LNG ‘clus­ters’ to bring down costs

The Australian Energy Review - - NEWS - El­iz­a­beth Fabri

AUS­TRALIA’S liq­ue­fied nat­u­ral gas (LNG) in­dus­try must ‘fun­da­men­tally re­think’ its ap­proach and op­er­at­ing model if it wants to com­pete with global peers, Deloitte oil and gas leader Ber­nadette Cul­li­nane has said.

Speak­ing at the South East Asia Aus­tralia Off­shore and On­shore Con­fer­ence (SEAAOC) in Dar­win in Au­gust, Ms Cul­li­nane said high op­er­at­ing costs of Aus­tralian LNG projects, driven by their com­plex na­ture and re­mote lo­ca­tions, were much higher com­pared to coun­tries such as Qatar, the US, Rus­sia, West Africa and Malaysia.

“Cap­i­tal in­vest­ment in Aus­tralia is de­clin­ing and there hasn’t been an LNG fi­nal in­vest­ment de­ci­sion (FID) since 2012; what hap­pens next will be in­ter­est­ing,” Ms Cul­li­nane said.

“Given con­struc­tion timescales, new LNG FIDS, such as in­vest­ment in back­fill­ing ex­ist­ing fa­cil­i­ties with new sources of gas, need to be taken now.

“For Aus­tralia to ac­tively par­tic­i­pate in the next gen­er­a­tion of sup­ply, some­thing needs to hap­pen to make the un­der­ly­ing project eco­nomics more at­trac­tive for devel­op­ers and in­vestors.”

Ms Cul­li­nane said there were many ways Aus­tralia could im­prove com­pet­i­tive­ness, for ex­am­ple es­tab­lish­ing ‘eco­nomic clus­ters’ in Dar­win, Kar­ratha and Glad­stone, where com­pa­nies would be co-lo­cated with lo­cally based sup­pli­ers, spe­cialised ser­vice providers, re­search or­gan­i­sa­tions, and gov­ern­ment bod­ies.

“Stud­ies of eco­nomic devel­op­ment in ad­vanced coun­tries have shown firms co-lo­cated in clus­ters are more likely to be more in­no­va­tive, pay higher wages and achieve greater pro­duc­tiv­ity than firms that are ge­o­graph­i­cally iso­lated with fewer lo­cal link­ages,” Ms Cul­li­nane said.

“This ap­proach is also ad­vo­cated by the NERA and METS Ig­nited, the in­dus­try growth cen­tres for en­ergy and min­ing equip­ment and tech­nol­ogy ser­vices, re­spec­tively.”

Dar­win, in par­tic­u­lar, was uniquely po­si­tioned to be de­vel­oped as the first re­sources in­dus­try clus­ter in Aus­tralia.

“Dar­win is the home to sev­eral new, world-class oil and gas fa­cil­i­ties as well as a crit­i­cal mass of firms in re­lated in­dus­tries, in­clud­ing trans­port, ser­vices, min­ing, agri­cul­ture, de­fence and tourism,” she said.

“All firms would stand to reap the ben­e­fits of the clus­ter and sig­nif­i­cantly im­prove com­pet­i­tive­ness.”

Im­age: IN­PEX.

in­pex’s ichthys on­shore pro­cess­ing fa­cil­i­ties near Dar­win.

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