Maritime Union of Australia, The v Offshore Marine Services Pty Ltd

[2012] FWA 3601

[2012] FWA 3601

FAIR WORK AUSTRALIA

DECISION

Fair Work Act 2009
s.739—Dispute resolution

Maritime Union of Australia, The
v
Offshore Marine Services Pty Ltd
(C2011/129)

COMMISSIONER WILLIAMS PERTH, 1 MAY 2012

s.739 - Application to deal with a dispute.

[1] This matter involves an application made under section 739 of the Fair Work Act 2009 (the Act). The applicant is the Maritime Union of Australia (the Applicant) and the respondent is Offshore Marine Services Pty Ltd (the Respondent).

[2] The Applicant on the behalf of its members has pursued the matter through the dispute resolution procedure set out in Clause 45 of the Offshore Marine Services Pty Ltd Integrated Ratings, Cooks, Caterers and Seafarers (Offshore Oil and Gas) Enterprise Agreement 2010 [AE879645] (the Agreement).

[3] There is no disagreement from the Respondent and I am satisfied that there is jurisdiction for the Tribunal to determine this dispute.

[4] The matter in dispute is whether or not the Respondent is required to pay a project allowance provided for in the Agreement with respect to work carried out in the Cossack Wanaea Lambert Hermes (CWLH) oil field.

Background

[5] The CWLH field is operated by Woodside Energy Ltd (Woodside) and is located on the North West Shelf of Australia between 67 and 74 nautical miles North, North West of Dampier.

[6] Production from the CWLH fields produces around 73,000 barrels of oil a day and is processed on the floating production storage and offload (FPSO) vessel the Cossack Pioneer connected to a riser turret mooring. The Cossack Pioneer was commissioned in 1995.

[7] In order to support the projected field life, replacement of the Cossack Pioneer and the existing subsea infrastructure was required as they were approaching their maximum design life after a period of 15 years plus in operation. The Cossack Pioneer has now been replaced by the OKHA FPSO.

[8] Technip Oceania Pty Ltd (TOPL) was engaged by Woodside to undertake the disconnection and replacement of the existing pipelines. A total of eight pipelines were replaced.

[9] Replacement mooring chain, riser replacement and umbilical diagnostics was also included in TOPL’s scope of work. Three new risers replaced the existing three which were removed. The risers were removed from the site as they float and it was more efficient to recover the lines.

[10] Due to wear on the existing mooring chains, 200m of 4¼ chain from each of the eight mooring legs were replaced by new chain of the same specification.

[11] Umbilical diagnostics were carried out on existing Electrical Hydraulic Umbilicals to identify faults in the electrical system.

[12] Pressure testing of replacement pipelines, risers and jumpers was also undertaken.

[13] Two installation support vessels were used for the project; the Venturer and Rockwater 2.

[14] The Respondent was engaged by TOPL to provide the marine labour to undertake the project work consisting of approximately 40 employees. The project work was undertaken between January 2011 and September 2011.

[15] The Applicant maintains that the project involved the construction of a new pipeline on the CWLH field. Consequently the Applicant argues that payment of a project allowance under the Agreement is required.

[16] The relevant clause of the Agreement is Clause 31 Construction Project Allowance Bonus which reads as follows:

“31.1 The Parties have agreed to the payment of a Project Allowance - Bonus (PAB) to be paid at the completion of construction projects. The PAB will apply in accordance with the criteria outlined below.

“Construction Project” means: work involving the installation of new jackets, topsides, pipelines, flow lines, risers and associated mooring systems for offshore platforms, monopods, FPSO’s and FSO’s. It does not include remedial work, maintenance, repair or replacement of existing jackets, topsides, pipeline, risers, mooring systems or associated infrastructure.

31.2 Eligibility

(i) The PAB is only payable to Employees who are employed on vessels engaged on Construction Projects.

(ii) The PAB will apply to any vessel engaged on the construction spread for more than 48 hours. This excludes steaming time to and from the construction spread.

