Sector Competitiveness Plan

Sector Competitiveness Plan

2017

NERA’s vision is to maximise the value to the Australian economy by having an energy resources sector which is globally competitive, growing, sustainable, innovative and diverse.

Registered office:Australian Resources Research Centre Level 3, 26 Dick Perry Avenue Kensington WA 6151

ABN 24 609 540 285

T: (08) 6555 8040 E: [email protected]: www.nera.org.au

@NERAnetwork NERA – National Energy Resources Australia

3National Energy Resources Australia – Sector Competitiveness Plan 2017

Contents

About NERA 4 About this Document 5 Foreword 6

1 Executive Summary 8

Executive Summary 10

Introduction to this SCP 14 Sector Themes 19

Roadmap to the Future 32 The Three Levers to a Strong Future 33 Regulations 34 Pathway to a Sustainable, Resilient, Energy Resources Sector 34 Knowledge Priorities Action Plan 35 Key Performance Indicators 40

2 Global and National Challenges 48

Global Megatrends and Implications for Australia’s Energy Resource Sector 50 Global Megatrends 51 An Emerging Megatrend – The Search for Energy Security 54 An Environment of Disruption 55 Impact of Global Megatrends on Australia 56 Australia’s Response to Sector Trends 57

Current State of the Energy Resources Sector 60 Australian Oil and Gas Industry 65 Australian Coal Industry 70 Australian Uranium Industry 74 Transition from Rapid Growth 77

Sector Benchmarking 78 Oil and Gas Industry Competitiveness Assessment 2016 80 Coal Industry Competitiveness Assessment 2016 87

3 Sector Challenges and Knowledge Priorities 94

Sector Wide Challenges and Opportunities 96 Sector Wide 97

Sector Specific Challenges, Constraints and Opportunities 98 Australian Oil and Gas Industry 98 Australian Coal Industry 101 Australian Uranium Industry 102 Cross Sector Challenges and Opportunities 103

How the Australian Energy Resource Sector Should Respond 104 The Three Levers to a Strong Future 104

Sector Knowledge Priorities 108

Capability and Leadership 114

Business and Operating Models, Technology and Services 128

Regulatory Environment 144

Glossary 149

Definitions 149 Stakeholder Consultation Process 149 Acronyms 150

Bibliography 151

4 National Energy Resources Australia – Sector Competitiveness Plan 2017

About NERA

The Australian Energy Resources Growth Centre (AERGC Ltd), trading as National Energy Resources Australia (NERA), is an industry-led, government-funded initiative, which aims, through a national focus, to improve competitiveness, collaboration and productivity by focussing on reducing cost, directing research to industry needs, improving work skills, facilitating partnerships and reducing regulatory burden.

NERA forms part of the Australian Government’s Industry Innovation and Competitiveness Agenda. It is one of six national Industry Growth Centres established to drive innovation, productivity and competitiveness in sectors of competitive strength and strategic priority for Australia, and to increase employment and opportunities for small and medium sized enterprises (SMEs).

NERA will work to support the Australian energy resources sector to identify and deliver projects and activities to enhance the sector’s innovation, competitiveness and productivity. The long-term objectives and strategic outcomes of the sector cannot be delivered by NERA alone, and will require commitment from industry leaders, government, research organisations and other key stakeholders.

NERA’s vision, mission and strategies were developed as a result of early stakeholder consultation to develop the proposal to establish NERA. Key sector themes have informed the consultation which was undertaken to develop the 10-year Sector Competitiveness Plan, including the knowledge priorities, strategic goals and focus areas for the sector.

VisionTo maximise the value to the Australian economy by having an energy resources sector which is globally competitive, growing, sustainable, innovative and diverse.

MissionThrough a national focus, grow collaboration and innovation to assist the energy resources sector manage cost structures and productivity, direct research to industry needs, deliver the future work skills required and promote proportionate fit for purpose regulation.

Six StrategiesNERA will achieve our vision though six strategies:

1. Connect industry stakeholders to promote collaboration.

2. Facilitate deeper engagement between industry and researchers.

3. Support industry growth through policy and regulation.

4. Promote industry sustainability through fostering a greater understanding of the social, environmental, economic and operational consequences of industry activity, and by promoting trusted, inclusive custodians of scientific data.

5. Develop and support initiatives to focus on work skills of the future.

6. Identify and facilitate growth of new opportunities for the energy and resources industry value chain domestically and globally.


About this Document

This Sector Competitiveness Plan (SCP) will underpin the efforts of the Australian energy resources sector to increase the competitiveness and sustainability of the Australian oil and gas, coal and uranium industries. To achieve this, the SCP sets out a strategic road map over a 10-year horizon, including key themes, knowledge priorities, goals and initiatives. These will be addressed through industry led projects.

This SCP considers the trends and influences impacting the entire Australian energy resources sector and identifies broad challenges, constraints and opportunities both at a sector-wide and industry-specific level. Many of the challenges and opportunities identified are common across all three industries of oil and gas, coal and uranium, while others are specific to one; these differences are highlighted in the body of the plan.

The SCP is a foundation document for NERA. It presents the challenges and opportunities faced by the Australian energy resources sector and describes how NERA will assist the sector to address key priorities to enhance innovation, competitiveness and productivity. This document will be updated annually. It will necessarily evolve if it is to remain relevant over the next 10 years as goals are achieved, the sector’s priorities change and the opportunities to capture change and disruption both globally and locally continue to evolve.

The document is presented in three major sections:

Section 1 comprises an executive summary to the document, highlighting the SCP’s key material and subjects, and the roadmap to the future which sets out NERA’s plan and the key performance indicators (KPIs) being used to measure the sector’s progress.

1

Section 2 discusses the global megatrends that are changing the face of the energy resources sector and how those trends are impacting Australia. It then places the Australian energy sector into perspective with both the background to each industry and the historic trends that have resulted in the current state of the industry, before presenting the results of sector benchmarking that NERA has commissioned into the oil and gas, and coal sectors.

2

Section 3 considers the sector wide and individual industry challenges and constraints, then discusses each of the NERA knowledge priorities and initiatives in detail, as well as offering some case studies that have helped inform the initiatives currently being developed.

3


Foreword

An Industry on the Move: Navigating an Age of Innovation and DisruptionAs this document goes to print, the Australian energy resources sector is on the move, and in exciting ways.

Energy resources will continue to make a significant contribution to the economic growth of Australia for the foreseeable future. However, as the world’s energy balance continues to evolve the sector must adapt to remain competitive, productive and sustainable.

It is well understood that the sector is nearing the conclusion of an unprecedented level of investment and construction. At the same time, the sector faces a perfect storm of disruptive and significant threats and Australia as a nation must find a path to a low emissions economy whilst also securing both energy reliability and affordability for all.

In the face of this storm, it is tempting to batten down the hatches and retreat into the pursuit of individual solutions. Yet significant challenge can also trigger much needed change and unlock huge opportunities - opportunities that can only be realised to their full potential by working together to innovate, transfer knowledge and commercialise value.

As an industry, we have a long and proud history of pioneering, discovery, problem solving and invention. Over decades, the Australian energy resources sector has delivered critical infrastructure, some of the world’s newest high technology production facilities and significant high quality natural resources, while reliant on and underpinning the development of a well-educated and highly skilled workforce. Additionally, we have the advantage of proximity to the Asian economies, world leading capabilities in remote operations and low carbon emissions technologies, a strong and growing start-up community, world class research facilities and knowledge and a strong tax incentive scheme for research and development.

In recent times, faced with a volatile commodity price environment and increasing global competition, the focus of energy resource companies has necessarily been to significantly lower capital costs and improve efficiency and profitability. This focus on efficiency will ensure the sector has the fundamentals right and, combined with our existing strengths and advantages, provide a solid base on which to build for the future.

The next phase of change though is far harder. Relying on incremental changes to yesterday’s practices is a sure recipe for stagnation and ultimately decline. For the Australian energy resources sector to remain globally competitive and able to rapidly adapt in an age of disruption and innovation, we will need to seek transformational change.

It will take strong leadership and skilful navigation by all parties - governments, industry, the technology and service sector and research organisations - to find sensible and practical solutions that the community will accept, and to innovate to support a globally competitive and sustainable sector.

Transformational change requires bold and insightful leadership and a willingness to find and break through barriers. For example, if the energy resources sector is to harness the huge efficiency benefits and competitive advantages to be had from the explosive growth of technologies, including advanced manufacturing techniques, automation, 3D manufacturing (with plant able to be printed onsite to meet immediate need), drones (to take over remote, offshore exploration and significantly reduce cost), and the Internet of Things (including cloud computing, mobile computing, embedded computing and consumer electronics), then we must unlock our intellectual property and move away from a reliance on closed, single sourced and bespoke solutions. We need to commercialise our huge investment in research and knowledge, and adopt open, multi-vendor approaches that deliver improved products and capabilities to a global market.


FOREWORD

Such changes will enable operators and miners to form new relationships with technology vendors across the value chain, and for the technology vendors to collaborate with each other and bundle products and services, for example in formal clusters to lower the risks of failing and maximise the benefits that new technologies can provide for all.

This new digital environment, as well as changes to the sector’s commercial and operating models, will also result in the need for a very different mix of skills. The sector needs to build a comprehensive understanding of its future skills requirements in terms of scope, scale, skills and experience, and collaborate with governments and other skills development stakeholders to set out a clear plan for building that capability.

From an energy perspective, Australia is currently facing a number of serious challenges, and urgently needs a clear and cohesive pathway for its transition to a low emissions future and to underpin economic development. To get there will require substantial, highly funded collaboration in selected areas between industry, research institutions and government. For example, Australia could secure a strong carbon capture and storage technology advantage, and there is potential to both develop and commercialise low emissions technology and to transfer and export that knowledge and capability globally. The research has been done and the next stage is demonstration and deployment. However, for this to occur it will require funding in the order of billions of dollars, and this will be difficult to obtain without clear priorities and concerted effort by all parties.

A vibrant exploration industry is also critical to the ongoing supply, security, reliability and affordability of Australia’s energy supply. NERA’s global competitiveness benchmarking shows that in oil and gas we have an attractive environment for exploration, but we are at the lowest point in decades for exploration activity (both onshore and offshore). This low level of activity is driven by a combination of low commodity prices, high cost, government red tape and community opposition. A priority for immediate action is, that the state governments and regulators address approvals for onshore gas projects on a case by case basis, and not proceed with blanket moratoria. For the coal exploration sector, according to the 2015 Fraser Institute Survey of Mining Companies, 55 per cent of respondents in Queensland and New South Wales reported that regulation uncertainty had a negative impact on the states’ investment attractiveness, versus only 13 per cent in Western Australia. Australia must make progress in creating an attractive exploration environment across the whole energy resources sector and for new and existing firms.

Achieving a stable and high-performance regulatory environment across all jurisdictions is critical. Regulation needs to support economic development and innovation, whilst providing for independent, transparent and objective oversight of industry activities and measurable environmental performance proportionate with risk. This will assist in securing the acceptance of Australian communities. The focus needs to be on risk based, transparent and outcome focussed regulation which requires strong demonstration of and accountability for, industry performance, whilst also encouraging innovation.

In conclusion, the size of the prize is significant for everybody. NERA’s benchmarking to date has identified the potential to unlock AUD$5 billion of value in the oil and gas sector, and AUD$4.5 billion of value in the coal sector. We will be identifying the uranium sector’s potential to create value in 2017. Australia has the potential to continue to supply innovative products, capabilities and services for many years to come to meet both domestic and international energy resource needs, generate substantial revenue for the nation and grow an export orientated sector.

This Sector Competitiveness Plan represents the collective wisdom and insights of all stakeholders across the Australian energy resources sector. During our extensive consultations, it became very clear to us that there is strong commitment and passion for achieving a competitive, innovative and sustainable sector, and that the sector remains vital to Australia’s economic development and low emissions future.

NERA is committed to working with stakeholders to pursue strategic initiatives and projects that will assist the energy resources sector adapt to current and future challenges and disruption.

We would like to thank you all for your support and valuable input into this roadmap for the sector’s future, and we look forward to working with you on this journey of change.

Miranda Taylor Chief Executive Officer

Ken Fitzpatrick Chair


EXECUTIVE SUMMARY

1

This section provides a stand-alone summary of the Sector Competitiveness Plan for the Australian energy resources sector.

It provides an executive summary, an overview of the key themes, the challenges and opportunities facing the Australian energy resources sector, and a road map to achieve a vision for innovation, improved productivity and sustainability and a globally competitive service and technology sector. The road map identifies three key business levers to a strong future, sets out nine knowledge priorities with initial key performance indicators against which the changes in the sector can be tracked over the coming decade.


This Sector Competitiveness Plan (SCP) has been produced to provide a cohesive and comprehensive call to action for the Australian energy resources sector. It is the product of an extensive industry consultation process and review of the contemporary literature on both the sector and the broader global trends affecting the sector into the next 10 years. This SCP identifies the challenges and opportunities that the sector must navigate in the coming decade, based on the current landscape. It proposes a structured and evolving series of knowledge priorities to be addressed in order to build on the industry’s existing strengths, and create an adaptable, resilient and sustainable Australian energy resources sector.

Executive Summary


The value added to the Australia economy from the Australian energy resources sector, comprising the coal, oil and gas and uranium industries, has been and continues to be huge. Combined, the sector directly provides approximately 89,800 jobs with a gross value add of $42.2 billion (2015/2016). Coal and gas are the nation’s largest commodity exports after iron ore, providing a safe and secure energy source to our trading partners. The scale of the sector makes the nation largely self-sufficient in energy and provides the fuel needed to underpin many industries and the lifestyle of a developed nation.

After decades of capital investment, innovation and operation, the Australian energy resources sector has many strengths that it can build on, including some of the world’s newest high technology production facilities, a well-educated and highly skilled workforce and significant high quality natural resources. These attributes are supported by Australia’s proximity to the Asian economies, world leading capabilities in remote operations and low carbon emissions technologies, a strong and growing start-up community, world class research facilities and knowledge and, a strong tax incentive scheme for research and development. With these strategic advantages, the sector has the potential to continue to supply both domestic and international energy resource needs for many years to come, to continue to generate substantial revenue for the nation and to grow an export orientated service and technology sector.

However, the Australian energy resources sector is facing a number of individual and systemic challenges. How the sector reacts to them will determine whether it continues to thrive as one of the world’s principal sources of energy, or stagnates under the burden of current global and economic pressures.

Internationally and domestically, society is facing increasing energy security challenges. In the international energy market, many developed nations are seeing the end of their domestic energy supplies and are looking to international sources for the energy resources they need to fuel their economies and societies. Domestically, Australia is struggling with changing societal and political drivers, with both short and long term impacts on the security and affordability of the energy needed to attract and fuel businesses.

As set out in this SCP, the sector must react to volatile commodity prices, a rapidly evolving energy marketplace, changing societal energy expectations, an increasingly complex regulatory environment and a rapidly evolving global energy mix. Only by working together, with producers, service suppliers, research and educational communities all collaborating, will the sector be able to deliver its future potential.

To unlock this potential, the sector needs to use the three levers of building contemporary business models, enhancing operational models and technology capabilities and improving capacity, skills and culture, while also addressing the regulatory environment in which the sector operates. Through addressing these levers, the sector will remain competitive while creating future markets and customers.

