Gertjan Leideman is Energy Strategy Lead of Accenture Australia

Gertjan Leideman is Energy Strategy Lead of Accenture Australia

By Gertjan Leideman

ANALYSTS expect Australia’s liquid natural gas (LNG) projects to contribute significantly to the country’s economic growth, with LNG set to overtake coal as the nation’s second biggest export, behind iron ore.

Over the next few years, Australia’s LNG export volumes are forecast to rise 70 per cent and by an average of 42% per year. By 2018, Australia is expected to overtake Qatar to become the largest exporter of LNG in the world.

Although the outlook looks strong, Australia is now at a crossroads in its future as an energy supplier.

As it ramps up its journey as a significant natural resources exporter, its internal energy system faces considerable challenges, including rising costs, falling productivity and falling energy prices.

Given this new industry landscape, it is imperative that Australia’s oil and gas industry seeks to maintain its competitive position as a leading global energy supplier through both conventional and unconventional sources.

Various studies have shown that by focusing on areas such as improving and simplifying a nation’s regulatory environment and generally increasing industry collaboration it can have a major effect on the country’s natural resources and energy sectors – in particular delivering substantial cost benefits.

The successful establishment of a robust energy sector in Australia will be underpinned by a strong innovation agenda.

Research conducted by Accenture in collaboration with The Australian Financial Review has revealed increasing co-operation between government, industry and individual project owners is a key way to increase collaboration and innovation.

Indeed, improved collaboration can overcome current industry obstacles, including the difficult approval requirements for capital investments, green tape from environmental regulation, disparities in costs that hamper productivity and competitiveness, and long-term planning by agreeing on locations or corridors for future infrastructure that is crucial for a geographically dispersed market such as Australia.

In order to innovate as an industry, operators should share infrastructure, best practices and cooperate in the assessment, development and implementation of new ideas. Adopting a collaborative approach across the sector will reduce research and development costs for all players involved.

For example, unconventional oil and gas operators in international markets have made significant savings in well-delivery costs by aligning their operating models to a ‘manufacturing approach’ over the past 10 years.

Digital is creating new opportunities to address the key challenges in the industry; the combination of technology, data and advanced analytics are already driving new insights and are accelerating the innovation journey.

Collaboration with the development and utilisation of service providers will also reduce overall costs and improve productivity.

In the United Kingdom (UK), industry stakeholders and government created several taskforces including ‘PILOT’ (formerly the Oil and Gas Industry Task Force).

Some of the key initiatives from this program include the standardisation of supplier qualifications by all operators, sharing of forecast service requirements between all operators and service providers, using common structures for contracts and invitations to tenders, skills and training.

Government support of industry collaboration and the encouragement of industry led initiatives will also support growth in the sector.

The government should establish and support the development of industrial clusters for various equipment, technologies and services locally and provide initial financial support for small and medium-sized enterprise development.

As the third-largest exporter of energy in the world, Norway’s energy producers benefit from government-led tax incentives, and a points-based program which rewards R&D and knowledge transfer between local institutions, which is then taken into consideration during subsequent licencing rounds.

Collaboration can take many forms. Countries like Brazil and Saudi Arabia are setting up technical centres of excellence supported by governments and industry, which focus on developing particular upstream assets (like deepwater or unconventionals), an important part of which is skills development and training.

In addition to general industry collaboration, countries like the UK are promoting more collaboration over access to infrastructure – which is seen as a major barrier to new development projects – with the US oil industry, focusing on similar infrastructure issues.

Operators should adopt a true continuous improvement mind set across their operations with a focus on key capabilities such as integrated planning. They should also embrace the opportunity which digital and advanced analytics bring to their business.

As Australia starts its latest energy growth spurt, it is well placed to learn lessons from other geographies who are, or have, faced similar challenges.