agree with that, fundamentally. I think
there is a business for refining in Australia. It is important to the economy.
These are high-tech, high-skilled jobs that are very important for the
long-term viability and vibrancy of the Australian economy. It is important
from an education perspective. It is important from an infrastructure
As the sector adapts it is crucial that both government and industry
work to ensure that the skills utilised in the oil refining sector are
preserved and that displaced workers have viable employment options.
The Construction, Forestry, Mining and Energy Union (CFMEU) told the
committee that the average age of workers was early to mid-50s and the average
length of service for workers was 20 years. According to Shell,
refinery workers earn between $130 000 and $150 000 per annum for a
35-hour week and a nine-day fortnight.
The evidence indicates that workers in the sector are highly skilled,
relative to other industries. BP claimed that the
market for skilled employees was ‘highly buoyant’ and that the resources boom
had driven wage inflation.
For BP, labour is now the second largest cost associated with
refineries, following crude feedstock. It stated
The Australian personnel
cost index (that is, the cost of labour per barrel produced) is some four times more expensive
in Australia than in the region. This is not just a challenge in comparison to Asian economies. On a global
scale, skilled worker
costs in US and European competitors are now substantially lower on a USD equivalent basis through a combination of exchange rate movements
and the very high domestic wage inflation over recent years, which have not been compensated for in
productivity improvements. This is compounded by comparatively generous
non cash benefits of domestic
labour and its impact on productivity.
Shell stated that labour costs had increased three-fold over the last
ten years. The CFMEU countered this
claim, and argued that increases were a function of the strong Australian
Caltex acknowledged that wages did affect the company’s profitability,
but stressed that wages did not factor into its decision to close the Kurnell
… in the case of Kurnell, where we have made the decision to
close, had the AWU offered to halve their wage rates—they did not; but had
they—it probably would not have changed the outcome. Quite frankly, the numbers
were so compelling against it that it was not about those sorts of issues.
Whether it was tax or other imposts, they were not at the margin. The structure
of the refinery, the fact that it is energy inefficient, the fact that it was
set up to make regular grade gasoline and is constrained to a particular type
of crude just meant that its fate was set by the hardware. However, when the
operation starts to become marginal then these things do start to become more
and more important.
Employment in the sector and the impact of closures
The employment figures for the petroleum refining and fuel manufacturing
industry, and the impact of closures, varied between sources. According to RET
approximately 5 500 people were employed in 2011 in the refinery industry.
The Australian Institute of Petroleum (AIP) has estimated that the industry
directly and indirectly provides between 3 500 and 4 000 jobs.
The Australian Manufacturing Workers’ Union (AMWU) estimated that there are
4 700 permanent and contract staff directly employed by sector.
Industry and the unions provided the committee with refinery specific
employment figures. For example, BP submitted that they directly employ 828
workers at the Kwinana and Bulwer Island refineries.
Another 500 contract workers provide labour such as specialist engineering and
maintenance services. Periodically, the labour force increases by an additional
500 workers during shutdown activities.
It has been estimated that the closures of the Clyde and Kurnell
refineries will directly result in the loss of 490
and 700 permanent jobs
respectively. These figures however do not include contract workers or the
indirect job losses to associated businesses and services.
According to Shell, its decision to close the Clyde refinery and convert
it to an import terminal would lead to the loss of 200 jobs, from a total of
310. It is anticipated that
180 people will be made redundant (of which 60 are expected to retire); 20
employees resigned; and more than 100 employees have been redeployed within Shell
(13 employees at the upstream Prelude project and 90 employees in the terminal
conversion or the operational terminal).
The CFMEU provided the committee with a report on the effects of closing
the Clyde refinery. The report stated that
the closure would result in the direct loss of 490 jobs and the indirect loss
of 1 700 jobs in NSW. In its submission the
CFMEU stated that the refinery directly employs 350 workers and around 220
contractors. The CFMEU evidence contends
the total job losses across Australia will be around 2 200.
It is anticipated that indirectly jobs will be lost in the plastics and
Caltex announced that the Kurnell refinery will close in mid-2014. Caltex
has estimated that 430 Caltex employees and 300 contractors will be directly
affected. The effects of the
closure are compounded for the town of Kurnell as its total population is only
2 200. The AWU posits that
‘[t]he sheer quantum of jobs being lost in this instance will ensure that
further jobs are lost not merely in the supply chain but in community
business’. The AWU has stated:
It is likely that the removal of such a large volume of jobs,
income and resulting consumption from such a small community will have a
deleterious effect on local businesses and further increase job losses and
closures in the supply chain and in other sectors that rely on income from
Redeployment within the companies was an option for some employees. During
the hearing Caltex stated:
Since the announcement, we have lost about 20 employees from
Kurnell, but 13 of those employees have actually moved to our sister refinery
in Brisbane. So within the industry there is some transferring of skills, and
we are proactively promoting that. But, in terms of other activities, we are
doing a lot of the same things that Shell are doing, as Andrew Smith talked
about. We are having employment fairs. We had Chevron visit just recently,
seeking interest in LNG roles that they are involved with. We are supporting
retraining of all our employees, and every employee has an opportunity to get
funding from the company to assist in retraining activities as well.