• Buildingcontemporarybusinessmodels – involves building new markets, new customers and new services through the entire value chain. It requires, for example, providing turnkey solutions to customers rather than simply the resources used to generate energy, finding new export markets for our LNG operations and maintenance knowledge and expertise, and delivering clean technologies. It involves building new, collaborative relationships within the entire energy resources value chain, global partnerships to access global supply chains, and other industry sectors such as advanced manufacturing, defence and shipping.

• Enhancingoperationalmodelsandtechnologycapabilities – the sector urgently needs to reduce process complexity and waste, to standardise operating practices and to collaborate through initiatives such as research/industry precincts, multi-user technical facilities and establishment of industry and innovation clusters (clusters can force-multiply investment, reduce risk for the participants and commercial contributors, and speed innovation; vendors can achieve critical mass and collaborate to provide scale and ease of access for export opportunities). The sector could work together to optimise processes through the development and adoption of disruptive technologies such as machine learning and diagnostics, 3D printing, advanced materials and new ways to build small scale, economically viable plants which require minimal capital investment to maintain production. There are further opportunities for the sector to share non-competitive and pre-competitive information such as environmental and meteorological data.

EXECUTIVE SUMMARY

EXECU

TIVE SU

MM

ARY


• Improvingcapacity,skillsandculture – the sector needs to find ways to maintain and build its skill base, both to operate its existing facilities and to prepare personnel to become ‘operators of the future’, with the commercial skills needed to develop new markets, customers and services. As the sector drives productivity and efficiency, companies are looking to optimise plants and work processes, and are increasingly adopting automation, digital technologies and collaborative teams. This requires industry to develop new capabilities, workforce skills and attributes.

• Addressingtheregulatoryenvironment – to facilitate innovation, improve productivity and competitiveness and secure both future investment and a sustainable economy, Australia needs a modern, best in class regulatory environment. The energy resources sector needs consistency, efficiency and flexibility to allow innovation, whilst working within a regulatory framework that provides the community with transparency on, and confidence in, regulators’ decision-making processes and the industry’s performance and where the regulations in place are proportionate to the risks being controlled. The sector itself can work collaboratively on its own internal standards to ensure alignment across the sector, and cooperatively with governments to reform regulation to focus on high performance outcomes. Australia needs to re-establish its reputation as an attractive business environment and a destination for future investment.

Moving from current operating models to those of the future will require ongoing incremental change together with more disruptive, transformational change. Incremental change, with the occasional adoption of a major technological innovation, has largely been the standard operating practice for the majority of business. While this approach provides a relatively low risk, predictable environment, it is only capable of maintaining the status quo because an incremental approach is also adopted by peers and competitors alike. Transformational change, while offering large potential opportunities created by changes to business models, operating models and culture, comes with higher risk. However, only through accepting this risk in a considered way, and pursuing the opportunities created through transformational change will the Australian energy resources sector move ahead of the competition into a sustainable and resilient future.

Business and operating models that can adopt and deploy transformative, plug-in technology or combinations of disruptive technologies offered by small to medium enterprises will accelerate cost savings, improve efficiencies and experience improved productivity. By way of example, working directly with unmanned aircraft systems, continuously collecting high-definition seismic data onshore or offshore, delivered in real-time directly into the operator, with real-time geophysics analytics, reducing seismic interpretation from many months, to a few days or even hours, adjusting as new data streams into the business. Or, building microscale plant using remote advanced manufacturing techniques, commissioned, operated and maintained remotely through onshore or offshore remotely operated vehicles.

This SCP, therefore, proposes a number of incremental and transformational changes for the energy resources sector. It offers a timeline to pursue the changes, and provides research-based benchmarking of the industries that show where the greatest opportunities can be found now and in the future. It proposes a series of Key Performance Indicators (KPIs) against which future change can be measured and adjustments made over time.

It is incumbent on all parties in the Australian energy resources sector to consider these changes and collectively work to implement them, both collaboratively and in constructive competition. The sustainability of the industry depends on the actions taken in the next few years. There is a real opportunity to transform the industry and unlock its full potential.

EXECUTIVE SUMMARY


LNG exported

Proven gas reserves

Shale gas

Oil products imported

Known world resources

Coal seam gas

Conventional gas

GAS

GROSS VALUE ADD (2015/2016)

42.2 BDIRECT EMPLOYMENT

89,800 jobs

Oil and gas

Coal

Petroleum and coal product manufacturing

Uranium

OIL

URANIUM

71 Mt

437 Tcf

$24 B

30%

Oil products exported

$11 B

235 Tcf

227 Tcf

Coal exported

COAL

375 MtReserves

37 Bt

Annual world supply

11%

EXECU

TIVE SU

MM

ARY

Legend: Mt = million tonnes per annum, Tcf = trillion cubic feet, B = billion, Bt = billion tonnes

Australian Energy Resources Sector


Australia is one of the world’s top producers and exporters of natural gas, coal and uranium. With the combined value of exports to the Australian economy estimated to be around $60 billion 1 the sector creates valuable jobs, export income and tax revenue. The anticipated sustained growth in energy demand presents significant opportunities for Australia.

Introduction to this SCP


While Australia’s current role in the energy resources market is a strong one, the rapidly evolving global energy market, together with growing societal environmental awareness, global commitments to reduce carbon emissions and the increasing economic and technological viability of alternative energy sources require sector wide adaptation. The Australian energy resources sector represented by NERA, and comprising the oil and gas, coal and uranium industries, must embrace this change to secure its role in powering the world and contributing to a clean and sustainable future.

As a result of the significant investment in, and development of, knowledge and technical capabilities and skills, the Australian energy resources sector is well-placed to compete globally and unlock new investment, supply chain efficiencies and export opportunities. To maximise this potential, the sector must improve the efficiency and competitiveness of both exploration activity and existing operating assets as a priority. It must rapidly adapt and transform through:

Business Models

• Newmarkets

• Newcustomers(includingproviding turnkey energy solutions across the value chain)

• Newcollaborativepartnerships,acrossvalue and supply chains, with the research sector and with other industry sectors, to leverage scale and cross sector transfer of knowledge

• Technologyandcapability

Operating Models and Technology Capabilities

• Radicallyreduceprocesscomplexity and waste

• Collaborateandstandardise

• Sharelogisticsandregionalsupply bases

• Removeunnecessaryandbespokestandards and conditions

• Shareenvironmentalresearch

• Optimisethroughautomation

• Digitaltechnologyandadoption of advanced manufacturing systems and technologies (such as 3D printing and new materials)

• Developandoperateminiplants to enhance the ability to scale up and down and adapt to a more distributed world

Culture, Capabilities and Skills

• Leadershipforcollaboration

• Commercial

• Digital,automation

• Innovationandentrepreneurialrisk taking

• Baselineskillsstudies

• Commoncompetencyframeworks and future skill requirements

To be competitive in the sector, Australia will need to be:

• Atop-rankedjurisdictionforenergyresourcesinvestment;

• Acentreofinnovationacrossthelifecycleofenergyresourcese.g.exploration,development,operations and maintenance and decommissioning, and within the community of supporting technology companies and service providers; and

• Positionedtocapitaliseonthedevelopmentsinglobalandregionaleconomies,andtherapidlychanging energy mix.

INTRODUCTION TO THIS SCP

EXECU

TIVE SU

MM

ARY


To achieve these strategic outcomes, the Australian energy resources sector must overcome the following challenges:

• Legacyofpoorproductivityperformanceduringthehighcapitalinvestmentphase,andtheneedtodrive improved asset and labour productivity in the operations phase;

• Tighteningoperatingmargins;

• Addressingthesocial,economicandenvironmentalimpactsofenergyresourceextraction,productionand use, and building community engagement with the sector and a social licence to operate;

• Adaptingtothelowcarbonemissionsenvironment,cleantechnologiesandchangingglobalenergymix;

• Complexityofgovernmentregulationandapprovals;and

• DevelopingthecapabilitiesofAustralianorganisationsatalllevelsinthevaluechainsupportingthesector, and driving deeper engagement between the research sector and SMEs within the service sector.

This SCP provides a 10-year horizon road map. It sets out the key themes and strategies, the challenges, constraints and opportunities and then identifies the knowledge priorities, focus areas and initiatives that combined can ensure the Australian oil and gas, coal and uranium industries remain globally competitive, innovative, sustainable and diverse.

The SCP examines the challenges, constraints and opportunities in three ways:

1. It considers the evolving global environment and megatrends in which the sector must operate.

2. It examines the current state of the Australian energy resources sector, both as a whole and at the individual industry sector level.

3. It provides an overview of the ‘size of the prize’ to be had for Australia from improved competitiveness, through a series of sector global competitiveness assessments. The assessments and benchmarking will provide a base for year-on-year tracking of Australia’s performance.

Knowledge priorities and focus areas:

This review, undertaken through extensive domestic and international literature research, together with data gathering and stakeholder and industry consultations, has identified a set of knowledge priorities. These knowledge priorities in turn identify focus areas, areas where the sector needs to focus its short to medium term collective efforts.

Combined, these form a 10-year road-map for the sector, building on its strong knowledge and technology capabilities and skills base to ensure the Australian energy resources sector has a strong and growing future.

Building the strong future envisioned in this SCP requires the collective effort of all stakeholders in the sector to work together for the common good.

• Majoroperatorsoftheenergyresourcesector’sprojects,facilitiesandactivitieshaveasignificant part to play to support this future.

• Thesupplychain,whichprovidesthetechnology,equipmentandservicestotheoperatorsalsoplaysa major role in helping identify, develop and deliver innovative and practical solutions.

• Universitiesandresearchorganisationshaveacriticalroleinunderpinningtheknowledgeeconomy.They explore and identify new frontiers, new technology developments, new techniques and trials, create new methodologies and provide independent sources of trusted data.

• Educationandskillsprovidersneedtotrainandequiptheindustryworkersoftodayandidentifyandprepare for future Australian energy resources sector work skill demands.

• Governmentsplayacriticalroleinsettingaconsistent,clear,fairandobjectivepolicyenvironmentand supporting robust, independent and competent regulators and regulations that provide the community with confidence that the industry is accountable to high standards, whilst in parallel giving industry the ability to innovate and adapt within a stable and supportive framework.



In the days of the construction boom and high commodity prices, companies were able to act independently, without considering collaboration or building in options for third party access/usage in the future. Now that commodity prices have dropped significantly, and with increasing disruption in the energy mix, there is an imperative for companies to work together to develop mutually beneficial situations. This will take a change in the traditional mindset, for operators of existing assets to adopt more flexible operating regimes, and for regulators to support the new paradigm.

This SCP covers all parts of the energy resources life cycle, from exploration, development and execution, through the long production phase and into abandonment.

To address the role of all parts of the sector, this SCP outlines:

• CollaborationbetweenOperators/MinersandSupplyChain (technology and services and to build value chain opportunities).

• ResearchandInnovation (industry led, including research sector engagement with supply chain, to drive greater commercialisation).

• WorkforceSkillsandEducation.

• RegulatoryReform.

APPROACHThe SCP has been developed through a multi-step, iterative process. This process included a combination of desk top studies, industry and stakeholder consultations, meetings and workshops. Figure 1 below shows the key steps undertaken in developing the SCP.

Figure 1: Sector Competitiveness Plan development

Strategic Imperative

Strategic Engagement

Research Hypotheses Prioritise Socialise

NERA’s strategic goals

established

Early engagement with industry

Sector Competitiveness Plan knowledge priorities, strategies, projects

Identify global and national themes

Develop hypotheses,

test and refine through

workshops

Identify priorities and

initiatives

Further testing and refinement

The SCP provides an outline of priorities for the next 10 years which underpin a transformational program for the sector. While this SCP identifies plans for the Australian energy resources sector set against the challenges and opportunities in early 2017, it is an evolving document and will be updated on an ongoing annual basis to reflect changes in the marketplace.


EXECU

TIVE SU

MM

ARY


Figure 2 below sets out how NERA is facilitating new ways for stakeholders across the energy resources sector to work together to better adapt, drive innovation, access entrepreneurial investment, reduce costs and improve efficiency across the value chain.

Figure 2: Ten year transformation process

The transformation path: industry leadership and collaboration to deliver an energy resources sector in Australia that is innovative and adapting to a disruptive energy market

Formulating

Year 1-2Creating

Year 3-4

Participating and changing

Year 5-8

Leading and transforming

Year 9-10• FormingNERA

• Earlystakeholderengagement

• Initialalignmentwith vision, mission and strategies

• Clearvalueproposition

• Furtherstakeholderengagement on Sector Competitiveness Plan

• Identifyandbegintoconnect initiatives, organisations and networks

• Identifyopportunitiesfor industry and broad cross-sector collaboration

• Earlyindustrycollaboration focused on improving efficiency and performance

• Earlyparticipation in pilot initiatives and projects

• Growingindustryparticipation and engagement

• Earlyworkonanational work skills framework

• Beliefsandbehaviours are being challenged

• Willingnesstoshare,cooperate and challenge thinking

• Enhanceddatasharing

• Industry,innovationnetworks, entrepreneurs, researchers, value chain and venture capitalists actively collaborating

• Commoncompetency frameworks established

• Widerangeofsector stakeholders collaborating

• Newentrantstovalue chain with new capabilities

• Megadatasets/insights emerge – intelligently interrogating data and applying lessons learnt

• Workforceskillssupporting disruptive innovation and technology uptake

• Innovationsallowingthe sector to adapt more quickly

• Policyandregulationreforms supporting timely industry investment, activities and growth, whilst ensuring high industry standards e.g. social, environment and safety

• Industryisoptimistic and experiential

• Strongleadershipsupports collaboration - accepted normal way of working

• Industryableto harness entrepreneurial innovation and investment

• SCPaddressingmega trends and knowledge priorities resulted in measurable improvements to the sector’s competitiveness

• Developingnewinsights and capabilities

• Delivering‘newto the world’ operating models, markets, products, technologies and services

• Workinginnovationsystem increasing global demand for Australian value chain e.g. in areas of comparative advantage



Sector ThemesEight key themes have been identified and adopted by NERA and supported by the Australian Government. These themes represent the key opportunities for achieving sector wide improvements in competitiveness and sustainability through greater collaboration and knowledge sharing, and provide a framework for NERA and the industry to categorise initiatives and projects for further development, review and prioritisation.

These themes are:

Theme 1: Manage cost structures and improve productivity Improve management of high cost activities and focus on increasing efficiency and asset productivity to drive value creation through innovation and collaboration. Australia’s energy resources sector must aspire to be best in class in all phases, from exploration through operations and maintenance, to closure and abandonment.

Theme 2: Adopt predictive analytics (digital technologies)Improve industry operational performance through the application of digital technologies and a collaborative approach to the identification and resolution of operational issues. Through such an approach, the Australian energy resources sector can achieve global best practice operational performance, improve productivity and international competitiveness.

Theme 3: Drive deeper engagement with the value chainEnhance collaboration amongst supply chain organisations and operators to harness existing capabilities and identify solutions that will improve the competitiveness of the sector. Through deeper engagement new ideas will be brought forward faster, allowing the sector to become increasingly innovative.

Theme 4: Develop work skills of the futureFurther develop our understanding of the skills implications associated with new technology and innovation across the energy resources sector. Through collaboration, assist the education and training sector to respond effectively to these identified skill demands, building a workforce ready to engage with tomorrow’s technologies and challenges.

