Page 43 - OGA-Sept-2015
P. 43
MARKETPLACE
OIL & GAS AUSTRALIA
Price fluctuations unlikely to impact oil
and gas industry trajectory
BY MIKE LYNN, NATIONAL LEADER, 6. National and integrated oil companies: So, Singapore? Or Shanghai? Australia’s
OIL AND GAS, DELOITTE. evolving dynamics – It is currently hard LNG trade should hedge its bets and retain a
THE CYCLICALITY of the oil and gas to foresee a future where international oil foot in both.
industry, including recent price plunges, is companies don’t play a pivotal role in oil and
unlikely to impact the long term trajectory gas exploration and production. LNG prices: a buyer’s market
of the sector, Deloitte has found. Around 60 million tonnes of additional LNG
The global gas industry has, of course, supply will come just from Australia in the
However current fluctuations may speed up been built on long-term investments, and has next 24 months, just as buyers are challenging
a number of global industry trends. successfully emerged from cyclical downturns some of the long held basics of pricing and
in the past. contracting.
The 2015 edition of Deloitte’s global Oil and Our projects are generally tied to the legacy
Gas Reality Check report highlights six key The last 12 months have certainly brought model that includes long-term contracts and
issues/trends: further changes to industry fundamentals, prices indexed to oil. But Australia simply isn’t
including expansion and contraction on a competitive in its current state and things need
1. Shift in supply-demand fundamentals – number of fronts. to change.
Fluctuating industry dynamics are fuelling a Local operators need to respond to
power play between traditional and new oil Macroeconomic conditions, demand-supply changing customer demands and focus on
suppliers balance, regulatory constructs, cost of inputs, margin improvement by targeting cost and
commodity prices, competitive behaviour, the productivity gains if they are to achieve their
2. New trading patterns emerging – As oil impact of geopolitics, and the related use of full potential.
and gas supply and demand fundamentals energy as a diplomatic tool are all coming into
continue to evolve, new global trade patterns play, and impacting different countries and Investing in innovation: the cost of complexity
are emerging markets, in different ways. Getting costs and productivity corrected
to match the new price environment is a
3. OPEC: under pressure – OPEC currently Three of the trends are particularly relevant competitive imperative.
supplies approximately 32 per cent of the for Australia’s LNG sector. Our LNG sector, and this includes suppliers
world’s crude oil, however, its market share will and contractors, needs to have a cost and
fall by 5% by 2018 as the supply of US tight oil Shift in supply-demand fundamentals productivity profile that is cost competitive and
picks up The global centre of demand for economically viable at US$50 per barrel.
hydrocarbons has shifted from the US to Asia, But improvements are only going to come
4. LNG prices: a buyer’s market – The price and most new supply of oil and gas will be via a focus on innovations across people, data
of LNG was once a model for stability, but it is absorbed by demand in Asia, on Australia’s and organisation and where the sector does
less so now. Until prices stabilise, natural gas doorstep and our core LNG export market. away with its traditional ‘go it alone’ attitude
will trade in more geographically proximate Asia is central to Australia’s LNG future and collaborates at every opportunity.
regions as our operators shape-shift this year from
construction to marketing and trading, but Mike Lynn is Deloitte’s national leader Oil
5. Investing in innovation: the cost of a question remains over where to locate the and Gas. He is based in Perth. l
complexity – Capital spending is likely to fall trading function. Singapore is angling to be the
off in the near term, however megaprojects dominant centre for the region, but China is
will still be required to meet long-term global also likely to emphasise Shanghai as its trading
energy demand hub.
New thinking needed for difficult future
NEW WAYS of thinking are needed for oil and that is a positive, that is going to create challenging our corporate strategy,” he said.
and gas companies to find a way forward opportunities.”
in the current tight market conditions, “That also says they are undergoing quite
according to professional services firm It was, he said, a difficult challenge, as a shift in where they thing their business
KPMG. the demand was now for people skilled in strategies are going.”
operating facilities, rather than building them.
The group’s national oil and gas sector leader “If you want to have a strategic Human
Jonathan Smith told the Australian Mines and It also came at a time when Australia’s dollar Resources conversation, I think there is a great
Metals Association’s 2015 Resource People had fallen against foreign currencies, making opportunity to get beside the executives and say
National Conference that Australia’s two-speed roles in Australia less attractive to skilled – what are the capabilities we are talking about?
economy had changed the other way, with expats from Europe and the United States. What capabilities do we need to be growing,
resources states now in reverse. nurturing, bringing in?”
In accessing these potential growth areas,
“I do think there are opportunities but the Mr Smith said it was important that companies One way of going about this was to attract a
opportunities are quite different to what they take a serious look at their operating models diversity of thought to the business, he said.
were two years ago or three years ago,” he said. and at re-defining their corporate strategies,
adding that now was the first time he had “I do think innovation in our capital
“There has been huge pressure on heard some of his senior contacts discuss intensive industries is the one thing we can
optimisation, but I am seeing more challenging their business strategies in the past really nurture here,” he said. l
conversations about where growth is and seven or eight years.