The unions and industry are cognisant that the impact of closures
extends beyond the refineries to associated service providers, local businesses
and downstream industries.
The AMU provided an example of the downstream impacts of the Kurnell
A tangible example of the net impact of the Caltex closure is
the recent shutdown of the local lubrication refinery. This closure lead to the
loss of 100 direct jobs and also lead to the closure of a downstream supplier
and the loss of a further 60 jobs. The sheer quantum of jobs being lost in this
instance will ensure that further jobs are lost not merely in the supply chain
but in community businesses.
Caltex has provided the committee with a list of businesses, both
upstream and downstream, which will be affected by the closure. These include:
- the possible closure
of LyondellBasell and HCE;
- loss of work for
various contractors; and
- loss of income for
some 470 small businesses which supply the refinery, at a quarterly spend of
approximately $50 million.
LyondellBasell submitted to the committee that it employs 175 people and
is the only Australian manufacturer of polypropylene. In its submission
LyondellBasell did not discuss the closure of the Clyde refinery and its
impact. However, it did state that it sourced 95 per cent of its key
raw materials from Australian refineries and that it purchased and shared utilities
and services onsite with Shell at both the Clyde and Geelong refineries.
During the hearing, the CFMEU stated:
… aside from the direct job losses in oil refining, there are
other flow-on impacts to firms like LyondellBasell in terms of high-skilled,
complex manufacturing jobs, high-wage, high-skill jobs, so there is likely to
be a permanent loss of that manufacturing capacity and those manufacturing
skills as a result of large parts of the plastics and petrochemicals industry
In relation to the possible effects of refinery closures on businesses
like LyondellBasell, RET commented:
Oil refinery closures in
Australia are therefore likely to have flow on effects on downstream
manufacturing activity through reduced availability of feedstock for the
chemicals and plastics industry. While many of the final products could be
imported, and some inputs could be replaced with imports, there are likely to
be adjustment pressures on the chemicals industry.
The unions and industry recognise the importance of refineries as places
to employ and train high skilled workers. During the hearing Mobil
One thing we feel people need to consider is not only the
supply and demand implications but ultimately the jobs that are involved. These
are high-tech, high-skill jobs. If we provide the right environment for these
types of jobs, then we provide a draw in our universities and the
infrastructure of the manufacturing industry as somewhere to develop engineers,
scientists, high-skilled fitters and tradespeople and things. If you do not
have that there, you will not have something that is resilient to the commodity
cycle. People seem to forget that commodities do go through cycles over time.
So we need a place where those high-skilled workers can reside. If we do not
have that, as we go through the commodity cycle all those skills atrophy.
Similarly, the CFMEU discussed the impact the closures would have on the
capacity of tertiary institutions to provide practical training:
A particular point that was raised with us by people in the
University of Sydney and UNSW was that they basically place people undertaking
tertiary education—engineering and petrochemicals people—in those refineries.
Those training opportunities are no longer going to be there. So, for major
universities in Sydney, it is going to be a problem getting the on-site
training positions for their students. So we are talking about the loss of
tertiary skills, graduate skills, as well.
The AIP makes the point that the refinery industry is technologically
advanced and as such employs and brings to Australia highly skilled staff:
International expertise flows readily into the Australian
refinery workforce. There are also many ‘spill-over’ effects into other
industries through the transfer of technical skills and expertise to other
Alternative employment opportunities
The committee heard that the skills of displaced workers were in high
demand in other areas of the resources sectors, particularly LNG. Industry and
government indicated that they were committed to assisting displaced workers
find alternative employment. In the EWP, the Australian Government indicated
that there will be ‘strong demand’ for workers in the energy resources sector
generally and it is aiming to facilitate workforce mobility to fulfil demand.
Shell told the committee:
Most of the skills that are in the refinery area are in
demand internationally, ranging from somebody who is a panel operator, who
typically would have at least 10 years experience, to the engineers and
management. These are all skills that are in strong demand internationally. We
have a number of the workforce, ranging from operators to instrument
supervisors to electrical supervisors to various engineering disciplines,
working internationally and in Shell projects offshore.
In its submission, Shell has cautioned that it has experienced
difficulty redeploying employees, despite the workers having the relative
training and skills required for their new positions:
The small number of employees who opted to try for roles in
our upstream business supports the view that Australian workers on the whole
are not readily mobile – despite many of these workers having the right skills
and training to easily transfer to the upstream business.