Theme 5: Drive industry-led researchPromote ‘industry-led’ research through stronger engagement between industry and research organisations. Encourage a more streamlined research funding application process and support universities in placing greater value on applied research, commercialisation and mid-tier and SME participation engagement pathways. Support the development of a reliable database of research related information.

Theme 6: Improve industry sustainability (social, environmental, economic) Improve industry sustainability through identifying and supporting leading practices in stakeholder engagement, to enhance understanding of the social, environmental, economic and operational consequences of industry activity, and by identifying and supporting trusted custodians of scientific knowledge.

Theme 7: Understanding and unlocking Australia’s future resource base Improve identification, appraisal and cost effective and sustainable development of marginal resources. Develop cost-effective and sustainable means to commercialise these resources to deliver significant economic, social and community benefits.

Theme 8: Achieve proportionate, fit for purpose regulationPromote effective policy and regulation that supports energy resources industry activities and provides the Australian community with confidence and trust in industry oversight by promoting: evidence and outcomes based regulatory frameworks; greater harmonisation of regulatory requirements between states and territories, and between the states/territories and the Commonwealth; acceptance of trusted international standards; and reduction of the regulatory burden on the energy resources sector.


EXECU

TIVE SU

MM

ARY


GLOBAL MEGATRENDSGlobally, the energy resources sector is facing a number of megatrends. Individually, each of these trends present significant change and challenge to the sector but when combined, they are resulting in operational and market disruption to which the sector must respond and adapt. Seven current and one emerging global megatrends are considered in this SCP:

UrbanisationTechnological

evolutionAsian

centuryChanging

energy mix

Globalisation of business

Changing demographics

Low carbon future

Search for energy security (emerging)

The disruption caused by these megatrends requires the energy resources sector to find new ways of working and to work together to innovate. These trends pose challenges but also opportunities for the energy resources sector, to maximise the value from existing industry investment, to adapt to the changing landscape and to build a competitive, resilient and sustainable future for the sector.

An environment of disruptionThese multiple trends, when considered together, form one overarching ‘megatrend’ – an increasingly disrupted energy market. This one megatrend is transformative, defines the present and shapes the future by its significant impact on societies, economies, industries, and organisations. It provides significant challenges and substantial opportunities to the sector, and the pace of change is likely to continue. Industry must be agile, adaptable and innovative and needs to build the organisational skills and attributes to stay at the forefront of the wave of disruption.

Impact of global megatrends on AustraliaAs a major supplier of the world’s conventional energy and as a country with its own established energy networks, the Australian energy resources sector faces a number of major challenges to remain competitive in the increasingly complex modern energy marketplace. While the global and regional demand for our resources in the energy market continues to be strong, internal changes in each market are placing additional complexity on what has, for a long time, been a relatively stable mix of energy demand.

How the Australian energy resources sector responds to this new environment will determine its future trajectory. The sector must be prepared to undergo both incremental and transformational improvements. Incremental improvements alone will not be enough to keep pace with change. Transformational change is required for the sector to keep pace with the shifting energy paradigm and compete with global challenges. Finding ways to exploit the opportunities presented by the disruptions will be vital to the future of the Australian energy resources sector, allowing it to continue to play a significant role in the global energy mix.



Incremental improvement

• Leaneroperations,asexemplifiedbythemanyoperatorsalreadyfocusingonincreasingassetutilisation;

• Bettermanagementofhighcostactivities,particularlyinnewprojectsandothermajorcapitalinvestments;

• Increasingmovementbyoperatorstowardsharinginfrastructurebothattheirfacilitiesandinlocations such as maintenance and supply bases;

• Collaborativeplanningoflabourandresourceintensiveplannedmaintenanceandupgradeactivitiesto avoid competition over labour and shop time;

• Staffreviewsatfacilitiesandinvariousnationalheadoffices;and

• Anincreasingdrivetoimproveproductivityfromnewandexistingassets.

Transformational improvement

• Developoperatingmodelsfocusingonnewandinnovativeapproachestoexecutionandbetterleveraging of existing capacity. Build on Australia’s highly regarded existing capabilities in areas such as remote operations and data analytics for process optimisation and decision making, to support operational and value chain optimisation;

• Expandourstrengthsinthedevelopmentofalternativeenergysourcesandactasabaselinecleanenergy source for Asia;

• Assistdevelopingnations,particularlythosetransitioningfromfossilfuels,tomeettheiremissionsreduction commitments by providing energy diversification;

• Increase‘energyliteracy’ofcommunities,governments,regulators,companiesandotherstakeholders;and

• Exportcleantechnologiestodevelopingcountries.Thiscouldincludelowcarbonemissiontechnologies,hybrid power generation, battery storage and carbon capture and storage (especially geosequestration where Australia’s geology provides a strong competitive advantage). Leading the development and adoption of these clean technologies is likely to help the sector strengthen its social licence, drive up the demand of our existing energy resource portfolio, as well as opening up new markets (i.e. gasification utilising coal deposits with low ash fusion temperatures).

An imperative to changeStanding still is not an option. The modern energy resources environment requires all sector participants to continually explore ways to change regulatory, business and operational models simply to remain competitive. As set out in this SCP, the Australian energy resources sector must find ways to:

• Collaboratemore-betweenpeerorganisations,verticallywithinvaluechains,acrossthetraditionalboundaries between industries and with research organisations, where directed and undirected findings can help lift the productivity of the industry;

• Addresstheregulatoryburdenrestrainingmanyareasoftheenergyresourcessectorfromthrivingand growing in the future, in ways that maintain and enhance community support for the industry;

• Identifyandexplorenewmarketsfortheproductsoftheenergyresourcessector,opportunitiesthatfill needs in the marketplace or displace expensive import alternatives: one example is expanding the use of LNG as a domestic source of energy.


EXECU

TIVE SU

MM

ARY


CHALLENGES, OPPORTUNITIES AND CONSTRAINTSGrowing energy demand in Asia, increased societal environmental awareness, and an evolving global energy mix create immense opportunity and substantial challenges for the Australian energy resources sector.

Major shifts are expected in the ways in which power is generated, distributed, controlled and consumed as the world moves to incorporate more renewable energy in the broader mix. This shift will force sector-wide adaptation, as new infrastructure needs to be built and integrated, and new operational frameworks are created. Despite these challenges, there are significant opportunities for Australian energy resources participants, particularly in meeting growing Asian demand.

Sector wideA number of challenges and constraints are sector wide and, while impacting each sector differently, there are some common causes and solutions.

Challenges

• Volatilecommoditypricesduetomajorstructuralchangesinglobalsupplyandanongoingoversupply in the global market.

• Highcapital(CAPEX)andoperational(OPEX)costsmakingAustraliauncompetitiveasaninvestmentdestination.

• Concernsassociatedwiththeongoingmanagementofwater,ensuringitisequitablyavailableforallland users including agriculture, human settlement and industry.

• Understandinghowbesttomanagecarbonemissionsfromboththeprimaryproductionofenergyresources and their consumption.

Constraints

• PerceptionthatAustraliahasgrowingsovereignriskforcapitalinvestmentduetoincreasedrestrictiveregulatory burden, frequent changes in policy and growing restrictions on development in various states. These restrictions are inhibiting both domestic exploration and the sector’s ability to develop discoveries necessary to underpin the long-term viability of the Australian energy resources sector.

• Australia’srelativelypooradoptionofinnovation,makingitdependantonimportedideasandtechnology rather than building home grown solutions. Australia was ranked twenty-sixth for innovation by the World Economic Forum in 2016 2.

In addition to these sector wide challenges, there are also a number of more discrete challenges and opportunities that will be faced by the industries making up the sector over the coming decade.



Oil and gasThe Australian Liquefied Natural Gas (LNG) industry’s capacity has increased more than four-fold over the past five years to supply the anticipated increase in demand. This rapid growth has created a number of challenges and opportunities for the developing industry.

Challenges

• Relativelyhighoperatingcostenvironmentduetohighlabourcosts,remotenessofoperations,anddistance from global supply chains result in many aspects of the Australian oil and gas industry being substantially more expensive than other jurisdictions. For example, costs to explore and develop a shale gas well in Australia are believed to be around 250 to 300 per cent higher than to develop a similar well in the United States.

• Limitedavailabilityofprocesstechniciansandoperatorswiththehigh-levelskillsrequiredtorunincreased numbers of integrated teams and operations. Technological change will drive multiskilling into the future, requiring significant changes to current training regimes as well as articulation of skills development pathways to ensure a sufficient number of suitably skilled personnel for future needs.

• Apotentialshortageofspecialistskilledandexperiencedlabourformaintenanceandturnaroundsfor Australia’s 21 LNG trains. This could be further impacted by parallel activities in the broader energy resources sectors especially in the case of a recovery in commodity prices which will increase competition for such skills.

• Challengestotheindustry’ssociallicencetooperate,includingnegativecommunityperceptionsofthe social and environmental impacts of unconventional developments, concerns over the potential development of new offshore basins and increasing community expectations around the transition to renewable energy sources. This will require the sector to operate through high levels of community engagement, corporate transparency and exemplary social citizenship.

• Areputationasahighcost/lowproductivitymarketplace,giventhemanyprojectbudgetandschedule overruns experienced during the recent expansion phase of the industry, is contributing to operators deferring future major capital investment in Australia in favour of other jurisdictions. To help restore Australia’s reputation, the industry needs to demonstrate that it can operate and maintain the new and existing facilities to world’s best standards at competitive cost.

• Uncertaintyovercapitalandregulatorycostsofabandonment,asmanyoperatorsbegintoplanfor the end of life of their facilities; and given that, to date such abandonment activities have been relatively few, the need to establish and test an appropriate regulatory framework.

• TheemergenceoftheUnitedStatesasanewandmateriallylowcostLNGsupplierintoboththeAtlantic and Pacific basins. The United States is now seen as a low risk jurisdiction for project delivery and sovereign risk - a position which Australia held for many years.

• TheexpansionofgasexportsintoChinafromRussianandBalticnations.

• TheunknownbutpotentialriseofadomesticChineseunconventionalsourceofgassupply.

• Difficultyoflocalserviceproviderstointegrateintotheinternationalsupplychain.


EXECU

TIVE SU

MM

ARY


While the output capacity of the Australian oil and gas industry has grown over the past decade through the construction of additional LNG trains, the long term viability of the sector has been jeopardised by the precipitous decline in exploration. This is illustrated by the almost tenfold decline in the number of new offshore wells being drilled 3 as shown in Figure 3. There are still a number of known offshore reservoirs yet to be developed, but without an active exploration regime the long-term future of the sector remains at risk.

Figure 3: Offshore petroleum exploration wells

100

90

80

70

60

50

40

30

20

10

02008 2009 2010 2011 2012 2013 2014 2015 2016

Source: APPEA

Opportunities

• Increasingcollaborationamongstoperatorstomaximiseassetproductivity.

• Improvingcollaborationbetweenoperatorsandtechnologyandengineeringserviceproviderstoincrease innovation and productivity.

• LeveragingthecriticalmassemerginginAustralianoperationstodevelopanexport-orientedandcompetitive service and technology sector.

• Addressingcost,regulatoryandsociallicenceconcernstoensureAustraliacontinuestobeperceivedas a politically stable and economically reliable destination for future capital investment.

• Developingshaleandtightgasbasinstosupportdomesticdemand,andpotentiallyforexport.

• Emergingnewmarkets,suchasIndia,andfromtheexpandeduseofgas(LNGandcompressednatural gas) as a source of transport fuel.



CoalIncreased pressure to reduce carbon dioxide (CO2) emissions and a switch towards renewable energy sources means that domestic demand for thermal coal is forecast to decline over the next 10 years. However, reduced domestic demand will be offset by increased export demand from Asia and an anticipated overall growing demand globally 4. Demand for metallurgical coal is expected to increase in the medium term with reinvigorated demand from China and other developing nations.

Challenges

• Sub-optimalassetproductivityandcostsinavolatilepriceenvironment.

• Highcostandinefficientinfrastructurecontractsimpactingsomeproducers.

• OverlapofcoalminingtenementswithagriculturallandinNewSouthWalesandQueensland,leading to conflicting pressures on land and water use.

• Effectivemanagementofbothsurfaceandgroundwaterconsistentwithenvironmentalrequirements.

• Increasingsocialconcernwithclimatechangeandtheenvironmentalimpactofresourceextraction,which will limit the industry’s social licence to operate.

• IncreasingGovernmentregulationand‘greentape’.

• Developmentofcoherentandcosteffectivemineclosureandrehabilitationplans.

Opportunities

• Technologicaladvancesandimplementationofoperatorassistanddecisionsupporttechnologiesused in other bulk commodities to unlock productivity improvements.

• Ongoingutilisationofhighefficiencylowemission(HELE)technologies,controloffugitiveemissionsand carbon capture and storage (CCS) to minimise carbon footprint.

• Improvedminedesignandoperationstofacilitatereducedconsumptionandcompliancewithregulatory scrutiny of water use.

• Improvingutilisationoftheserviceindustrytoleverageexistingcapacityofworkshops,skilledpersonnel and equipment.

• Productmixevolutionwiththedevelopmentofnewsuperiorproducts.

• StrategictargetingofincreasingAsiandemandforhigherqualitycoalwithahigherspecificenergyand lower ash content.


EXECU

TIVE SU

MM

ARY


Uranium The uranium industry will need to overcome regulatory hurdles, perceived radiation safety concerns and social licence to operate issues to participate more fully in the energy future of Australia and the world.

Challenges

• Lackofinformedpublicknowledgeandunderstandingofthescienceassociatedwithenergygeneration and the associated levels of risk with each technology.

• Limitsontheportsfromwhereuraniumcanbeexported,withonlyDarwinandAdelaidecurrentlylicensed for the export of uranium, and limits on the ability to access ports elsewhere in Australia whilst carrying cargoes of uranium. This restricts the options available to the domestic uranium industry to transport its products to international customers.

• LegislativeandpolicyrestrictionsattheFederalandState(s)levelonmininge.g.inNewSouthWales,Queensland and Victoria, and on the development of nuclear power and other parts of the uranium value chain (e.g. waste management and disposal), which limits the growth of the industry.

• Buildingacomprehensiveunderstandingofthechallengesassociatedwithprocessingchallengingore bodies in which much of the known Australian uranium is found.

• EquipmentandskillsshortageswhichlimitthecapacityofAustralianminestorespondquicklytoanincrease in demand.

• StrategicdevelopmentofuraniumproductioncapacitybyKazakhstan 5 through counter-cycle investment has positioned them ahead of Australia to respond to any increase in uranium demand (although Australian uranium is still regarded by many customers as their preferred product).

Opportunities

Given the drive to reduce carbon emissions globally, Australia’s uranium has the potential to assume a much more significant position as a source of export revenue. To realise this potential, Australia needs to take advantage of the following opportunities:

• Aspartofabroaderenergyliteracyinitiative,thesectorneedstohelpenhancetheoveralllevelofpublic understanding of how energy resources are produced, how power is generated and the role energy resources play in the nation’s economy. The sector also needs to continue to test current attitudes towards uranium mining and other aspects of the nuclear value chain.

• Reconsiderationofrestrictivelegislation,replacementwithefficient,fitforpurposeregulation.

• Testingoftechnologicalimprovementssuchasheapleachingandin-situleachingtoimproveproduction capacity with low operating expenditure.