(iii) When an Employee qualifies for the PAB, the PAB will be paid for every duty day the Employee is specifically engaged on the Construction Project. It does not include:

(b) Mobilisation and demobilisation voyages except where the vessel is engaged to deliver equipment (ie new jackets, topsides, pipelines, flow lines, risers and associated mooring systems for offshore platforms, monopods, FPSO’s and FSO’s) to and from the spread from a Port outside of Australia;

(c) Pre and post miscellaneous and ancillary work including but not limited to site survey and as laid inspections.

(d) Days on workers compensation, sick leave (personal injury and accident insurance), study leave, or compassionate leave; and

(e) Superannuation.

31.3 Subject to the above, the PAB is paid from the day of the vessel’s point of importation (Customs clearance). The PAB ceases upon the day of the vessel's permanent departure from the Construction Project location or when the construction phase is deemed to have finished.

31.4 Project MOU’s will address the issue of when the construction phase is “deemed to have Finished”.

Conditions of PAB Payment

31.5 The PAB will equate to $175 for each duty day engaged on the Construction Project applicable from commencement of the Agreement.

31.6 The PAB will be moved by the salary escalations under this Agreement, in accordance with the following table.

Commencement of Agreement	1 July 2010	1 July 2011	1 July 2012
$181	$192	$203	$215

31.7 The PAB payment is payable subject to the following:

(i) The Employee shall not qualify for payment for any day on which they have engaged in industrial action in breach of the Dispute Resolution Procedure in this Agreement or the provisions of the Occupational Health and Safety (Maritime Industry) Act 1993; and;

(ii) The PAB will be paid on termination of an Employee's employment on the Construction Project on a pro-rata basis for the days worked.

(iii) In the case of a permanent Employee, who is not terminated but is either transferred to another operation or goes on workers compensation or continues in the Employer’s employment when they complete work on the Construction Project, payment will be made on a pro rata basis for each day worked on the Construction Project.

(iv) This PAB arrangement will apply for the life of this Agreement. If a replacement agreement is negotiated and agreed at the expiry of this Agreement, this will be included in a replacement agreement and will not be sought or applied otherwise. Any replacement agreement will only apply to Projects approved and mobilised after the date of any replacement agreement being operable.”

Evidence

[17] Evidence for the Applicant was given by Mr Noel Nielsen a Union Organiser with the Maritime Union of Australia. Mr Nielsen’s evidence went to his dealings with the Respondent’s management regarding the work in question and a series of information exchanges between him and the Respondent regarding the scope of work involved.

[18] His evidence was that at the conclusion of that process he remained of the view that the project was a “Construction Project” within the meaning of Clause 31 of the Agreement and he had advised the Respondent of that by email on 24 March 2011.

[19] The Respondent did not seek to cross-examine Mr Nielsen. Accordingly I accept his evidence in full.

[20] Evidence for the Respondent was given by Mr Andrew Buck who is employed by TOPL as the Engineering Manager for the CWLH project. In that capacity he apparently had the overall responsibility for the day-to-day engineering of the project.

[21] His evidence was that the project involved replacement and maintenance of the existing CWLH infrastructure. This did not add to the CWLH production capacity.

[22] The work included replacing over 20,000m of existing pipe with a similar meterage of identical pipelines. The total length differs by approximately 1% due to differing fabrication and lay tolerances to ensure they can be safely laid around existing subsea assets.

[23] The replacement pipelines are connected to the same structures as the replaced pipelines.

[24] The replaced pipelines were filled with treated seawater for stability and to prevent environmental contamination and have been blanked off and left on the seabed. They were left on the seabed because of the additional time it would have taken to recover them and because this would have extended the disruption to production.

[25] Three new risers replaced the three existing risers, which were removed.

[26] Concrete mattresses were installed where pipelines crossed over each other. These mattresses support the weight of the upper pipeline and prevent this crushing the pipe underneath.

[27] 200m of chain from the eight moorings were replaced by new chain links to the same specification.

[28] Mr Buck was cross-examined on a limited number of matters. In cross-examination he confirmed that the existing pipeline was filled with treated seawater to stop rusting. This allows the pipeline to retain enough capacity to allow it to be recovered in future years but does not protect the pipeline for reuse. The old existing pipelines are of no purpose and cannot be used.

