The oil and gas industry needs to focus on cost and competitiveness to thrive in the current low-oil-price environment, says Australian Petroleum Production & Exploration Association (APPEA) Chairman Martin Ferguson. His comments were echoed by Roy Krzywosinski, managing director of Chevron Australia. The executives made their remarks during APPEA’s 55th Conference in Australia.
“What is clear is that there are many views on what may happen to the price of oil. However, we all agree that it is essential that we carefully plan,” Ferguson says. “We must strive to be the most efficient and best at what we do. Our industry has achieved great things. And as today’s project updates sessions showed, we are still busily building and committing for the future – despite the challenging framework that confronts us.”
However, to continue to be successful, a key area of focus for the industry must be cost and competitiveness, he says. Industry and governments should work together to address challenges that are under their particular control.
“We must sharpen our project management,” he says. “It is critical that we strive for efficiencies and cost reductions. An important part of this is seeking opportunities for collaboration and sharing of infrastructure. But governments at all levels must also play a part. The legal and regulatory framework sets the boundaries within which industry must operate.”
Also, because good laws and regulations are essential, every nation should have sensible expectations for safety, environmental management, risk management and the protection of workers’ rights, he says, but warns that overregulation can be harmful.
“Unfortunately, sometimes bad politics trumps good sense, and this imposes significant consequences on our economy. Right now, the Australian oil and gas industry is faced with regulatory challenges in several key areas, including access to resources, inefficient and duplicative approvals processes and other unnecessary red tape, and industrial relations laws that impair productivity and encourage repeated disruptions to projects.” Although a “good start” has been made regarding some of those challenges, much work remains to be done, he says, because in tough times, poor policy can inflict serious and lasting consequences. Ferguson calls on the government to provide stability, remove unnecessary inefficiencies, curb regulatory risks and costs and develop a regulatory climate that fosters optimism and a “can-do” attitude.
“The worst thing it can do is to pander to sectional interests and scare mongers with anti-development agendas,” he cautions. The Australian government should not be tempted to continue the entrenchment of adversarial industrial relations, or to continue to conduct “one unnecessary hydraulic fracturing review after another while ignoring decades of evidence that this is a safe technology,” he says.
Also, restricting access to resources in response to fear campaigns, as opposed to careful consideration of scientific evidence, must be stopped, Ferguson says. Bad legislative policies and regulations can discourage investment that is needed to bring on new gas supplies and can lead to economic regression.
“Am I being alarmist? What is the worst that could happen? Australia turned towards isolationism and protectionism in the 1890s. This ushered in a period of stagnation and decline that lasted until World War II,” he says.
As chairman of APPEA, Ferguson vows to continue to work to achieve energy commitment and vision across all political parties at the state and federal level. Going forward, APPEA will pursue efforts to ensure Australia’s energy security and economic future by encouraging the entrepreneurial spirit that led to the successful discovery and development of the country’s major oil and gas provinces, he says.
Roy Krzywosinski of Chevron Australia agrees with Ferguson’s comments, noting that similar key requirements are needed by the energy industry, in partnership with government, to maximize future energy success.
“We need an attractive investment environment which fosters an open-for-business, entrepreneurial culture, a regulatory framework which encourages and doesn’t impede industry growth, a flexible and predictable industrial relations system encouraging a more direct employee-employer relationship, and one which supports and embraces competitiveness, a globally competitive taxation system, and finally, government policy which supports research and development investment for large projects.” he says. Such key elements underpin investor confidence in making major capital investment decisions. The government, on behalf of all Australians and the industry, have a shared interest to shape the investment environment that will secure the energy, revenue and jobs in the future, Krzywosinski says.
“It is a national imperative we get the policy settings right to attract the next wave of investment. Some would say this represents a potential US$100 billion dollars waiting in the wings with the associated economic benefits.”
Also, cooperation in non-competitive areas can deliver shared benefits that can drive down costs, he says, using as an example the operations in the Gulf of Mexico and North Sea where most logistics services are shared.
“In Australia, there are too few examples of cooperation during the development and construction phases of projects, and we need to move to a more collective mind-set,” he says. “In the area of safety, this is an example where industry is working together, and is seeing real results. “
Krzywosinski summarized his comments by saying, “We need to continue finding innovative solutions to drive down our costs. Our industry requires us to think big, but let’s think even bigger.”
Image: Chevron Australia managing director Roy Krzywosinski, far right, at APPEA 2015 / Chevron
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