• Improvingtheattractivenessoftheuraniumminingsectortodrawlabourbackfromotherminingsectors, both in terms of radiation safety and salaries.



CROSS SECTOR CHALLENGES AND IMPACTSMany opportunities and challenges span two or more sectors or sit outside discrete sectors, and are likely to have a profound influence and impact on the energy resources sector in the coming years.

These will include factors such as the rapid emergence of renewable energy technologies which, when added to the global and domestic mix, may drive markets in unanticipated directions. An example of this is seen in the deployment of domestic solar power technologies to meet household electricity needs, which are causing substantial disruption to the generation and distribution networks together with increased pricing instability. The impact of the increasing uptake in solar panels, combined with emerging domestic battery storage and smart grid technology, will cause even greater disruptions in the coming years.

A further challenge facing not only the energy resources sector, but the broader Australian workforce is the ageing working population and declining numbers of students pursuing science, technology, mathematics and engineering (STEM) subjects in schools and universities. This will limit the available pool of appropriately skilled workers to pursue the next waves of innovation and to maintain the increasingly technologically challenging facilities operated by the sector 6, all of which are highly influential on the future prosperity of the nation.

SECTOR KNOWLEDGE PRIORITIESWhile many of the actions required by the sector to address the challenges and opportunities ahead are relatively well known and understood, there are other issues which are not as well defined or where there are known gaps in knowledge – these are referred to as knowledge priorities. Many of these knowledge priorities were identified in the initial consultation period during the preparation of this SCP, and have been aligned with NERA’s key themes. The nine knowledge priorities, listed in Table 1, identify the key areas where additional work is required to understand the challenges and choices the sector faces in the current environment.

These knowledge priorities will change over time as the sector and new challenges arise. However, by systematically addressing these knowledge priorities now, the industry will maintain its globally competitive edge and thrive in the future.

The nine knowledge priorities have been grouped into three broad categories:

1. Capability and leadership;2. Business and operating models, technology and services; and3. Regulatory environment governing the industry.

Many of the knowledge priorities encompass multiple challenges and opportunities.


EXECU

TIVE SU

MM

ARY


Table 1: Sector knowledge priorities

Knowledge priority Focus areas

Capa

bilit

y an

d le

ader

ship

1 Work skills for the future

• Integratedoperationsofthefuture• Workforcecapability• Projectmanagementskills

2 Enabling effective collaboration

• Crosscompanycollaboration• Intergenerationalandinterdisciplinaryengagement• Industryandappliedresearchcollaboration

3

Understanding Australia’s resource base

• Developingagreaterunderstandingofprospectivebasin geology across the minerals and energy sectors

4 Social licence to operate

• Socialbenefits• Infrastructureclosureandrehabilitation• Watermanagement• Tailingsmanagement

Busi

ness

and

ope

rati

ng m

odel

s, te

chno

logy

and

ser

vice

s

5 Unlocking future resources

• Integratedgeologicalinformation• Crossindustrycollaboration• Maximisingageingassets• Environmentalsciencecollaboration

6

New markets, new technologies, new business models

• Asiantradeagreements• Developinternationaltechnologypartnerships• Commercialisationofoperationaltechnological

developments• Carboncaptureandstorage(CCS)• Lowemissionstechnologies• LNGasafuel• Hybridtechnologies• Adaptingtothechangingenergymix

7 Commercialisation of Research and Development (R&D)

• Livinglabs• Understandinganddevelopingcommercialisation

pathways

8 Efficient operations and maintenance

• Operatingmodelsforremoteoperations• Data,digitisationandpredictiveanalytics• Robotics,sensorsandautomation• Developagreaterunderstandingofdecommissioning

techniques

Regu

lato

ry

envi

ronm

ent

9

Regulatory framework optimisation

• Encouragingsensibleregulatoryframeworkstoallowongoing exploration

• Harmonisationofstandards• Reviewofself-imposedregulations• Industrialrelationsandworkplacereform*• Resourcemanagementreformandreviewofthe

existing permitting systems

*Note:IndustrialrelationsandindustrialreformarenotpartofNERA’sscope



LIKELY EVOLUTION OF THE SECTORFor the foreseeable future, the energy resources sector will continue to make a significant contribution to the economic stability of Australia. However, as the world’s energy balance continues to evolve, the sector must adapt to remain competitive. While the full impact of the macro changes in the sector are hard to foresee, many aspects of the sector’s evolution during the coming decade can be more easily predicted.

Asian demand

A sustained increase in Asian demand across all energy resources is expected, as India and the Association of Southeast Asian Nations (ASEAN) take up the slack from plateauing Chinese demand. Indeed, the global demand for energy is anticipated to increase by 34 per cent between 2014 and 2035 7. Australia is ideally located to service much of this growth, and can reasonably expect continued development in export volumes and revenue growth.

High capacity export industry

In the near future Australia is forecast to overtake Qatar as the world’s largest producer of LNG, though Australia could be challenged by capacity increases in the United States depending on how the United States gas market develops. Similarly, Australia already enjoys a very strong position as one of the world’s top exporters of coal and uranium. Having invested substantially in the infrastructure to achieve these rankings, the sector needs to continue to invest in their operations to ensure a strong future.

International nuclear revival

The extent and magnitude of the nuclear revival, and its impact on current uranium over-supply, could make a significant difference to Australian energy exports. In addition, an increased acceptance of uranium locally may result in other aspects of the downstream nuclear value chain being considered.

Renewable energy sources

With the increasing penetration of both wind generation and rooftop solar, electricity distribution networks are experiencing major disruptions. The impact of this change will be further deepened by the growing deployment of domestic battery storage. These technologies are exerting new pressures on the traditional coal and gas fired assets of electricity generators and distribution networks as the flow of electricity changes from purely outbound from the power stations, to a more dynamic and complex pattern.

Demand for coal

Domestically, increased commitments to reduce CO2 emissions, coupled with a move towards renewable energy sources, means that domestic demand for thermal coal may decline over the next 10 years. However, developments in clean technologies such as carbon capture and storage and increased export demand from Asia as high-quality Australian coal displaces domestic Asian production, is likely to offset this decline. Demand for metallurgical coal is expected to increase in the medium term with reinvigorated demand from China and other parts of Asia. Meeting this ongoing demand will require the timely approval of new developments to ensure adequate capacity.

Exploration challenges

The growth of the Australian energy resources sector is dependent on its ability to identify, appraise and produce from new fields and deposits cost effectively. However, the viability of exploration activities on these future and frontier assets are being placed under serious question. Exploration companies are subject to an increasingly onerous and unpredictable regulatory burden. For example, the future viability of the Australian oil and gas sector is being placed at risk by the current lack of exploration, especially because, in the current low-price environment, companies are producing from their reserves faster in order to maintain revenue but are not adding new reserves to their portfolio through exploration to ensure future production capacity.

In parallel, activist shareholders are applying growing and conflicting pressures by simultaneously demanding greater immediate returns on their investments in a traditionally long-term industry and also divesting investments in industries such as fossil fuels, which are out of favour with sections of the broader society.


EXECU

TIVE SU

MM

ARY


Optimisation focus on facilities

Significant capital investment in new major energy resource projects appears unlikely in the short to medium term, in view of the major expansion phase across the sector, most visible in the growth of the LNG industry, coupled with the decline in commodity prices for the sector over the last two to three years. The focus is expected to be on optimisation of new and existing facilities through productivity and efficiency improvements while maintaining capacity through smaller projects.

HELE and CCS Development

To enable industry growth to continue within required COP21 (also known as the 2015 Paris Climate Conference) emission levels, the energy resources sector will need to develop high efficiency, low emissions (HELE) technologies for coal fired power generation and CCS for both coal and gas.

Incentives for research and development

The focus on operational and social licence to operate research and development has been a strong industry-wide activity in the coal sector through the work of the Australian Coal Industry’s Research Program (ACARP) 8, where a small voluntary but sector wide levy is placed on production.

The fund generated from this levy, which qualifies under research and development tax incentive legislation, is managed by an industry body to support an ongoing list of around 200 individual and focussed research initiatives across the industry, including funding a number of PhD scholarships 9. Such an independent, industry focussed scheme could be considered for the Australian oil and gas sector to build a broad, industry wide and transparent research community to examine issues of interest to the sector, complementing the joint industry project (JIP) model more traditionally employed by the sector.

SUMMARY

The Australian energy resources sector faces major challenges to remain competitive in the increasingly complex modern global energy market.

Maintaining Australia’s current position as a world leading energy resources producer will require transformative effort by all those directly and indirectly involved across the oil and gas, coal and uranium industries.

While global and regional demand for our energy resources continues to be strong, internal disruptions in each market are placing complexity on what has, for a long time, been a relatively stable mix of energy demand. The Australian energy resources sector needs to adapt to these market disruptions and it must be prepared to undergo both incremental and transformational changes.


Incremental improvements include leaner operations, better management of high cost activities, particularly in the areas of new projects and other major capital investments, sharing infrastructure both at facilities and in locations such as maintenance and supply bases, collaborative planning of maintenance and upgrade activities to avoid competition over labour and shop time, reviews of staffing levels both at the facilities and in the various national head offices, and an increasing drive to improve productivity from new and existing assets. However, these incremental improvements alone will not be enough to keep pace with change.


Transformational change is required for the sector to keep pace with the shifting energy paradigm and meet global challenges. The sector needs to develop new operating models, focusing on new and innovative approaches to execution and better leveraging of existing capacity. Given the expected high level of automation in future operations, we need to build on Australia’s highly regarded existing capabilities in areas such as remote operations and data analytics for process optimisation and decision making, to support operational and value chain optimisation.



Finding ways to exploit the opportunities presented by the disruptions will be vital to the future of the Australian energy resources sector, allowing it to continue to play a significant role in the global energy mix.

Opportunities exist for Australia to continue to act as a baseline energy source to meet the sustained and increasing demand from Asia. But Australia needs to build strengths in the development of alternative and renewable energy sources. Australia is well placed to assist developing nations, particularly those transitioning from fossil fuels, to meet their emissions reduction commitments by providing energy diversification and reliable electrical grids and systems.

Standing still is not an option. In the modern energy resources environment, continually exploring ways to change regulatory, business and operational models is required of all participants to simply remain competitive.

As set out in this SCP, the Australian energy resources sector must find ways to:

• Collaboratebetterinallways,betweenpeerorganisations,verticallywithinvaluechains,acrossthe traditional boundaries between industries and with research organisations where directed and undirected findings can help lift the productivity of the industry;

• Explorewaystoaddresstheregulatoryburdenthatisrestrainingmanyareasoftheenergyresourcessector from growing into the future, but in ways that maintain and enhance community support for the industry; and

• Identifyandexplorenewmarkets,createopportunitiestofillneedsinthemarketplaceordisplaceexpensive import alternatives, such as expanding the use of LNG as a domestic source of energy.

NERA is committed to working openly with stakeholders to identify and pursue strategic initiatives and projects that will assist the Australian energy resources sector to adapt to current and future challenges and disruption.

NERA will achieve this through directing research and technology development to meet the needs of operators and end-users in ways which are tied to commercial pathways. It will facilitate industry-led projects and ensure they address NERA’s strategic themes, knowledge priorities and strategic initiatives set out in this SCP and are endorsed/supported by the energy resources sector and stakeholders.

NERA is not acting alone in this endeavour, but is building on the work of many previous sector wide and specific economic and industry reports and research initiatives. Many of these previous reports have substantially similar findings, whether they investigated a single industry or jurisdiction, a specific technology or considered the broader energy resources sector in its entirety.

Achieving an Australian energy resources sector that remains globally competitive over the next 10 years and beyond will require significant innovation, growth and behavioural change. To be considered competitive, Australia needs to be:

• Atop-rankedlocationforenergyresourcesinvestment–somewhereinternationalanddomesticoperators seek to invest because it is cost competitive and has a strong reputation with a stable and supportive policy and regulatory environment, and is recognised as a centre of excellence for knowledge and skills;

• Acentreforinnovationinenergyresourceoperationsandsupportingservices–wherenewtechnologiesand approaches to problems are actively sought, tested, refined and deployed, and where those innovations, technologies and approaches are seen as world leading and in demand; and

• Positionedtocapitaliseontheshiftingglobalenergymix–asectorthatworkscooperativelywiththedisruptive technologies and seeks to find the right balance for a sustainable sector, economy, society and environment.

Key to this future success will be increased collaboration amongst operators, contractors, service providers, the government and research organisations; a willingness to explore challenging and, at times, uncomfortable new issues and opportunities; and a willingness to take considered risks on novel disruptive solutions to tomorrow’s pressing questions.


EXECU

TIVE SU

MM

ARY


The Australian energy resources sector is at a historic inflection point. Each of the three industries which comprise the sector face major changes that, dependent upon their response, will determine the sector’s long term strength.

All three industries have to respond to the lower emissions environment and a societal move to renewable energy sources and clean technologies.

The oil and gas industry is nearing the end of an unprecedented investment in and development of new facilities, often delivered late and above their forecast budget, and into a market that is increasingly competitive, and with tighter margins than seen for the past decade. The coal industry is similarly experiencing a tightening market as the growth experienced by China and other regional emerging nations settles into more stable consumption levels, and faces increased pressure from environmental and activist groups. The uranium industry faces ongoing regulatory restrictions over its activities, despite world demand for the high quality and end-to-end accountability of Australia’s product.

Roadmap to the Future


These pressures mean that the sector as a whole must find new ways of working to build a successful and sustainable future. Different approaches are required from the sector’s leaders - leadership that places strong emphasis on increasingly open collaboration with peers, suppliers, clients, the research community and the broad community, and a willingness to take considered risks in developing and deploying novel and cutting edge technology and solutions in the pursuit of a sustainable future for the sector. These changes will require significant cultural shifts within and between stakeholders. To survive and thrive in the coming decade will require new ways of operating and different ways of thinking to those of the past.

The three levers to a strong futureTo remain competitive and build future markets and customers requires the sector to address three primary levers- a suitable business model, a contemporary and future focussed operating model incorporating technological capabilities, and building the right capability, skills and culture to succeed.

1Business models

The energy resources sector needs to find new markets to supplement current markets, secure new customers and provide alternate forms of services that more deeply engage with the value chain. This can include the provision of turnkey energy solutions and clean technologies to support the use of the energy resources. This could also include the provision of knowledge and skills in specialist areas such as LNG operations, remote operations and modular construction.

Equally, the sector needs to build stronger, more collaborative partnerships, within the sector, between the sector and technology and research organisations and with other industry sectors where the synergies and common challenges may lead to novel and powerful solutions.

2Operational models and technology capabilities

The last two to three years have seen significant cost cutting across businesses but, there are still significant efficiencies to be captured by reconsidering existing operating models and exploring novel ways to reduce process complexity and waste, find ways to collaborate more broadly, share logistics demands through consolidation and support the establishment of regional innovation and industry clusters and common supply bases.

In parallel, there is an opportunity to reduce unnecessary and expensive bespoke standards and conditions around contracts, inductions, training and qualifications and seek ways to use common, industry wide substitutes. Companies need to be open to sharing environmental and other research which is non-competitive and of benefit to the whole sector. Businesses in the sector could increase their efforts to optimise their operations through ongoing development and deployment of automation, the adoption of advanced manufacturing such as 3D printing, the use of alternate materials and the adoption of lean systems.