Shell concluded that there are jobs available in upstream LNG projects,
however, employees will need to be mobile.
In his submission, Mr Velins suggested that the growth in LNG plants
would provide employment opportunities for refinery workers.
Caltex submitted that:
While refinery closures inevitably reduce employment in the
sector, the avoidance of losses in refining frees up capital for more
productive use within the economy, boosting employment overall; in addition,
Australia has a shortage of skilled labour broadly of the type released by
refinery closures, so it is expected labour will be redeployed overall into
more productive uses.
The AWU told the committee that they had received anecdotal reports that
Kurnell employees who were actively looking for new jobs were experiencing
You are talking about these highly skilled operators. They
have been through the rigorous process of applying for jobs, even in a FIFO capacity
into Western Australia and those rural areas, and only a small handful of guys
have been able to secure work in those growth industries, which is concerning.
It points to whether or not there is capacity for displaced highly skilled
manufacturing workers to find a path into these growth sectors of the economy.
There appears to be a disconnect there, and that is something of high concern,
given the already huge impact of losing a job and the probability of finding
In relation to the closure of the Clyde refinery, it was reported that:
It is likely that some of the staff directly affected by the
closure could find employment elsewhere. However, this transition period is
likely to create short-term hardships for these workers and their families
whilst they invest time and resources to re-skill and/or up-skill to remain in
In its submission RET identified the relative opportunities of workers
depending on their job description, in general it was concluded that:
Workers displaced by refinery closures
will have varying job prospects, depending on their skills and abilities, and
depending on their willingness to seek work in other sectors, occupations or
locations. Some workers with highly specialised skills may need to undergo
retraining in order to take advantage of available job opportunities.
RET advised the committee of the measures the Australian Government
would undertake to assist redundant employees, these included:
- a ‘Jobs Market’ for
employees of the Kurnell refinery, which would bring together job seekers with
employers and training organisations;
- the new ‘Resources
Sector Jobs Board’ which is a website advertising job vacancies;
- general employment
programs ‑‑ such as employment support with a ‘Job Services
Australia provider’ for help with resume preparation, job applications,
interview skills and career advice; the ‘Experience+Career Advice service’ for
redundant workers over 45 year; financial advice from Centrelink;
- general skills
development programs in particular the ‘Australian Government Skills Connect
initiative’ and the ‘Building Australia’s Future Workforce package’.
Caltex told the committee that it is ‘committed to supporting its people
with the highest level of care, attention and respect’.
To this end Caltex will be providing displaced workers with a range of
services, including redundancy benefits, vocational training allowances and
outplacement services, which include resume writing and interview skills
Shell has also submitted that it is committed to assist displaced staff:
As part of the conversion project Shell has invested a
considerable amount of time and effort to equip our staff for life outside
Shell. Apart from the almost 20 different programmes and seminars held for our
employees post the announcement, we have run a series of Career Expos where
local and National employers could engage with our employees on future job
opportunities. The employment opportunities presented at these Expos resulted
in employees feeling more confident that they could secure employment (even in
Sydney) post the conversion of Clyde - including nine direct offers of
employment from employers attending these Expos. In addition Shell worked with
the local TAFE College on having more than 160 employees receive recognition of
prior learning and thereby receive various trade certificates and
The energy sector is a major employer providing work directly and
indirectly for over 100 000 Australians. It is forecast that jobs in the
sector will grow by 3.9 per cent annually, for the next five years. Employment
in oil extraction is forecast to grow at 7.3 per cent. Employment in the oil
refining sector diverges from the wider energy sector. At present, 5 500
people are directly employed in the sector with growth declining because of
reducing refining capacity.
In general the energy sector’s workforce is more highly skilled than
other industries. This characterisation holds for petroleum refining and the fuel
manufacturing industry. A large proportion of workers in the sector are
employed in higher skilled occupational groups. It can take up to fifteen years
for employees to become fully skilled in certain fields. So as refining
capacity reduces there can be significant loss of skill, which cannot be easily
replaced. This potential skill loss is something that the oil companies should
Evidence presented showed that the people employed in the oil refinery
industry are highly skilled, productive and, as is indicated by the average
length of service, loyal.
Five refineries are remaining open and the committee did not receive any
indication that they would be closing in the short-term. Indeed, Mobil Oil and
Caltex indicated that refining was an important core business for them. The
cooperative approach that Mobil and its employees are taking at the Altona
refinery is commendable.
Where closures are inevitable, the committee holds the view that
reducing undue stress and assisting workers to adjust to changing employment
circumstances should be a priority for both industry and government. The
committee believes this can only occur when there is a level of certainty for
workers and targeted support. To date, structural changes have occurred in a
relatively orderly manner, with long lead times between closures being
announced and workforce having to adjust. Efforts to redeploy and reskill
displaced workers must remain a priority.
Julie Owens MP
30 January 2013