[29] His evidence was that the old pipelines that have been replaced cannot be reconnected, cleaned out or used for any other purpose in the future.

[30] His evidence was that the old pipelines have a fixed life. When they reach the end of this they are not certified for future use.

[31] His evidence was that the old replaced pipelines cannot be reconnected.

[32] His evidence was that the project involved the existing undersea pipelines being replaced by new pipelines. A total of eight pipelines were replaced.

[33] Mr Buck’s evidence was not challenged nor was it at odd with Mr Nielsen’s evidence on the facts. I accept Mr Buck’s evidence in full.

Applicant’s submissions

[34] This dispute arises over the application of the Agreement.

[35] Clause 31.1 of the Agreement provides that:

“The Parties have agreed to the payment of a Project Allowance – Bonus (PAB) to be paid at the completion of construction projects. The PAB will apply in accordance with the criteria outlined below.

“Construction Project” means: work involving the installation of new jackets, topsides, pipelines, flow lines, risers and associated mooring systems for offshore platforms, monopods, FPSO’s and FSO’s. It does not include remedial work, maintenance, repair or replacement of existing jackets, topsides, pipeline, risers, mooring systems or associated infrastructure.”

[36] The dispute between the parties arises from the nature of the work performed on the CWLH field on the North West Shelf of Australia. The Respondent maintains that the nature of the work was the replacement of existing subsea infrastructure and as such does not fall within the definition of “Construction Project” in Clause 31 of the Agreement.

[37] In particular, the Applicant maintains that the project involved the construction of a new pipeline on the CWLH field. The old pipeline remains in place and is capable of being reactivated at any point to perform additional functions.

[38] The task the Tribunal is being asked to perform is simply to determine whether the work the subject of this application is the replacement of existing subsea infrastructure or is a “Construction Project” within the meaning of Clause 31 of the Agreement.

[39] Relevantly, the Australian Concise Oxford Dictionary provides that “replacement: 1. the act or instance of replacing or being replaced; 2. A person or thing that takes the place of another”. It further provides that “replace: 1. To put back in place. 2. To take the place of; succeed; be substituted for. 3. Find or provide a substitute for. 4. Fill up the place of. 5. Be succeeded or have one’s place filled by another; be superseded”.

[40] While the new pipeline may be performing the functions previously performed by the old pipeline it has not taken its place as it is still in situ and is capable of being reactivated. In short, where there use to be one pipeline there is now two pipelines.

[41] The Applicant maintains that the facts demonstrate that this is a “Construction Project” within the meaning of Clause 31.

Respondent’s submissions

[42] The Respondent understands the Applicant’s argument as primarily being that the project work meets the definition of “Construction Project” under the Agreement on the basis that:

• the old pipeline remains in place and is capable of being reactivated at any point to perform additional functions,



• the new pipelines have not taken the old pipelines place as it is still remains on the seabed,



• the replacement of the old pipelines for new is not like for like; and



• there are now two pipelines as opposed to the existing one.

[43] The Respondent opposes the application based on the project work meeting the exclusions under the Agreement definition being the “replacement of an existing pipeline… mooring systems or associated infrastructure”.

[44] Clause 31.1 of the Agreement provides that:

““Construction Project” means: …It does not include…maintenance...or… replacement of…pipeline, risers, mooring systems or associated infrastructure.”

[45] The project work is a combination of replacement and maintenance work and not construction work therefore, in accordance with the Agreement, PAB is not payable.

Replacement and Maintenance Work

[46] The scope of work for the project involved the replacement of existing pipelines with identical pipelines.

[47] The replacement of the old pipelines does not require its immediate recovery from the seabed. While still remaining on the seabed the existing pipelines have been disconnected and decommissioned.

[48] The new pipelines have in some locations been installed over the old pipelines making the recovery of the old pipelines impossible until the whole project is decommissioned.

[49] The eventual removal of the decommissioned pipelines will not be considered until the life of the project has been exhausted, this is a normal occurrence in a large operation.

