While times are tough for the Australian oil and gas industry, emerging LNG export markets and the potential to tap into previously unconventional reserves, are providing a positive focus for the industry’s major players.
When the industry gathered in Melbourne for the 2015 APPEA conference and exhibition, the current difficult market conditions impacted the mood at the event. However there was no denying the positivity surrounding both Australia’s LNG export industry, and our growing potential to tap into the nation’s vast unconventional resources.
During his opening address, APPEA Chairman, Bruce Lake, noted that Australia will soon be the world’s largest LNG producer, thanks to the massive developments of the offshore North West Shelf in Western Australia, and the CSG to LNG projects operating out of Gladstone, Queensland.
In particular, Mr Lake noted the impact of the CSG to LNG projects, which have transformed the Queensland economy and revitalised regional communities in recent years – and will continue to provide governments with billions of dollars in export revenues for decades to come.
“Australia is in the box seat to lead the world in the development of this exciting new high technology sector,” said Mr Lake. “These projects will provide Australia with up to four decades of substantial export income and significant government revenues. They will also create high-paying, long-term operational jobs and foster a vibrant service industry.”
Forget about peak oil
Mr Lake also noted that the capacity for innovation that has delivered some of the great industry achievements of the past decade has also driven a dramatic fall in the oil price.
“Only a few years ago, everybody was fretting over peak oil. The good news is – we’ve stopped talking about that problem. The industry’s ability to tap previously uncommercial reservoirs through cutting edge technology and innovation has dramatically increased supplies.”
The benefit of being able to tap into previously uncommercial, unconventional oil and gas reserves – in the US and Canada, and now increasingly in Australia – is that there is significantly more supply in the global energy market, driving the oil price down drastically.
Mr Lake noted that while the market conditions provide the industry with a significant challenge, it also presents opportunity for innovation.
“This price correction is painful, but we have reacted quickly and effectively as we have done to previous challenges and we will be the stronger for it,” said Mr Lake.
“We are returning to fundamentals, reducing costs and increasing productivity. It is painful, it is difficult, but it is necessary.”
Sombre mood; but prospects remain strong
There’s no denying that the crowd at APPEA 2015 was somewhat sombre – given the market conditions it would be strange if it was anything but. Exhibitor and delegate numbers were also down on previous years, a reflection of the industry’s current operating position.
In talking to delegates at the event, many have been involved in the oil and gas industry for decades, and they have seen tough market conditions come and go – they understand that the oil and gas industry is a cyclical one; the massive boom of the previous decade was always going to have to correct itself at some point along the way.
Explorers and producers are adopting a ‘back-to-basics’ approach, focusing on bringing their “known quantity” reserves to market, and keeping an eye to the future, which, as conventional deposits wane, undoubtedly lies in the development of unconventional reserves.
APPEA Chairman noted that prospects for the industry remain strong – but he added a warning that governments must play an active part in helping to facilitate future growth.
“Despite our current challenges, all forecasts agree that the oil and gas industry’s contribution to the nation will continue to grow,” said Mr Lake.
“But the extent of that growth depends on decisions made over the next few years. If both industry and government play their part, the Australian oil and gas industry can go from strength to strength.”