Confronting the Productivity Challenge in the High Cost Economy: Evidence from the Australian Oil and Gas Industry

Confronting the Productivity Challenge in the High Cost Economy: Evidence from the Australian Oil and Gas Industry

Jerad A. Ford (University of Queensland, Australia), John Steen (University of Queensland, Australia), Martie-Louise Verreynne (University of Queensland, Australia), Bradley Farrell (Ernst & Young, Australia), Gerald Marion (Ernst & Young, Australia) and Seelan Naicker (4Sight Group Pty Ltd, Australia)
DOI: 10.4018/978-1-4666-5828-8.ch006
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Abstract

This chapter reports research findings into the productivity challenge facing the Australian oil and gas industry. This industry has been experiencing cost overruns indicating a productivity decline that puts future projects and investment at risk. Using world-class survey methodologies developed by the Centre for Business Research at Cambridge University and adapted for the oil and gas industry, an evidence-based view on business decisions and conditions is provided and linked to performance. While many of the productivity challenges facing the Australian oil and gas industry are beyond immediate managerial control, this research shows that key productivity drivers are in the realm of the firm to influence. The research reported in this chapter shows that improvements in innovation, collaboration, and deeper competitive capabilities are the best levers to lift business productivity and to build a growth pathway for the future for this industry.
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Introduction

Recent years have seen soaring investment in natural gas resources in Australia. A mix of conventional and unconventional natural gas projects are at the heart of this expenditure with a majority of projects focused on exporting Liquefied Natural Gas (LNG) to Asia. Conventional gas projects include offshore gas field developments like Chevron’s Gorgon project in Western Australia. Unconventional gas projects include Queensland’s Coal Seam Gas (CSG) projects, which will bring together distributed gas wells from across a vast geographic distance to parallel LNG processing plants on Curtis Island, Gladstone, Australia. Taken together, Australia has more than $US190b in LNG export projects under construction (Reuters, 2013), placing Australia on track to becoming the world’s largest exporter of LNG by 2025 (OECD, 2012). A list of the major projects, expected to be completed by 2020, is provided in Table 1.

Table 1.
Australian LNG projects expected to start through 2020 (Reuters, 2013)
Projects Under ConstructionDeveloper(s)Capacity
(mtpa)
Cost
($US bn)
Development Type
Gorgon 1,2,3Chevron15.652Conventional, off-shore
Queensland Curtis Island (QCLNG) 1, 2BG Group (QGC)8.520.4Coal Seam Gas
Gladstone LNG (GLNG) 1 2Santos/ PETRONAS/ Total / KOGAS7.818.5Coal Seam Gas
Australia Pacific LNG (APLNG) 1, 2Conoco Phillips / Origin925.4Coal Seam gas
Icthys 1, 2Inpex / Total8.434Conventional, Offshore
Prelude FLNG*Shell / KOGAS3.612.6Conventional, floating offshore
Wheatstone 1, 2Chevron8.929Conventional, Offshore

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