Australia: 35th AOG kicks off

Australia’s largest oil and gas event started on Wednesday, February 24, 2016, with a number of key announcements made at the AOG 2016 Conference and educational events.

At the Official Australasian Oil & Gas Exhibition & Conference (AOG) Media Breakfast, Bernadette Cullinane, Accenture’s Energy lead in the region, told a packed media room that Australia is well placed to achieve its target of being the world’s leading LNG producer.

However, she also warned that the country may miss some critical opportunities if the industry doesn’t take up the call for collaboration and take advantage of a number of technical innovations.

Cullinane told the media gathering that Australia has invested $250 billion on the LNG since 2009 in what will soon be the world’s largest LNG industry.

She added that however, as many operators around the world, including in Australia, are beginning to transition their state-of-the-art assets into the operations phase, it seems the future may not be as bright as anticipated.

She said that new sources of supply from Australia and independent US exporters such as Cheniere Energy are appearing at the same time as many long-term gas contracts in Asia are expiring. With access to flexible U.S. shale gas supply, these new players will disrupt the global patterns of LNG trading.

“According to our research, for the first time in LNG’s 50 year history, it will be a buyers’ market, with prices, particularly in Asia, lower than over the past few years,” she said.

Cullinane said that Accenture has estimated that the three countries that made up approximately 60 per cent of global LNG imports in 2014, (Japan, China and South Korea) and who are among Australia’s largest trading partners, could account for much less than 60 per cent in the future.

She also noted that the use of LNG for power generation is now challenged with coal proving resilient, nuclear likely coming back on stream in Japan, the costs of renewables falling, energy conservation and planned pipeline gas imports into large markets like China.

“Australia’s natural gas market is evolving and growing up and having to compete with many more sources of supply,” she said.

Cullinane told the media gathering that Australia’s oil and gas industry must not stagnate, but must “leap frog” to succeed.

“If we only implement lessons learned, we will be destined to a game of catch up with other producing geographies. Australia cannot afford to just keep the pace, we need to leap frog. Given what is likely to be a long term low commodity market as well as a buyer’s market, Australian operators and service companies together must embrace the future.

“With our newly minted, technically advanced industry, we have the opportunity to leap frog and to do more in terms of collaboration, innovation and digital technology than other regions,” Cullinane said.

She described leap frogging as “looking like Collaboration and NOT cost squeezing” as the key to a step change in performance.

There also needs to be an increased focus on longer-term strategic partnerships between operators and service companies to incentivise productivity.

NERA launched

The AOG Official Opening was used to launch the new National Energy Resources Australia (NERA).

Oil and gas industry executive, Ken Fitzpatrick – who will Chair NERA, used AOG as the forum to launch the new Perth-based development, which is part of the Australian Government’s $248 million Industry Growth Centre’s Initiative.

Fitzpatrick announced to a large AOG 2016 Official Opening session audience that:

– A new CEO, Miranda Taylor, formerly with APPEA – has a been appointed;
– A new senior management team and Board of industry leaders appointed;
– The headquarters for NERA will be co-located with the WA Energy Research Alliance at the Australian Resources Research Centre at Technology Park in Perth; and
– There will be Nodes in Brisbane and Adelaide planned for activation in 2016.

Fitzpatrick said that the Federal Government’s establishment of NERA was particularly critical at a time when the energy industry was facing a number of issues.

“The vision for National Energy Resources Australia (NERA) sees collaboration as central to its purpose. NERA is intended to support the oil, gas, coal seam gas, coal, uranium and related service industries in Australia. NERA’s vision is that by 2025 the sector is a world leader, growing, sustainable, innovative, globally competitive and productive,” Fitzpatrick said.

“Our mission is to improve competitiveness, collaboration and productivity by focusing on reducing costs, directing research to industry needs, improving work skills, facilitating partnerships and reducing regulatory burden.

“We want to enable growth through collaboration, innovation and knowledge sharing. And through a national focus, improve the competitiveness, collaboration and productivity of the Australian energy resources sector. The great opportunity that exists is for Australia is to find a way to drive down our project and operating costs, which remain among the highest in the world, and become best in class in operations and maintenance.

“International demand for Australian resources remains strong. Currently this sector is forecast to generate $66 billion worth of export earnings from approximately 1,200 companies, employing 120,000 people directly. By leveraging existing networks and initiatives to create opportunities for collaboration, innovation and knowledge-sharing we aim to help improve productivity and competitiveness for the sector as a whole,” he added.

Fitzpatrick was joined at the opening ceremony by WA Minister for Commerce, the Hon. Michael Mischin, who congratulated AOG on its continuing success.

According to AOG, more than 13,000 visitors are expected to attend the event over the three days.