3Capacity and culture

For the sector to truly embrace the future operating environment, it must invest in the capacity, skills and culture of its workforce, to define and develop the ‘operator of the future’, spread digital competencies more broadly throughout the businesses so that members of each organisation have the skills to leverage the volume of data available. They must invest in the development of enhanced commercial skills so that personnel understand the impacts of decisions earlier, and embrace innovation in an environment where the risks of deploying new technologies can be calculated and considered in a professional and future focussed way, with new technologies being brought into organisations earlier through measured demonstrations, possibly via the use of living laboratories.

ROADMAP TO THE FUTURE

EXECU

TIVE SU

MM

ARY



RegulationsThese three levers cannot truly deliver their potential benefits unless the regulatory environment is reviewed and appropriate adjustments made to allow the energy resources sector to thrive into the future. Regulatory reform must address the growing perception that Australian regulation poses a sovereign risk which inhibits both domestic and inward investment. Reform must consider for example, how regulations can be enablers to an innovative economy and focussed on delivering differentiated and high value outcomes, and how the sector can efficiently identify and explore future energy resources. Businesses themselves must also review their own internal requirements, and remove or streamline self-imposed and bespoke standards that simply add cost to the business without delivering an appropriate level of additional benefit.

Pathway to a Sustainable, Resilient, Energy Resources SectorThe complex interplay of the factors that contribute to building a sustainable energy resources future is diagrammatically represented in Figure 4 below. This diagram illustrates how each of the knowledge priorities and constraints identified and discussed in this SCP integrate and how, as a sector, it is critical that the issues are addressed in a coordinated, systemic and structured way. By addressing them through, working together concurrently on multiple fronts in a planned and measurable way, the sector will be able to build a sustainable future.

Figure 4: Pathway to a sustainable energy resource sector


Knowledge Priorities Action PlanSet out in Table 2 are focus areas and initiatives to address the sector wide knowledge priorities. Table 3 then broadly allocates responsibilities for each of the knowledge priorities to stakeholders within the overall energy resources sector, identifies which challenges each knowledge priority will help overcome, and proposes a timeframe during which action should be taken for the sector to move forwards in a structured and planned manner.

Although specific stakeholders in the sector, such as the explorers and permit holders, major operators of facilities, service, technology and equipment suppliers, research organisations, skills development and education sector are identified against each activity, it remains the collective responsibility of the sector to address these challenges. The role of NERA is to act as the catalyst for many of the activities and to initiate and guide many through the provision of logistics support, networking, promotion of initiatives to a broader audience and co-funding where appropriate.

The focus areas and initiatives identified in Table 2 set out the priorities for action in the short to medium term. The integrated pathway shown in Figure 4 and the knowledge priorities set out in Table 2 provide the overall strategic direction, and guide development and implementation of future initiatives.


EXECU

TIVE SU

MM

ARY



Table 2: Sector knowledge priorities and associated initiatives

Knowledge priority Focus areas KPI’s Initiatives

Capa

bilit

y an

d le

ader

ship



Improve management and work skills• Mapworkforceskillsandcapacityineachsectorclusteragainstprojectplanningcycles.Improve efficiencies in workforce planning• Standardisetrainingrequirementstoimproveefficienciesinworkforceutilisation.

• Identifyfutureskillsrequirements• Identifyanddevelopappropriateandaccredited

training to meet future skills needs• Ensureafuturefocussedtrainingandeducationsector• Explorenewopportunitiestoexportknowledge



Increase cross company collaboration• Developatleast[6]clustersinhightechnologyareas.

• Establishregionalindustryandinnovationclusters• Assetandequipmentsharing• Infrastructuresharing• Shut-downscheduling• Industryspecificcollaboration• Crossindustrycollaboration• Commonfacilityinductions• Sharedoperationalpractices• Weatherresearchandmodelling

3 Understanding Australia’s resource base


Build knowledge and enhance access to information• Improveenergyresourcessectoraccesstorobustsourcesofgeophysicaldataand

promote trusted custodians of information.

• Industrydatainitiative• Sharenon-competitivedataacrosssectors



Strengthen engagement with communities• Developacommunicationsstrategywhichengageswithstakeholdersoutside

the energy resources sector to articulate the social, economic and environmental benefits and challenges of the sector.

• Identifyandapplysolutionsforwaterstewardshipandtailingsmanagementincluding by applying new technologies.

• Communityengagementandeducation• Researchsocial,economicandenvironmental

consequences of the activities of the energy resources sector

• Energyliteracy• Informationstewardship

Busi

ness

and

ope

rati

ng m

odel

s, te

chno

logy

and

ser

vice

s



Unlock resources• Addtothenumberofprojectsinthepubliclyannouncedandfeasibilitystages.

• Workwithtechnologysupplierstoidentifynew ways to access resources

• Computationalgeoscience• Unmannedaircraftsystemsgeophysics

6 New markets, New technologies, New business models

• Asiantradeagreements• Developinternationaltechnologypartnerships• Commercialisationofoperationaltechnologicaldevelopments• Carboncaptureandstorage(CCS)• Lowemissionstechnologies• LNGasafuel• Hybridtechnologies• Adaptingtothechangingenergymix

Improve commercialisation and acceptance of new technology• Unlockvalueandacceleratecommercialisationbyidentifyingatleast[25]new

technology projects.

• ExtendthenetworkofsmallscaleLNGfacilities• Broadersupportforfocusedinnovation

7 Commercialisation of R&D

• Livinglabs• Understandinganddevelopingcommercialisationpathways

Improve R&D capability by identifying barriers and mapping gaps• Identifyandmapbarriersandgapsinsectorcommercialisationfunnel.• Respondtogapsbybuildingalignmentbetweenresearchfundingandemergingindustry

clusters in a least 2 key areas across oil and gas, coal seam gas, uranium and coal.Improve R&D commercialisation• Increaseappliedresearchandcommercialisation.Increased commercialisation outcomes• IncreasethenumberofcompaniesclaimingtheR&Dtaxcreditsforsectorrelevant

technologies by identifying and unlocking commercialisation barriers.

• Strengthenindustry-ledresearchstewardship• Enhanceindustryengagementwithresearch

institutions• Researchanddevelopmentfundingmodels• ImproveunderstandingofIntellectualProperty• Supportlivinglabsandpilotplants


• Operatingmodelsforremoteoperations• Data,digitisationandpredictiveanalytics• Robotics,sensorsandautomation• Developagreaterunderstandingofdecommissioningtechniques

Reduce costs and improve efficiencies• Adaptnewtechnologiestoimproveefficienciesandproductivityinexistingprojects

by[20%],includingbydevelopingatleast[2]sharedremoteoperatingcentres.

• Explorewaystobuildtheindustry’sskillbaseinremote operations and facility life extension

• Focussedresearchandearlydeploymentof new technologies

• Researchintolifeextensionofageingfacilities

Regu

lato

ry

envi

ronm

ent 9 Regulatory framework

optimisation• Encouragingsensibleregulatoryframeworkstoallowongoingexploration• Harmonisationofstandards• Reviewofself-imposedregulations• Industrialrelationsandworkplacereform*• Resourcemanagementreformandreviewoftheexistingpermittingsystems

Identify and map barriers• Identifyandmapkeyareaswhereregulatoryreforminthesectorisneeded,

and support possible reforms.Align Australia’s standards with international best practice• Deliver2projectsonenhancedalignmentofAustralianStandardswith

international best practice.

• Adoptandharmoniseinternationalstandards• Regulatoryreformtosupportongoingsectorgrowth• Reviewregulatoryframeworks




Table 2: Sector knowledge priorities and associated initiatives


Capa

bilit

y an

d le

ader

ship























Busi

ness

and

ope

rati

ng m

odel

s, te

chno

logy

and

ser

vice

s

























Regu

lato

ry

envi

ronm





international best practice.



EXECU

TIVE SU

MM

ARY



Table 3: Knowledge priorities action plan

Challenges

Improve adoption of innovation

Close the skills gaps

Enhance productivity

Manage water

stewardship

Address high cost

environment

Improve energy literacy

Reduce sovereign

riskCa

pabi

lity

and

lead

ersh

ip


2Enabling effective collaboration

3Understand Australia’s resource base

.

4Social licence to operate

.

Busi

ness

and

ope

rati

ng m

odel

s, te

chno

logy

and

ser

vice

s

5Unlock future resources

6New markets, new technologies, new business models

7Commercialisation of research and development

8Efficient operations and maintenance

Regu

lato

ry

envi

ronm

ent

9Regulatory framework optimisation

KEY PARTIES: Operator Supplier Research Government Education




Challenges

Improve adoption of innovation



Manage water

stewardship

Address high cost

environment


Reduce sovereign

risk

Capa

bilit

y an

d le

ader

ship




.


.

Busi

ness

and

ope

rati

ng m

odel

s, te

chno

logy

and

ser

vice

s


6New markets, new technologies, new business models



Regu

lato

ry

envi

ronm

ent


WHEN: Short Medium Long

EXECU

TIVE SU

MM

ARY



Key Performance IndicatorsThe Key Performance Indicators (KPIs) describe in a more concrete sense what can be achieved by stakeholders focussing on the knowledge priorities and aligning on a shared vision for the energy resources sector. They set a trajectory for transformation against which progress can be tracked and adjusted where needed.

Work skills of the futureWith the construction phase generated by the energy resources boom largely complete, the focus now is to ensure sufficient breadth and depth of capability to support operating projects during their lifecycle, both for ongoing operations and maintenance, but also for shutdowns. Most plants will be scheduling maintenance shutdowns in the mid-term, which will put a strain on existing labour resources, drive up costs and potentially require overseas skills to be brought in.

Table 4: Work skills of the future KPI target

Knowledge priority Focus areas Initiatives

Work skills for the future

• Integratedoperationsofthefuture

• Workforcecapability

• Projectmanagementskills

• Identifyfutureskillsrequirements

• Identifyanddevelopappropriateand accredited training to meet future skills needs

• Ensureafuturefocussedtrainingand education sector

• Explorenewopportunitiestoexport knowledge

KPI milestones Target Timing

Improve management and work skills

Map workforce skills and capacity in each sector cluster against project planning cycles.

Develop and implement plans to ensure sufficient local skills are available to support the next phases of industry activity.

By 2017

By 2020

Improve efficiencies in workforce planning

Standardise training requirements to improve efficiencies in workforce utilisation by:

1. Delivering a national safety induction framework; and2. Delivering standard role based competency matrices.

By 2018By 2018

The key initiatives NERA will support are aimed at improving efficiencies as well as upgrading workforce capabilities in the sector, with a pivot to higher skilled jobs.

• Workingwithindustrytomapworkforcecapabilities/capacityineachsectorhubagainstprojectplanning cycles, and support the development of training facilities to ensure adequate local skills are available, with sufficient breadth and depth of skills to support the industry of the future.

• Togetherwithindustryandeducationproviders,investintrainingandeducationrelevanttothenextmajor phase of industry activity – operations and maintenance, shutdowns.

• Workingwithindustryandeducationproviders,toestablishanationalsafetyinductionframework.

• Workwithindustryandeducationproviders,todevelopstandardisedcompetenceswhichareportable across the sector.


Enabling effective collaboration

Table 5: Enabling effective collaboration KPI target


Enabling effective collaboration

• Crosscompanycollaboration

• Intergenerationalandinterdisciplinary engagement

• Industryandappliedresearchcollaboration

• Establishregionalindustryandinnovation clusters

• Assetandequipmentsharing

• Infrastructuresharing

• Shut-downscheduling

• Industryspecificcollaboration

• Crossindustrycollaboration

• Commonfacilityinductions

• Sharedoperationalpractices

• Weatherresearchandmodelling

KPI milestone Target Timing

Increase cross company collaboration

Developatleast[6]clustersinhightechnologyareas. By 2026

The key steps NERA will take to support increasing collaboration include:

• Workingwithindustrytodevelopnewoperationsandmaintenance,logisticsandcampaignmodelstoimprove efficiencies, reduce costs and improve productivity, including by sharing assets and equipment.

• Encouragestandardisationandsimplificationacrossthesector,focusingontheprequalificationprocess, and work skill competences (see also work skills of the future KPI).

• Incollaborationwithindustry,developregionalindustryandclusterstrategiestomaximiseutilisationof infrastructure such as supply bases.

• Promotecollaborationbetweenindustryandresearch,includingbysupportinginnovationclustersand providing funding for industry collaborative projects (see also commercialisation of research and development KPI).


EXECU

TIVE SU

MM

ARY




Table 6: Understanding Australia’s resource base KPI target



• Developingagreaterunderstanding of prospective basin geology across the minerals and energy sectors

• Industrydatainitiative

• Sharenon-competitivedataacross sectors


Build knowledge and enhance access to information

Improve energy resources sector access to robust sources of geophysical data and promote trusted custodians of information.

Ongoing focus

Deliver 2 key projects by 2018

NERA will:

• Takealeadroleinpromotingconsolidationofgeophysicaldataforunder-developedbasins.

• Identifyandsupportprojectsaimedatimprovingbroaderaccesstoandsharingofgeophysicaldata.

Social licence to operateThe sustainability of the sector requires engagement and support from the community to build a strong social licence to operate. Distrust, concern and unease of communities have been manifested in restrictions on developing onshore energy resources, which significantly inhibit exploration, future production and growth of the sector.

Energy resources underpin the Australian economy, and a sustainable and energised industry is a fundamental part of Australia’s future. Constructive and respectful engagement on social, environmental and economic sector impacts is needed to address community concerns, whether by providing independent robust information or finding solutions to issues raised by stakeholders, and will, in parallel, deepen the energy literacy of the community and key stakeholders.

Table 7: Social licence to operate KPI target


Social licence to operate

• Socialbenefits

• Infrastructureclosureandrehabilitation

• Watermanagement

• Tailingsmanagement

• Communityengagementandeducation

• Researchsocial,economicandenvironmental consequences of the activities of the energy resources sector

• Energyliteracy

• Informationstewardship


Strengthen engagement with communities

Develop a communications strategy which engages with stakeholders outside the energy resources sector to articulate the social, economic and environmental benefits and challenges of the sector.

Identify and apply solutions for water stewardship and tailings management including by applying new technologies.

By 2026


NERA will:

• Supportresearchandcommercialisationoftechnologieswhichprovidesolutionstocommunityconcerns, including uptake of clean technologies in the energy resources sector.

• Helparticulateeconomic,socialandenvironmentalbenefitsofenergyresourcesinAustralia.

• Promoteindependenttrustedcustodiansofscience,andengagementwiththecommunityin public debate.

• Togetherwithindustry,government(s)andotherstakeholders,worktodevelopamulti-facetedshortto long term strategy to increase energy literacy and public engagement on energy choices and the transition pathway (secure, sustainable and affordable).

• Workwithindustryandgovernment(s)topromoteappropriateregulationandtransparency,and to support improvements in community and stakeholder engagement as well as the perception of the sector.

Unlocking future resources

Table 8: Unlocking future resources KPI target


Unlocking future resources

• Integratedgeologicalinformation

• Crossindustrycollaboration

• Maximisingageingassets

• Environmentalsciencecollaboration

• Workwithtechnologysuppliersto identify new ways to access resources

• Computationalgeoscience

• Unmannedaircraftsystemsgeophysics


Unlock resources Add to the number of projects in the publicly announced and feasibility stages.