[50] No new facilities, in respect of increasing the capacity of the CWLH infrastructure, were added during the project work, no additional pipelines were installed.

[51] The connection locations for all pipelines occurred at the same commencement and finishing locations, the number of connections remains the same and there are no additional connections to allow for future expansion.

[52] The replacement pipelines were connected together and to the same structures as the existing pipelines.

[53] It is not possible to use the old pipelines and the replacement pipelines together at any time in the future.

[54] The existing and replaced pipelines have been filled with sea water and sealed.

[55] The project work is based entirely and exclusively on replacing and or maintaining the existing CWLH infrastructure. The project work did not involve adding to the CWLH production capacity or its potential capacity.

[56] No new infrastructure was installed that did not replace, maintain or assist in the replacement/installation of existing infrastructure.

Summary

[57] The existence of the replaced pipelines on the seabed does not detract from the simple fact that they have been replaced. Removal of the old pipelines does not alter the project status as per the Agreement.

[58] The existing pipelines while remaining in place have been decommissioned and are not capable of performing additional functions.

[59] The replacement of the existing pipelines for new pipelines are like for like.

[60] There continues to only be one operating system of pipelines.

[61] The existing mooring chains were replaced, in part, like with like.

[62] The CWLH Project was entirely a replacement and maintenance exercise associated with an existing project and infrastructure. The Agreement excludes such work from the definition of a “Construction Project”.

[63] The term “replacement” does not require the existing and replaced infrastructure to be removed from site. Replacement requires one thing to take the place of another, or be substituted for, which is what has occurred in respect of the pipelines and mooring chains on this project.

Consideration

[64] The question to be determined by the Tribunal is whether or not the work detailed in the evidence of Mr Buck falls within the definition of “Construction Project” as provided for in Clause 31.1 of the Agreement but more particularly whether it falls within the exclusion contained in that definition. The relevant provision is set out below:

““Construction Project” means: work involving the installation of new jackets, topsides, pipelines, flow lines, risers and associated mooring systems for offshore platforms, monopods, FPSO’s and FSO’s. It does not include remedial work, maintenance, repair or replacement of existing jackets, topsides, pipeline, risers, mooring systems or associated infrastructure.” (Underlining added).

[65] I am satisfied that the work does fall within the first sentence of the “Construction Project” definition.

[66] Therefore the matter to be determined is whether the work that was undertaken was remedial work, maintenance, repair or replacement of existing jackets, topsides, pipeline, risers, mooring systems or associated infrastructure.

[67] The Respondent argues that the work undertaken was the replacement of a pipeline, some risers and parts of the mooring system and maintenance of associated infrastructure.

[68] The Macquarie Dictionary definition of replacement is “the act of replacing” and “a person or thing that replaces another”. The word replace is defined as “to fill or take the place of; substitute for (a personal or thing)” and “to provide a substitute or equivalent in the place of”.

[69] In this case I accept that the installation of new pipeline, risers and parts of the mooring system was to take the place of and substitute for the old pipeline, risers and parts of the mooring system.

[70] The Applicant has not made out its case that simply leaving some parts of this infrastructure, in particular the pipeline in situ on the sea floor means the old pipeline has not been replaced. The evidence is clear that the old pipeline is no longer connected to the production facility and will not be, and indeed cannot be reused.

[71] The Applicant’s argument that the word replacement in the definition of “Construction Project” requires that the replaced infrastructure is removed is not correct.

[72] Separately I am satisfied that the diagnostic work on the Electrical Hydraulic Umbilicals was maintenance work.

[73] In the circumstances then I am satisfied that the work in question falls within the exclusion to the definition of “Construction Project”. That work was replacement of pipeline, risers, mooring systems and maintenance of associated infrastructure and was not a “Construction Project” within the meaning of the Agreement.

[74] Consequently I find that the construction project allowance provided for in Clause 31 of the Agreement did not apply to this work.

COMMISSIONER

Appearances:

L. Edmonds, Solicitor for the Applicant.

G. Bull for the Respondent.

Hearing details:

2012.
Perth:
February 16.

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