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New Deloitte report says innovation and collaboration are key for Australian LNG success

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LNG Industry,

Deloitte has released a new report – ‘The good, the bad and the ugly: the changing face of Australia’s LNG production’. The report explains how innovation and collaboration remain key for the success of LNG in Australia, with over AUS$200 billion in new and existing projects.

The report features interviews with 10 Australian leaders in the LNG sector, who suggest what they would do differently if they could; mistakes that the industry must never repeat; and what practices should become standard in any LNG project looking to move forward.

The report says that the following successful practices should be repeated:

  • Stimulation of innovation and embrace new thinking.
  • Focus on employee conditions and engagement.
  • Build a strong record on health, safety and environmental performance.
  • The report says that the following practices should done differently:

    • Improve the management of the implications of concurrent projects (several independent projects focused on the same resource has, in some cases, led to too much infrastructure).
    • Take a long-term, collaborative approach to working with local communities (health, safety and environmental concerns could be addressed at an earlier stage, leading to reduced regulation).
    • Build a trading function from the outset.
    • More effective management of contractors.

    The report claims that the following practices should never be repeated:

    • Getting swept up in enthusiasm and having the mentality of ‘get it done at all costs’.
    • Underestimating the collective impact of the industry on local markets.
    • Using legally driven frameworks as the primary method of gaining access to a resource (the report claims that a friendly approach to land-owners and stakeholders is beneficial over a detached approach).
    • Going it alone (infrastructure could be shared, minimising costs and better positioning companies to compete more effectively).

    Geoffrey Cann, Deloitte Australia’s National Director, Oil and Gas, said: “Australia is about to become a true LNG superpower, and the local sector has a great deal to be proud of.

    “No nation has ever attempted to stand up 10 LNG projects consisting of 15 LNG trains at the same time, and likely none ever will again. Australia leads the way with a diverse range of project configurations and future possibilities.

    “The scale of this build-out would be impressive under any economic conditions, but it’s particularly notable considering it occurred at a time when many companies and governments had curtailed capital spending in the wake of the global financial crisis.

    “The journey hasn’t always been plain sailing. Australia’s LNG industry has encountered a number of challenges, including some of the highest costs in the world, low productivity and significant social license concerns along the way. It certainly offers valuable lessons for other global geographies or any other rapid growth resource development.”

    The industry leaders that are interviewed in the report repeatedly focus on the fact that project owners could benefit from greater collaboration and innovation. Jamie Hamilton, Deloitte Consulting Partner, Oil and Gas, said: “The industry is acutely aware of what it needs to do better and that there is also plenty of room to innovate further.

    “But companies must go beyond operational innovation for the industry to survive the current oil price downturn, and for proposed projects elsewhere to proceed successfully. This means innovating in areas such as community relations, human resources, general and administrative processes, supply chain and procurement, taking a fresh approach to labour negotiations and contract structuring.

    “Innovation also extends to collaboration. New means and ways are sorely needed for working together, sharing knowledge, and inviting input from other sectors, as well as suppliers, service providers, and government.

    “While regulatory and policy conditions differ greatly around the world, a first step to greater collaboration simply involves a change in perspective, from viewing an LNG project in competitive isolation, to seeing it as part of a vibrant, global energy ecosystem.

    “The long-term outlook for LNG is bright as the world continues to shift toward cleaner forms of energy, and particularly, for example, greater flexibility in delivery quantities, floating LNG, spot markets and demand-side developments play their role.

    “The current oil price downturn, while painful, could be a blessing in disguise since it is motivating operators to learn from the past and to innovate for the future which, in combination, could take the sector to new heights.”

    Edited from press release by David Rowlands

    Read the article online at:

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