where growth is going to come from than I
have for probably the last two or three years “This is the first time that I have heard
them saying we are getting together, we are
having strategic planning sessions and we are
CELEBRATING 34 YEARS OF PUBLISHING IN AUSTRALIA ENERGY PUBLICATIONS 41
OIL & GAS AUSTRALIA
Price fluctuations unlikely to impact oil
and gas industry trajectory
BY MIKE LYNN, NATIONAL LEADER, 6. National and integrated oil companies: So, Singapore? Or Shanghai? Australia’s
OIL AND GAS, DELOITTE. evolving dynamics – It is currently hard LNG trade should hedge its bets and retain a
THE CYCLICALITY of the oil and gas to foresee a future where international oil foot in both.
industry, including recent price plunges, is companies don’t play a pivotal role in oil and
unlikely to impact the long term trajectory gas exploration and production. LNG prices: a buyer’s market
of the sector, Deloitte has found. Around 60 million tonnes of additional LNG
The global gas industry has, of course, supply will come just from Australia in the
However current fluctuations may speed up been built on long-term investments, and has next 24 months, just as buyers are challenging
a number of global industry trends. successfully emerged from cyclical downturns some of the long held basics of pricing and
in the past. contracting.
The 2015 edition of Deloitte’s global Oil and Our projects are generally tied to the legacy
Gas Reality Check report highlights six key The last 12 months have certainly brought model that includes long-term contracts and
issues/trends: further changes to industry fundamentals, prices indexed to oil. But Australia simply isn’t
including expansion and contraction on a competitive in its current state and things need
1. Shift in supply-demand fundamentals – number of fronts. to change.
Fluctuating industry dynamics are fuelling a Local operators need to respond to
power play between traditional and new oil Macroeconomic conditions, demand-supply changing customer demands and focus on
suppliers balance, regulatory constructs, cost of inputs, margin improvement by targeting cost and
commodity prices, competitive behaviour, the productivity gains if they are to achieve their
2. New trading patterns emerging – As oil impact of geopolitics, and the related use of full potential.
and gas supply and demand fundamentals energy as a diplomatic tool are all coming into
continue to evolve, new global trade patterns play, and impacting different countries and Investing in innovation: the cost of complexity
are emerging markets, in different ways. Getting costs and productivity corrected
to match the new price environment is a
3. OPEC: under pressure – OPEC currently Three of the trends are particularly relevant competitive imperative.
supplies approximately 32 per cent of the for Australia’s LNG sector. Our LNG sector, and this includes suppliers
world’s crude oil, however, its market share will and contractors, needs to have a cost and
fall by 5% by 2018 as the supply of US tight oil Shift in supply-demand fundamentals productivity profile that is cost competitive and
picks up The global centre of demand for economically viable at US$50 per barrel.
hydrocarbons has shifted from the US to Asia, But improvements are only going to come
4. LNG prices: a buyer’s market – The price and most new supply of oil and gas will be via a focus on innovations across people, data
of LNG was once a model for stability, but it is absorbed by demand in Asia, on Australia’s and organisation and where the sector does
less so now. Until prices stabilise, natural gas doorstep and our core LNG export market. away with its traditional ‘go it alone’ attitude
will trade in more geographically proximate Asia is central to Australia’s LNG future and collaborates at every opportunity.
regions as our operators shape-shift this year from
construction to marketing and trading, but Mike Lynn is Deloitte’s national leader Oil
5. Investing in innovation: the cost of a question remains over where to locate the and Gas. He is based in Perth. l
complexity – Capital spending is likely to fall trading function. Singapore is angling to be the
off in the near term, however megaprojects dominant centre for the region, but China is
will still be required to meet long-term global also likely to emphasise Shanghai as its trading
energy demand hub.
New thinking needed for difficult future
NEW WAYS of thinking are needed for oil and that is a positive, that is going to create challenging our corporate strategy,” he said.
and gas companies to find a way forward opportunities.”
in the current tight market conditions, “That also says they are undergoing quite
according to professional services firm It was, he said, a difficult challenge, as a shift in where they thing their business
KPMG. the demand was now for people skilled in strategies are going.”
operating facilities, rather than building them.
The group’s national oil and gas sector leader “If you want to have a strategic Human
Jonathan Smith told the Australian Mines and It also came at a time when Australia’s dollar Resources conversation, I think there is a great
Metals Association’s 2015 Resource People had fallen against foreign currencies, making opportunity to get beside the executives and say
National Conference that Australia’s two-speed roles in Australia less attractive to skilled – what are the capabilities we are talking about?
economy had changed the other way, with expats from Europe and the United States. What capabilities do we need to be growing,
resources states now in reverse. nurturing, bringing in?”
In accessing these potential growth areas,
“I do think there are opportunities but the Mr Smith said it was important that companies One way of going about this was to attract a
opportunities are quite different to what they take a serious look at their operating models diversity of thought to the business, he said.
were two years ago or three years ago,” he said. and at re-defining their corporate strategies,
adding that now was the first time he had “I do think innovation in our capital
“There has been huge pressure on heard some of his senior contacts discuss intensive industries is the one thing we can
optimisation, but I am seeing more challenging their business strategies in the past really nurture here,” he said. l
conversations about where growth is and seven or eight years.
where growth is going to come from than I
have for probably the last two or three years “This is the first time that I have heard
them saying we are getting together, we are
having strategic planning sessions and we are
CELEBRATING 34 YEARS OF PUBLISHING IN AUSTRALIA ENERGY PUBLICATIONS 41