By 2026

NERA will:

• Workwithoperatorsandotherindustryparticipantstodevelopcollaborativesolutionsforsharinginfrastructure and utilising ullage, including new operatorship models to allow third party access to infrastructure.

• Buildcollaborationbetweentheresearchanddevelopmentsectorandindustrytopromoteandimplement emerging technologies to mature new fields and marginal resources.

• Supportinnovativemethodsofdevelopingmarginalandnewresourcesthroughdifferentbusinessmodels, operating models and a contemporary culture and mindset.


EXECU

TIVE SU

MM

ARY



New markets, new technologies, new business modelsAustralia is a net exporter of energy 10, after becoming a net importer of petroleum and petroleum related products since 2004 10. The next window of opportunity is to build from the platform of existing energy projects to develop new technologies, products and services for both domestic and export markets. Examples of these include hybrid energy solutions incorporating clean technologies, low emissions technologies and carbon capture and storage (CCS), as well as LNG for transport fuel, and remote operations technology.

Table 9: Market growth KPI target


New markets, new technologies, new business models

• Asiantradeagreements

• Developinternationaltechnologypartnerships

• Commercialisationofoperationaltechnological developments

• Carboncaptureandstorage

• Lowemissionstechnologies

• LNGasafuel

• Hybridtechnologies

• Adaptingtothechangingenergymix

• ExtendthenetworkofsmallscaleLNG facilities

• Broadersupportforfocusedinnovation


Improve com-mercialisation and acceptance of new technology

Unlock value and accelerate commercialisation by identifying atleast[25]newtechnologyprojects.

2026

NERA will:

• Improvethecommercialisationofnewtechnologybyencouragingcross-disciplineengagementacrossmultiple sectors, and supporting pilot plants and technology application opportunities.

• Supportindustryandresearchinstitutionstounlockandcommercialisevalue.


Commercialisation of research and development

Table 10: Commercialisation of research and development KPI target


Commercialisation of research and development

• Livinglabs

• Understandinganddevelopingcommercialisation pathways

• Strengthenindustry-ledresearchstewardship

• Enhanceindustryengagementwith research institutions

• Researchanddevelopmentfunding models

• ImproveunderstandingofIntellectual Property

• Supportlivinglabsandpilotplants


Improve research and development capability by identifying barriers and mapping gaps

Identify and map barriers and gaps in the energy resources sector commercialisation funnel.

Respond to gaps by building alignment between research fundingandemergingindustryclustersinatleast[2]keyareasacross oil and gas, coal seam gas, uranium and coal.

By 2017

By 2026

Improve research and development commercialisa-tion

Increase applied research and commercialisation:

• bysupportingresearchinstitutionscommercialisingresearchand development with targeted project funding; and

• bysupportingthenumberofintellectualproperty,trademarks and licences taken out for sector relevant technologies through commercialisation facilitation.

Ongoing

By 2026

Increased com-mercialisation outcomes

Increase the number of companies claiming a research and development tax credit for sector relevant technologies by identifying and unlocking commercialisation barriers.

Ongoing by 2026

NERA will:

• Workwithoperators,serviceprovidersandresearchinstitutionstoincreaseengagementandimprovecollaboration in applied research by supporting living labs.

• Togetherwithresearchinstitutions,worktoincreasethenumberofcompaniesengagingwithresearchand bridging the gap between industry and research for PhD students and other STEM graduates.

• Supportappliedresearchmaturationbydevelopingasharedunderstandingofnewtechnologiesandbuilding acceptance of new technology both within industry and with regulators.


EXECU

TIVE SU

MM

ARY



Efficient operations and maintenance

Table 11: Efficient operations and maintenance KPI target


Efficient operations and maintenance

• Operatingmodelsforremoteoperations

• Data,digitisationandpredictiveanalytics

• Robotics,sensorsandautomation

• Developagreaterunderstandingof decommissioning techniques

• Explorewaystobuildtheindustry’sskill base in remote operations and facility life extension

• Focussedresearchandearlydeployment of new technologies

• Researchintolifeextensionofageing facilities


Reduce costs and improve efficiencies

Adapt new technologies to improve efficiencies and productivity inexistingprojectsby[20%],includingbydevelopingatleast[2]shared remote operating centres.

By 2026

The key steps NERA will take to support industry to build ‘future proof’ operating models and the industry’s skill base include:

• Workingwithindustrytosupportsharedremoteoperatingcentres(ROCs)tobringtogethercollaboration across different energy resources industries and researchers.

• Promoteuseofdataanalyticstoimproveefficienciesinprojectsandsupportcontinuousimprovement.

• Supportthecommercialisationandapplicationofnewandemergingtechnologiessuchasadvancedautomation and 3D printing.

• Supportindustryindevelopingdataanalyticscapabilityforenergyresourcesprojects.




Table 12: Regulatory framework optimisation KPI target



• Encouragingsensibleregulatoryframeworks to allow ongoing exploration

• Harmonisationofstandards

• Reviewofself-imposedregulations

• Industrialrelationsandworkplacereform*

• Resourcemanagementreformandreview of the existing permitting systems

• Adoptandharmoniseinternational standards

• Regulatoryreformtosupportongoing sector growth

• Reviewofregulatoryframeworks


Identify and map barriers

Identify and map key areas where regulatory reform in the sector is needed, and support possible reforms.

By 2018

Align Australia’s standards with international best practice

Deliver[2]projectsonenhancedalignmentofAustralianStandards with international best practice.

By 2018

*Note:IndustrialrelationsandindustrialreformarenotpartofNERA’sscope.

The key initiatives NERA will take to improve Australia’s regulatory regime include:

• Workingwithgovernmentandindustrystakeholderstoidentifyareaswheretheregulatoryregimecanbe streamlined and provide suggestions for possible reforms, moving to a performance based approach.

• HarmonisationofinternationalstandardsinAustralia.

UTILISATION OF KPIsThese KPIs set a framework for stakeholders to build a transformed, sustainable and competitive energy resources sector. Some KPIs cover a 10-year period and set a stretch target, others address a more immediate horizon. Progress against the KPIs will be reviewed in the annual SCP reviews and the KPIs will be updated to ensure increasing alignment and traction on the knowledge priorities. The KPIs set a frame of reference to measure progress in identified areas but also to support activities on other initiatives identified in the knowledge priorities.

The KPIs encompass multiple challenges and opportunities, and will inevitably change over the 10-year horizon as challenges, information, knowledge and strategic outcomes evolve. However, through systematically addressing these issues, the energy resources sector will achieve an innovation driven, globally competitive edge together with a sustainable future.

EXECU

TIVE SU

MM

ARY

GLOBAL AND NATIONAL CHALLENGES

2

Section 2 provides a more detailed examination of the global and national megatrends and challenges facing the Australian energy resources sector. It examines the current status of each of the three industries represented in the sector, then introduces a series of industry competitiveness assessments and benchmarking reports commissioned by NERA. This benchmarking articulates the size of the prize for Australia of having an energy resources sector which is globally competitive, innovative, sustainable and diverse.

The detail in this section has informed the knowledge priorities, focus areas and initiatives identified in the earlier road map section of this SCP.



Global Megatrends and Implications for Australia’s Energy Resources Sector

Globally, the energy resources sector is facing a number of megatrends. Individually, each of these trends present significant change and challenge to the sector but when combined, they result in operational and market disruption to which the sector must adapt.


GLOBAL MEGATRENDS AND IMPLICATIONS FOR AUSTRALIA’S ENERGY RESOURCE SECTOR

Global Megatrends

UrbanisationTechnological

evolutionAsian

centuryChanging

energy mix

Globalisation of business

Changing demographics

Low carbon future

Search for energy security (emerging)

Seven current and one emerging global megatrends are considered in this SCP. Individually, each of these megatrends pose challenges to and require action from the energy resources sector. Combined, these megatrends present an environment of disruption. Such disruption from these megatrends requires the energy resources sector to find new ways of working and to work together to innovate, as individually, the sector participants will not be able to create the ‘step change’ required to compete globally. The disruption poses many challenges, but offers multiple opportunities for the energy resources sector to maximise the value from previous industry investment, to adapt, and to build a competitive, resilient and sustainable future for the sector.

GROWING POPULATION AND CHANGING GLOBAL DEMOGRAPHICSThe 2015 United Nations (UN) report 11 estimates that the world’s population will reach 8.5 billion people by 2030, 9.7 billion people by 2050 and exceed 11 billion people in 2100. India is expected to surpass China as the most populous nation (by around 2022), and Nigeria overtaking the United States to become the world’s third largest country (by around 2050). Moreover, the UN report estimates that during the 2015 to 2050 period, half of the world’s population growth is expected to be concentrated in nine countries: India, Nigeria, Pakistan, Democratic Republic of the Congo, Ethiopia, Tanzania, the United States, Indonesia and Uganda. Clearly a growing and changing world population, particularly the massive growth of India and Nigeria, has significant implications for energy supply and for the energy resources sector.

According to the same UN Report, as fertility declines and life expectancy rises globally, the proportion of the global population in or approaching retirement is also rising significantly. Currently, Europe has the greatest percentage of its population aged 60 or over (24 per cent), but rapid ageing is occurring in other parts of the world, so that by 2050, all major areas of the world except Africa will have nearly a quarter or more of their populations aged 60 or over.

Coupled with the world’s ageing population is the rapid emergence of the Asian middle class. This growing demographic is forecast to represent approximately 66 per cent of the world’s middle class by 2030 (growing from 2009 levels of 23 per cent) 12. The new members of the Asian middle class are emerging as major consumers of goods and services, opening up large markets for both domestic goods and imported luxury items, many of which will require inputs from the energy resources sector for their manufacture, transport and use.

GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES


URBANISATIONIn the developed world, the mass movement of rural populations to factories and urban environments largely took place at the time of the industrial revolution, and significant progress has been made in managing the associated pollution. In the developing world, populations are rapidly moving en-masse into cities as these developing nations undergo their own industrialisation processes. The UN has forecast that by 2050, approximately 60 per cent of the world’s population will live in urban environments compared to around 54 per cent at present 13. This mass migration is fuelling rapid expansions of the cities, with commensurate demands on energy for construction of new homes, for providing power to inhabitants and for powering industries which manufacture required goods. This is likely to be accompanied by a demand to accelerate learning from the experiences of the developed world and calls to adopt cleaner solutions more rapidly.

Today, the most urbanised regions include Northern America (82 per cent living in urban areas in 2014), Latin America and the Caribbean (80 per cent), and Europe (73 per cent). In contrast, Africa and Asia remain mostly rural, with 40 per cent and 48 per cent of their respective populations living in urban areas. But all regions are expected to urbanise further over the coming decades. Africa and Asia are urbanising faster than the other regions and are projected to become 56 per cent and 64 per cent urbanised, respectively, by 2050.

The rural population of the world has grown slowly since 1950 and will reach its peak in a few years. The global rural population is close to 3.4 billion people and is expected to decline to 3.2 billion people by 2050. Africa and Asia are home to nearly 90 per cent of the world’s rural population. India has the largest rural population (857 million people), followed by China (635 million people) 13. Close to half of the world’s urban dwellers reside in relatively small settlements of less than 500,000 inhabitants, while only around one in eight live in the 31 mega-cities with more than 10 million inhabitants.

Urban lifestyles result in changes to the way in which food and water is accessed, and has significant implications for the structure of energy markets and grids.

The developed world will expect their energy to remain efficient, reliable and relatively low cost while increasingly demanding that the energy be produced from low carbon sources. In the developing world, the principal demand is gaining access to reliable energy, potentially in a bottom-up, localised and low carbon form, rather than the centralised networks seen in older, developed nations 14. This is similar to the way the deployment of widespread access to mobile phones and the internet in these regions skipped much of the hardwired, expensive infrastructure that is a feature of a more evolutionary deployment in developed countries.

TECHNOLOGICAL EVOLUTIONTechnological changes over the past decade are contributing to substantial changes in the ways in which societies access and consume energy and how businesses are able to optimise their production and distribution of energy. Among these developments is the ability for business to leverage data analytics to optimise their processes and production resulting from advances in data processing and storage and through what is known as the fourth industrial revolution 15, 16. This revolution is making it possible for virtually any product to be customised to the exact needs of its purchaser, whether that be the ability to order a new car with a personally selected specification or to build an industrial product specifically tailored to the needs of the end user. The Internet of Things (IOT) increasingly enables household and industrial devices to be capable of being interconnected, networked and controlled to enable more efficient use and monitoring of energy consumption.

Alongside the network and internet advances are technologies such as Unmanned Aerial Vehicles (UAV’s or drones) which are facilitating faster, safer activities with greater flexibility, such as inspections of facilities without the requirement to use scaffolding or other forms of access platforms; unmanned marine equipment which is similarly allowing more advanced activities without the requirement to deploy divers; 3D printing and rapid prototyping is facilitating the fabrication of complex physical shapes in fewer pieces, the fabrication of spares and components and providing the ability to build models more rapidly; Virtual Reality (VR) is being used to provide immersive training experiences for personnel, accelerating training, inductions and special modelling; the growing use of autonomous vehicles in mining operations, allows machinery such as haul trucks, locomotives, excavators and drilling equipment to be operated from central control buildings in major cities.

These new and emerging technologies are transforming the way in which businesses operate and offer substantial opportunities for future development, supporting gains in safety and productivity.



LOW CARBON FUTUREDriven by the global recognition of the impacts of climate change and agreements made at the Paris COP21 meeting 17, there is a drive towards low carbon emissions, alternative and renewable energy sources, and development of technologies to capture the carbon produced in conventional energy extraction and production. This movement to a low carbon future is happening at the international, national and local level. Globally, nations are reviewing their future energy policies and making adjustments to their energy mix, looking for efficiencies and economic viability of alternative energy sources. Countries are taking steps to reduce their carbon emissions either through alternative and renewable sources, or remediation such as various forms of carbon capture and sequestration. As an example, the European Union has adopted targets of 20 per cent of final energy from renewables, with Sweden aiming toward 49 per cent 18.

At the household level there is a substantial uptake in the installation of rooftop solar panel technology for domestic power generation. This has been fuelled by a combination of government incentives, changes in societal attitudes and reduction in the cost per kilowatt of such technology (resulting both from greater demand and technological advances). At the state energy generation level there has been heavy investment from local and international and local investors in wind generation, in addition to hydroelectric facilities, all of which generate electricity without the consumption of fossil fuels.

These developments in the generation and consumption of energy are having large, far reaching impacts on planning and deployment of traditional power generation, and the fuels used to operate them.

ASIAN CENTURYAs the 21st century has progressed, the Chinese economy has increased its global dominance in demand for natural resources, including all forms of energy, and production of consumer goods and input materials. This has driven substantial changes in the global economic balance, with China now the second largest global economy and the dominant economy in the Asia Pacific region where Australia conducts much of its trade. India is rapidly emerging as the next major nation to move its economy forward. India’s domestic consumption levels, driven by its growing middle class, are projected to be the highest in the world by 2030 19.

The Chinese economy is increasingly taking large ownership interests in the sources of natural resources on which their economy depends, with significant investments in numerous projects in Australian and other jurisdictions. This trend is forecast to continue for the foreseeable future.

India is predicted to be the next growth economy, with a forecast demand for energy to increase from 775 million tonnes of oil equivalent (Mtoe) in 2013 to 1,908 Mtoe by 2040 20. This demand is largely projected to be met through the use of coal (for which India is predicted to be the world’s largest importer by 2020 21), oil and gas and uranium.

