Australia’s record investment in LNG production

Australia’s liquefied natural gas industry

The decade-long development of Australia’s globally significant liquefied natural gas (LNG) industry has presented a raft of success stories, issues, and challenges that have tested the best local and global players.

The good, the bad and the ugly: The changing face of Australia’s LNG production features anonymized interviews with 10 Australian LNG leaders who provided candid insights into:

• The good: Successful practices to repeat
• The bad: Practices that should be done differently
• The ugly: Practices the industry must never pursue again

According to the report, innovation and collaboration remain at the core of the sector’s success as Australia, with over AU$200 billion in new and existing projects, emerges as the world’s largest LNG exporting nation.

The next level: Innovation and collaboration

Oil and gas companies are acutely aware of the need to do better, and all of the LNG projects in Australia are pursuing a broad range of internal improvement efforts. They also understand no single enterprise can attain the magnitude of improvement required to combat current cost pressures. Many industry voices, from chief executives to industry trade groups and analysts, have identified industry collaboration and innovation as two of the keys to tackling the sector’s cost and productivity issues. So, why didn’t more collaboration take place?

Some survey participants said pride got in the way. In their quest to control their own destinies, LNG developers may have missed an opportunity to bring in experts in pipelines, water treatment, electricity generation, and other specialties, which could have allowed them to focus more on what they’re good at.

The case for catalytic collaboration

The industry needs a catalyst, or an independent entity, to accelerate its collaboration efforts, with a focus on the highest impact areas, those that are deemed costly but not critical to competitive rivalry.

In addition, the sector faced an even bigger barrier to collaboration than the desire for control. In Australia, as well as in most areas around the world, oil and gas companies are reluctant to talk to each other for fear of being charged with collusion. With antitrust laws tightening globally, this sensitivity, survey participants largely agreed, is well warranted. A potential, innovative solution, however, is to work through a ‘catalyst,’ or an independent entity that isn’t invested in the projects themselves. This catalyst could serve as a repository of information for the purposes of identifying areas where working together would be in the highest and best interest of the community as well as project stakeholders.

Areas of collaboration identified as having the greatest potential impact include regulatory compliance, produced water management, simplified contracting, common safety standards, and shared emergency response capabilities.