LNG ‘clusters’ to bring down costs
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.”
inpex’s ichthys onshore processing facilities near Darwin.