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Deloitte: Oil and Gas cost reductions critical

By Rob Starr, Content Manager, Big4.com

According to Geoffrey Cann, Deloitte National Director for Oil and Gas, Australian gas operators need a greater understanding of the energy demand in the Asian market as well as much leaner operations if they are to remain globally competitive in the long term.

Mr Cann said that most Australian LNG projects are joint ventures with long term supply contracts already locked in across Asia and, as a result, the impact of LNG competition from the US would be limited to price reductions on cargoes not under contract. However, he warned that the playing field was going to alter dramatically and local operators should be seeking their own economic modelling and research to understand the impacts.

“If Australia is going to be a competitive player in the LNG market operators need to understand their cost footprint to determine whether their operation will be a marginal one in the context of changing demand and pricing conditions.”

“At present, the Australian industry is relying on strong long term export prices in excess of $15/mBTU to cover high production costs as well as fund the capital expenditure that’s been necessary to develop and expand these LNG megaprojects.”

Mr Cann said the Australian industry could also benefit from a fresh perspective in some areas and from working collaboratively to solve industry wide problems.

“There are some areas where competing operators can work together for the greater good. One example we’ve seen in other global hydrocarbon basins is in the areas of water management.  Companies realise that there’s no competitive advantage to be gained in being best in class in water management, and recognise there are benefits to the industry as a whole in managing the issue collaboratively.

“Another area where operators could benefit from a change in perspective would be in the management of Queensland’s coal seam gas industry where applying manufacturing approaches to their gas field operations would likely deliver improved productivity.”

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