(EnergyAsia, May 18 2015, Monday) — Having done the hard part of attracting A$250 billion worth of liquefied natural gas (LNG) investments, Australia may yet miss out on A$55 billion worth of benefits when the new plants start up over the next few years, said consulting firm Accenture. (US$1=A$1.3).
In a new report, the consulting firm said the country’s LNG sector lacks competitiveness against international rivals as it faces tough “regulatory constraints”, an overpaid workforce, inflexible labour relations, and costly tendering and contracting processes.
For Australia to derive the benefits from having “the world’s largest and most technologically advanced” LNG industry, Accenture said the country needs to “improve international competitiveness, remove regulatory constraints and introduce a more flexible labour relations regime.”
The firm’s new report “Ready or Not? Creating a world-leading oil and gas industry in Australia”, analyses the readiness of the LNG industry to capitalise on future opportunities as it moves from construction into production. The report, based on interviews with LNG operators and the companies that service them, was released ahead of the Australian Petroleum Production & Exploration Association (APPEA) Conference and Exhibition 2015 in Melbourne this week.
Accenture predicts that over the next five years, Australia’s natural gas production will grow by more than 90%, the number of producing wells will increase by 400% while pipeline infrastructure will rise by 45%.
The industry’s total capital investment and operating expenses will reach A$360 billion by 2020, up 40% from the A$250 billion invested during the recent capital investment boom.
“Against this growth backdrop, greater industry and regulatory collaboration, accelerated workforce re-training and further investment in digital and automation will be required,” said Accenture.
Bernadette Cullinane, Asia Pacific managing director for Accenture’s energy industry group, urged operators, the service sector and government to work together so that the industry can collectively realise an additional A$50 to $70 billion of shareholder value over the next 25 years.
“The speed, scale and scope of the transition is unprecedented. The industry must be ready to support and maintain safe, efficient and reliable operations for the next 40 years,” she said.
Citing Australia’s leading LNG operators and service providers, the report found that industry is well prepared in several areas for this transition – building workforce capacity and capability, and tuning and adapting business models for production. The companies surveyed rated workforce capability and capacity as the highest scoring of the five readiness dimensions measured at 0.68 out of a possible 1.0, and 0.58 respectively.
“Australia has a real opportunity to use the next few years to become a world leading LNG producer, delivering long term returns for all industry sectors,” said Paul Fennelly, APPEA acting chief executive.
“The construction phase has now peaked, and the industry is transitioning into an exciting new production and operation phase – an estimated 13 new LNG trains within seven new plants will come online between 2015 and 2018.”
The report highlights the areas that need to be improved with competitiveness rated at 0.37, regulatory framework rated at 0.40 and the industrial relations framework which scored the lowest score at 0.32.
“The research overwhelmingly highlighted that there is room for more collaboration on key services such as turnarounds and logistics, with many stating the industry hadn’t done enough sharing during the construction phase,” said Ms Cullinane.
“Accelerating industry collaboration and embracing innovation and digital technologies will help drive global competitiveness, attract the next wave of capital investment and transform Australia into the world’s largest and leading LNG industry.”