In recent years, there has been an increasing and substantial demand for energy from other nations in the region. This includes Indonesia which, while largely self-sufficient, imports some energy to meet its growing needs 22, and the Philippines which imports around 50 per cent of its required energy 23.

GLOBALISATION OF BUSINESSThe globalisation of the world’s economy and businesses means it is becoming more common for ownership of industries to be held by international businesses. These businesses may only have a regional presence in the Australian marketplace, but a significant influence over Australia’s energy future. Globalisation covers resource energy companies, the engineering businesses which service, operate and maintain the projects and many equipment suppliers of all sizes on which they rely to provide technology and skills. This globalisation trend provides new opportunities for Australian organisations to export their skills and expertise to the global marketplace in ways previously not considered.

At the same time, many areas of business are adopting more regionally focussed structures, reverting from their previous global approach. They are spinning off or launching local subsidiaries to exploit regional opportunities which are not always available to global organisations.


GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES


CHANGING ENERGY MIXDriven by the increasingly competitive pricing and reliability of alternative sources, the global energy market is accessing alternate forms of supply. Historically the world’s energy has been sourced almost exclusively from carbon based sources (coal and oil and gas, supplemented by nuclear), but now substantial portions of the world energy demands are being met through deployment of alternatives and renewables, including hydro-electric, wind and solar energy.

As these alternative and renewable sources penetrate the market, they are putting traditional sources under increasing pressure. The established power distribution infrastructure networks in many developed nations are facing challenges in the transition to non-synchronous and distributed energy sources. The networks were originally designed to distribute power only outwards from large, central power generation sources to the broader communities and were able to rely on system inertia provided by large, baseload generation to operate safely and reliably.

With solar and wind in particular being more localised and intermittent in nature, governments and operators of traditional power grids are being forced to reconsider their operation and viabilities. By 2030 Australia is predicted to have up to 30 per cent of its electricity generation decentralised 24.

The existing networks are being further pressured by the emergence of local storage solutions such as domestic battery technology which is predicted to reach up to 2.4 million Australian homes 25. When these localised energy sources are coupled with ‘smart’ domestic energy management software and localised power sharing through interconnected neighbourhoods, homeowners will increasingly be able to rely on their own ‘virtual power station’ to meet peak loads, points of time when their local, unconventional sources may not be able to generate sufficient capacity.

An Emerging Megatrend – The Search for Energy SecurityAlongside the seven megatrends discussed earlier, an eighth emerging megatrend has been shaping the energy resources sector for the past few years. This emerging megatrend is the combination of moves towards a low carbon future and the changing energy mix, with the driver to provide secure, reliable and affordable energy. The search for energy security is beginning to be seen both domestically in the Australian energy resources marketplace and on the world stage.

SEARCH FOR ENERGY SECURITYIn recent months Australia experienced a number of substantial, state based energy events. These include the spike in power prices in South Australia during July 2016 triggered by the scheduled outage of the South Australia to Victoria Interconnector. The South Australian blackout of September 2016 was triggered by an extreme weather event that caused cascading stresses to the transmission grid servicing both renewable and thermal power generation, and resulted in a rapid reduction of power system frequency, causing a complete blackout for the State. Ongoing issues were experienced in Tasmania as a combined result of the outage of the Basslink connection and historically low dam levels following low rainfall in the summer of 2015, which reduced the State’s ability to generate sufficient hydroelectric power. The issues in Tasmania have resulted in the formation of the Tasmanian Energy Security Taskforce 26 and at the national level, the Finkel Review into the reliability and stability of the National Electricity Market 27.

Outside Australia, many developed nations who have been previously relatively energy self-sufficient, such the United Kingdom, are seeing the approaching end of their domestic energy resources and are responding by seeking secure supplies elsewhere, as well as developing a broader mix of domestic supply from renewables and an expanded use of nuclear energy 28.

Secure and reliable energy supplies are important for several reasons: first, to deliver the energy needed to support the lifestyle expectations of the population, and to power essential services such as hospitals and schools, homes and offices; secondly, to ensure a reliable and price stable supply of energy for businesses and industries, in order to create jobs and economic prosperity in a reliable and sustainable way. Without energy security and price stability, business may be reluctant to invest and households will be under pressure.



The Australian energy resources sector is well placed to supply much of the region’s energy security needs through the export of coal, uranium and gas, but domestically faces a number of state-based challenges that must be addressed for energy stability to be maintained. The interaction between renewable energy and thermal energy sources, and their impact on transmission systems, together with the interaction between energy policy and climate policy at a state and federal level need to be considered in a consistent framework, such as the ‘energy trilemma’. The energy trilemma 29 underpins the World Energy Council’s definition of energy sustainability, it has three counter-posing drivers of affordability, environmental sustainability and energy security. Australia ranks thirty-first between Japan and Romania on the energy trilemma index 30, scoring a B for energy security and energy equity and a C for environmental sustainability of energy supply (the rankings are A to C with A being best in class).

In some parts of Australia, the higher than expected uptake in renewables, coupled with retirement of thermal power generation has created stresses in the system, which have impacted on energy security, and increased the perception of investment risk.

An Environment of DisruptionThese multiple trends, when considered together, give rise to a single overarching ‘megatrend’– an increasingly disrupted energy market. This megatrend is transformative, and defines the present and shapes the future by its significant impact on societies, economies, industries, and organisations. It is this convergence of global trends that is disrupting the global energy sector, providing both significant challenges for incumbents and substantial opportunities for those seeking to exploit new approaches.

Although fossil fuels will be critical to meeting the world’s energy needs for years to come (80 per cent of the global energy mix is expected to be supplied by fossil fuels in 2035 31), renewables accounted for half of global new generating capacity in 2014, and are expected to represent more than 50 per cent of all capacity growth through 2040 32. However, other estimates suggest that 60 per cent of the energy market will be taken up by renewable energy, leaving only 40 per cent of the market for the remaining industries.

The changes in the generation, distribution and consumption of energy will have a profound impact on the domestic and international energy marketplaces in which the Australian energy resources sector operates. While the overall impact of these changes will become apparent over time, it is clear that the sector needs to be prepared to act now to remain competitive.

Recent work by the Commonwealth Scientific and Industrial Research Organisation (CSIRO) 33 has identified the following trends within the Australian electricity marketplace that will be repeated in different forms on the global stage:

• Increasingelectricitycosts.

• Peakdemandandconsumptionhasreversedtheupwardtrendseenbefore2008/2009.Thereisnowan oversupply of generation capacity.

• Residentialelectricitycostsarenotwellalignedwiththecostsofservices.

• Thenation’selectricitysupplyhasstartedtodecarbonise.

• Uncertaintystillexistsaroundthenation’sfuturecarbonpolitics,andsocietalattitudestowardselectricity system reliability and costs are shifting.


GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES


Impact of Global Megatrends on AustraliaAs a major supplier of the world’s conventional energy and, as a country with its own mature established energy networks, the Australian energy resources sector faces a number of major challenges to remain competitive in the increasingly complex modern energy marketplace.

While global and regional demand for our energy resources remains strong, internal changes in each of the three industries and markets in the sector are placing additional complexity on what has, for a long time, been a relatively stable mix of energy demand.

• CustomercountriessuchasChinaareinvestingheavilyinrenewablesandtryingtoreducetheiremissions in reaction to growing public demand for a cleaner environment and, while their demand for Australian energy exports remains strong, it is likely that demand will plateau sooner and at a lower level to previous forecasts.

• Thegrowthofunconventionaloilandgasproduction,typifiedbyshalegasdevelopments,haveled the United States to become energy self-sufficient in recent years and potentially become a net exporter of hydrocarbons 31, putting new sources of supply into the global marketplace. This market penetration is being assisted by the recent expansion of the Panama Canal, enabling easier shipping into the Asian market.

• Thegrowingdemandinthedomesticmarketforenergyfromalternativeandrenewableenergysourcessuch as solar and wind are placing changing demands on domestic energy generation, distribution and consumption patterns. This demand is demonstrated by the uptake of domestic solar power generation with approximately 16.5 per cent of all Australian homes having installed the technology 32.

• Increasingdemandsbycommunitiesandstakeholdersthattheproductionofconventionalandunconventional energy resources be undertaken and regulated in a highly transparent manner, with significant timeframes required for early and ongoing community and stakeholder engagement; combined with this are the challenges associated with communicating complex technical and science based management of the risks and impacts from energy resource activities.

• Growinginternationalactivismagainstanddivestmentoffossilfuels.

• Afterunprecedentedrecentinvestmentinnewfacilities,particularlyintheLNGandcoalsectors,followed by a substantial drop in commodity prices, Australia’s domestic producers are facing challenging productivity and ramp up situations in bringing their new facilities on line and containing operations costs in the depressed marketplace.

• Emergingenergystoragemethodssuchasadvancingbatterytechnologyandtheuseofhydrogenarebeginning to change the energy mix, reframing the landscape in ways that are yet to be fully determined.

The Australian energy resources sector needs a comprehensive and cohesive energy policy that addresses:

• HowtomaximisethevaluetoAustraliafromthelargeinvestmentsintheenergyexportindustriesof oil and gas, coal and uranium over decades, and how it can transform to be globally competitive, innovative, sustainable and diverse in this rapidly changing marketplace;

• Howwecanusethisstrongindustrialbasetohelpbalancesocietalneedsandbuildamoresecurefuture for our society as a whole;

• Theopportunitiestopartnerwithandparticipateintheemergingcleantechnologiessector,andwithalternative and renewable energy industries; and

• Howdomesticdemandsforenergycanbemetinamannerthatbalanceseconomic,socialandenvironmental factors and delivers energy that is secure, reliable and affordable way.



Australia’s Response to Sector TrendsFinding ways to exploit opportunities presented by disruptions will be vital to the future of the Australian energy resources sector.

The Australian energy resources sector needs to adapt to market disruptions. It must be prepared to undergo both incremental and transformational improvements.

Figure 5: Transformational versus incremental change

Transformational change• Innovators• Early adopters• Risk aware• Forward looking practices and regulations• New skill sets• New markets

Incremental change• Late adopters• Risk averse• Restrictive practicesand regulations• Traditional skill sets• Traditionalmarketaspirations

Prod

uctiv

ity

Time

Incremental changeIncremental change has been the default mode for most industries in the energy resources sector as buoyant demand and stable commodity prices has led industries to become complacent.

This phase is now past and, while incremental gains are still valuable and worth pursuing, organisations also need to look to transformational opportunities to see the biggest future gains.

Incremental improvements include:

• Leaneroperations,asexemplifiedbythemanyoperatorsalreadyfocusingonincreasingassetutilisation.

• Bettermanagementofhighcostactivities,particularlyintheareasofnewprojectsandothermajorcapital investments.

• Anincreasingmovementbyoperatorstowardsharinginfrastructurebothattheirfacilitiesandinlocations such as maintenance and supply bases.

• Collaborativeplanningoflabourandresourceintensiveplannedmaintenanceandupgradeactivitiesto avoid competition over labour and shop time.

• Reviewsofstaffinglevels,bothatthefacilitiesandinthevariousnationalheadoffices.


However, these incremental improvements alone will not be enough to keep pace with change.


GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES


Transformational changeTransformational change is required for the sector to keep pace with the shifting energy paradigm and compete with global challenges.

The sector must develop operating models that focus on new and innovative execution approaches to better leverage existing capacity. Increased automation is expected in future operations. As such, the energy resources sector needs to build on Australia’s highly regarded existing capabilities in, for example, remote operations and data analytics for process optimisation and decision making, to support operational and value chain optimisation.

Increased Asian demand

Opportunities exist for Australia to continue to act as a baseline energy source to meet the sustained and increasing demand from Asia.

Development of alternate energy sources

Australia also needs to expand its strengths in the development of alternative energy sources as it is well placed to assist developing nations meet their emissions reduction commitments by providing energy diversification and systems.

Increase energy literacy

A key action will be to increase ‘energy literacy’ of communities, governments, regulators, companies and other stakeholders.

Exporter of clean technologies

The disruption in the energy market presents opportunity and incentive for Australia to become an exporter of clean technologies to developing countries. Such technologies include low carbon emission technologies including HELE, hybrid power generation, battery storage and carbon capture and storage (where Australia’s geology provides a strong competitive advantage as demonstrated by projects such as the Gorgon development 34 which is considered the largest greenhouse gas mitigation project undertaken globally to inject into a dedicated geological storage formation).

Being part of the development and adoption of these clean technologies is likely to help the sector win social licence, drive demand of our existing energy resource portfolio, and open up new markets such as gasification, production of hydrogen and efficiently utilising lower ranked coal deposits.

In addition to participating in its development, Australian businesses and energy resource consumers need to become earlier adopters of these new technologies. Such adoption underwrites the development investment and demonstrates the technology’s viability to the broader global market.

Ultimately, the establishment of innovative, integrated and networked resource solutions, with even broader potential disruption and upsides, will enable the Australian energy resources sector to respond to the increased disruption in the energy market into the future.

An imperative to changeStanding still is not an option. In the modern energy resources environment, continually exploring ways to change regulatory, business and operational models is required of all participants to simply remain competitive. As set out in this SCP, the Australian energy resources sector must find ways to:

• Collaboratebetterinallways,betweenpeerorganisations,verticallywithinvaluechains,acrossthe traditional boundaries between industries and with research organisations where directed and undirected findings can help lift the productivity of the industry.

• Addresstheregulatoryburdenthatisrestrainingmanyareasoftheenergyresourcessectorfromgrowing in the future while maintaining and enhancing community support for the industry.

• Identifyandexplorenewmarketsforenergyresourcessectorproducts,forexample,opportunitiesthat fill marketplace needs or displace expensive import alternatives, such as expanding the use of LNG as a domestic source of energy.




GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES

59


Australia ranks as one of the top three global exporters of liquefied natural gas, coal and uranium.

The Australian energy resources sector involves the exploration, development and extraction of energy and fuels from oil, gas, coal and uranium, and related services. In Australia, it directly provides approximately 89,800 jobs with a Gross Value Add of $42 billion (2015/2016), (Note that the statistics quoted do not include related supply and services inputs). This value is expected to increase as the balance of the LNG facilities currently under construction comes online later this decade.

The total value of Australia’s energy resources commodity exports was $60 billion in 2015/2016 1. Forward forecasts of export earnings from energy resources are uncertain given current volatility in commodity prices; as at December 2016 the Office of the Chief Economist forecast that Australia’s energy exports will grow to $92 billion (in current Australian dollars) by 2016-17 1. Australia’s energy resources exports in 2015/2016 contributed more than a quarter of Australia’s merchandise export revenue, and around a fifth of Australia’s total export revenue 36.

Current State of the Energy Resources Sector


OIL AND GAS

THERMAL AND METALLURGICAL COAL MINING

PETROLEUM AND COAL PRODUCT MANUFACTURING

URANIUM

Gross Value Add*

26.8 BDirect Employment**

28,500 jobs

Gross Value Add*


48,600 jobs

Gross Value Add*


8,500 jobs

Gross Value Add*


4,200 jobs35

GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES

Notes* GrossValueAddincurrentprices,$AUD,2015/2016Source:ABS(2016)AustralianSystemofNationalAccounts,Catalogueno.5204and5206.** Four-quarteraveragetoAugust2016.Thisdoesnotincludeemploymentthroughthevaluechaine.g.contractors/service/technologysectorsupportingenergyresources.Source:

ABS (2016) Australian Labour Market Statistics, cat. no. 6291

Sector Gross Value Add and Employment


Current challenges and responsesCurrently, the sector is facing considerable challenges:

Challenge Response

A fall in commodity prices from the high levels experienced over the past decade and marketplace competition from new sources of supply.

The sector has responded aggressively to falling commodity prices and high capital and operating costs by reducing workforce numbers and deferring discretionary expenditure (including reducing exploration, operating costs and research funding, and deferring capital investment).

The current prolonged period of lower commodity prices, which many commentators believe will run for at least another 12 to 18 months, will likely result in further expenditure restraint. The most telling and concerning impact of reduced discretionary spending has been reduced exploration programs. If this continues, it will delay new greenfield/brownfield expansions and reduce the future supply of the vital energy resources required to fuel the Australian economy.

High capital and operating costs adversely impacting productivity and competitiveness.

Increased community scrutiny and opposition to industry development.

The sector continues to actively address community opposition to new development. However, more needs to be done in this area. The building of community and stakeholder trust, and maintenance of a social licence, is a complex and multi-faceted challenge that requires collaboration and action by commonwealth, state and local governments, industry, and communities.

The sector must help build national energy literacy, so that the wider community can more fully understand the need to have a broad, stable and reliable energy mix that is affordable, reliable, secure and sustainable, as well as the implications of not achieving such an energy mix.

Dialogue between companies and the widening range of stakeholders will need to be more robust, sophisticated, collaborative and trust-based, in order to achieve a greater level of credibility, a stronger sense of legitimacy and, ultimately, community acceptance.

Both the industry and the community require independent trusted sources with impartial information to inform the debate. The key considerations in the management of scientific data are:

• Howandbywhomthedataareinterpretedformeaningandsignificance?

• Howthedataarepresented,andbywhom?

• Howtodecideenoughdataexists,andbywhom?

• Howtomakedecisions,giventhatthedataarealwaysincomplete andimperfect?

• Howtogaincommunityacceptanceofrisk-baseddecisionmaking,and how to deal with incomplete imperfect data (or raise awareness thatthisisthenormalsocietalmodusoperandi)?

• Theroleofthecommonwealth,stateandlocalgovernments,andtheinteractions with industry and community.

THE CURRENT STATE OF THE ENERGY RESOURCES SECTOR


A changing global energy market, developing viability of renewables, and an international commitment to reducing carbon emissions.

The changing energy market will be increasingly disrupted. The industry needs to find ways to leverage on new technology and maximise the value to the sector. It needs to research how to convert raw materials into accessible energy in cleaner ways so that it can contribute to Australia and the world’s low emissions future, and build greater social acceptability for energy resources.

At the same time, there is a growing level of complexity in the global and domestic energy market. Where once the world’s energy needs were largely met by conventional carbon-based, hydro-electric and nuclear power, there has been a rapid and significant deployment of photovoltaic and other solar energy, wind and hydro-electric, along with a diverse emerging range of other renewable energy sources, such as geothermal and wave energy. All of these newer sources are now competing with and interfacing with the traditional sources, making for a far more complex energy market.


GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES


Current trends

Pressure Impact

Australia’s depreciated dollar

While operating conditions remain difficult, the depreciation of the Australian dollar has benefited Australian exporters. The Australian Dollar (AUD) has depreciated against the United States Dollar (USD) over the past few years from levels over USD$1 to around USD$0.75, levels last experienced in 2010. Expectations are for the Australian dollar to remain around this level.

Export earnings In 2015/2016, export earnings in all resource and energy commodities are estimated to have declined by eight per cent year-on-year to $157 billion, in addition to the 12 per cent decline in the previous year. The 2015/2016 fall includes a 12 per cent decrease in iron ore; 10 per cent decline in metallurgical coal; and eight per cent decline in thermal coal export earnings 36.

Future forecasts for resources and energy export earnings, even for the current 2016/2017 period, are uncertain in the current volatile global market and price conditions. Nevertheless, resources and energy export earnings are forecast to increase over the medium term, with a key factor being the expected increase in LNG export earnings. LNG export earnings are forecast to rise rapidly, underpinned by new LNG production capacity coming online. This includes recently commissioned plants in Queensland, the ramp up of production at the Gorgon project, and the completion of other projects currently under construction 1.

Exploration expenditure

Private exploration expenditure in energy resources was reduced to half from 2014/2015 to 2015/2016, year-on-year. Deep cuts were evident across onshore and offshore petroleum exploration and coal exploration, as falling commodity prices disincentivise exploration 36, 37. With most commodity prices forecast to remain low in the medium term, exploration expenditure appears unlikely to rebound within that timeframe.

1. Capital expenditure

Capital expenditure for the mining sector was down 30 per cent year-on-year from 2014/2015 to 2015/2016, further to a 16 per cent decline the previous year.

2. Employment Total resources industry employment dropped by 15 per cent or 40,000 jobs between 2013/2014 and 2014/2015 year-on-year, then remained at similar levels in 2015/2016 36. The decline in employment is partly a result of the transition from the investment phase of the commodity boom to the production phase. However, in the wake of falling prices and low profitability, industry has also been consolidating and reducing expenditure on service providers, which has led to a fall in the workforce. Employment is not expected to rebound in the short-term, as a fall in construction labour due to reductions in capital expenditure will offset any increases in employment associated with growing production.

Australia is still ranked very competitively as an investment location by the Fraser Institute. Their 2015 study 38, released in 2016, which looked at the broad mining industry, including minerals and coal, ranked Western Australia as the top jurisdiction for mining investment in the world. In the survey, which polled 449 companies, the Northern Territory ranked seventh, South Australia tenth and Queensland sixteenth. However, while Australia’s ranking remained high, the research did find that policy attractiveness dropped in a number of states, due to shifting regulatory requirements, labour regulation, uncertainty of disputed land claims and trade barriers.



Australian Oil and Gas IndustryFollowing the rapid expansion phase of the past 10 years, the Australian oil and gas industry is poised to become the world’s largest LNG exporter by the end of this decade, with 21 LNG trains in operation.

The Australian upstream oil and gas industry is made up of distinct offshore and onshore segments. The offshore fields are located off Western Australia, the Northern Territory and in the Victorian Bass Strait. Onshore operations are more widely distributed, with conventional operations in Western Australia, the Northern Territory, South Australia and Queensland, and unconventional production concentrated in Queensland’s coal seam gas fields and the smaller shale resources in South Australia.

In the mid-stream segment, the extensive gas pipeline network in eastern Australia connects Queensland, New South Wales, Victoria and South Australia, mostly operated by the APA Group. Both Western Australia and the Northern Territory have their own gas distribution networks, with plans under development to connect the Northern Territory network to that of the eastern states at Mount Isa.

Oil, condensate and Liquefied Petroleum Gas (LPG)Australia’s production of oil, condensate and LPG - which are flammable mixtures of hydrocarbon gases used as fuel in heating appliances, cooking equipment, and vehicles - has been trending down since its peak in 2000, while production of natural gas has more than doubled since 1998 39. Australia is a net importer of crude oil and oil products, with the share of imports continuing to trend upwards. Historically Australia had a surplus in the trade of oil and gas until 2003/2004 but has been a net importer since then 39. In 2015/2016, Australia had approximately $24 billion imports of crude oil and refined products against exports of $8 billion of equivalent products 36. While the increase in the volume of LNG exports from the new LNG plants commencing production will offset the overall oil and gas trade imbalance, the nation’s dependency on imported oil products will remain for the foreseeable future.

Figure 6: Australia’s oil fields and basins


GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES


Gas and Liquefied Natural Gas (LNG)Australian gas production is forecast to increase from 81 billion cubic metres in 2015-16 to 128 billion cubic metres in 2017-18, an increase of 58 per cent. Conventional gas production is forecast to provide 91 billion cubic metres or 70 per cent of the 2017-18 total, with coal seam gas expected to provide 30 per cent of total Australian gas production by 2017-18 1.

Around half of Australia’s gas production is now produced for export. This share will increase as further LNG export capacity comes on line and ramps up over the next two years 1,10.

Figure 7: Australia’s gas industry, excluding shale gas



Australia’s LNG industry is clustered in three areas – Karratha and Onslow in Western Australia’s Pilbara region, Darwin in the Northern Territory and at Gladstone in Queensland. Over half of Australia’s LNG export capacity (both existing capacity and capacity under construction) - around 49 million tonnes per annum - is located in Western Australia. Queensland comes next with about 25 million tonnes per annum of nameplate capacity, followed by the Northern Territory.

Australia has significant shale gas potential, according to contingent and prospective resources estimates from Geoscience Australia 40, Gas production from shale gas resources started in the Cooper Basin in 2012.

Figure 8: Australia’s prospective natural and unconventional gas resources


GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES


Oil and gas industry forecastsAustralia is ranked eleventh in the world with proven gas reserves, and has significant petroleum resources and potential and undiscovered resources. The long-term growth in the Australian oil and gas industry depends on the level of exploration, but the recent decline in profitability, low commodity prices and rising cost of exploration have resulted in a reduction in the number of exploration wells drilled.

Oil, LNG and condensate exports

Forward forecasts of export earnings from oil products and LNG are uncertain given current volatility in global oil prices. As at December 2016, the Office of the Chief Economist expected the value of Australia’s exports of crude oil and condensates to be $6.2 billion in 2016/2017, increasing to $8.7 billion in 2017/2018. For LNG, prices are expected to rise from around AUD$7 per gigajoule (GJ) in 2016/2017 to around AUD$8 per GJ in 2017/2018. The pricing of LNG exports tends to be linked to the oil price, with a complex structure of time lags and caps to adjust the price payable for gas. Rising LNG prices and volumes are expected to lead to LNG export earnings increasing from $23.7 billion in 2016/2017 to $37 billion in 2017/2018 1.

New Australian liquefaction capacity will support global LNG market growth, with major sources of supply from Queensland Curtis LNG (QCLNG), Australia Pacific LNG (APLNG), Gladstone LNG (GLNG), Gorgon, Ichthys, Wheatstone and Prelude. Australian gas production and exports will grow, but sustained contract and spot price weakness will temper export values.

Contribution to the Australian economy

By 2020, the sector’s contribution to the national economy is expected to more than double to $65 billion, and tax paid by the sector will rise from $8.8 billion in 2012 to $13 billion 39. The anticipated increase in natural gas exports over the next decade is driving the forecast of strong growth in the sector. It is estimated that by 2030, when production and prices are expected to stabilise, the oil and gas contribution to the Australian economy will be 2.6 per cent. After accounting for interlinkages with the rest of economy, the sector is projected to be around 3.5 per cent of national output.

Figure 9: Historic pricing of Brent Crude

140

120

100

80

60

40

20

0

1986 1996 2006 2016

Data source – www.indexmundi.com



Global factors Australia is set to overtake Qatar as the world’s largest LNG exporter, with the combined nameplate capacity of Australian projects expected to reach 87 million tonnes per annum once the remaining LNG projects under construction are completed. Most of these volumes are destined for the North-East Asian gas markets of Japan, Korea and China.

The industry has significant global participation, with all the supermajors (Exxon, Shell, Chevron and BP) as well as six global majors being key industry investors. Australia hosts almost all major global industry service providers in every service segment including oilfield service companies (e.g. Halliburton, Schlumberger, Aker), EPC contractors (e.g. Fluor, KBR, Technip) and equipment manufacturers (e.g. GE Oil and Gas, Enerflex).

However, profit margins for projects are likely to come under strain over the next few years due to:

• Lowoilpricesrelativetoafewyearsago,whicharelinkedtoLNGcontractpricesintheAsia-Pacificmarket; and

• Supplyadditions,concentratedinAustraliaandtheUnitedStates,thatarelikelytooutstripgrowthindemand.

As a consequence, operators of Australian projects are expected to restrain capital expenditure and focus heavily on reducing operational costs for some time, with a view to improving operational margins. This is expected to include a very heavy focus on effective decision making and data analytics to support operational and value chain optimisation. However, the need to prepare for the next phase of supply to facilities cannot be overlooked. Operators will need to continue to explore and bring on new sources of supply to maintain production, but, will endeavour to do so at the lowest investment cost possible to achieve their objectives. These cost pressures are anticipated to drive the operators and their service providers to pursue improved productivity and innovative ideas.


GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES


Australian Coal IndustryThe coal industry has a long-established presence and history in Australia, as one of the industries that helped build the nation.

With 37 billion tonnes in black coal reserves, and about 375 million tonnes in annual exports (metallurgical and thermal coal), the Australian coal industry is the country’s second largest source of export revenue.

Australia has nine per cent of the world’s recoverable black coal and 22 per cent of the world’s brown coal. Globally Australia is ranked fourth behind the United States, Russia and China in recoverable resources 41. The Bowen Basin in Queensland and the Sydney Basin in New South Wales dominate coal production and contain 60 per cent of Australia’s recoverable black coal. Significant black coal resources are also found in the Surat, Clarence-Moreton and Galilee basins in Queensland and Gunnedah Basin in New South Wales. At 2015 rates of production, Australia’s black coal resources will support more than 110 years’ production 42.

The vast majority of the industry’s operational mines are in eastern New South Wales and central Queensland, which together account for nearly 98 per cent of annual black coal production. These mining operations are concentrated in the Sydney-Gunnedah Basin in New South Wales and the Bowen Basin in Queensland, with 80 per cent of production from open-cut mines. Most production in Queensland is of metallurgical coal 43, whilst New South Wales production is predominantly thermal coal 44. Additionally, there are over 20 new coal mines under consideration in Queensland alone 45.

Coal is exported primarily through terminals at Newcastle in New South Wales, and in Queensland through Hay Point, Gladstone and Abbot Point, together accounting for some 94 per cent of overall coal exports. Around 70 per cent of all Australian coal exports go to the Northeast Asian markets of Japan, China and Korea, with Taiwan and India the next two largest destinations by volume.

Australia has approximately 24 per cent of the world’s recoverable brown coal, and is ranked second behind Russia in terms of brown coal reserves. All of Australia’s brown coal is located in Victoria with approximately 93 per cent in the Latrobe Valley. Significant tonnages of other lower rank coals (Subbituminous) exist in South Australia, Western Australia and New South Wales. This coal is largely undeveloped. Brown coal is mined and exclusively used for electricity generation and at current rates, reserves will support 1,000 years’ production 46.



Figure 10: Australia’s coal basins and ports

As well as being a key export product, coal is also the mainstay of Australia’s domestic power generation, accounting for over 60 per cent of power generated across the country and for as much as 80 per cent of power generated in New South Wales and Victoria 10.

Analysis from the Queensland Resources Council and Wood Mackenzie in late 2015 47 indicated that over 30 per cent of coal mines were running at a loss and not covering costs.

As a result, coal producers have made substantial reductions to operating expenses and corporate overheads and are continuing to pursue savings within their operations 56. However, a large proportion of coal producers’ costs are ex mine with rail, port, energy and water supply costs essentially fixed as take or pay. Losses would typically need to be greater than the take or pay commitments before a producer will opt to close a mine and incur the full liability for contract commitments and other associated costs such as rehabilitation.

Coal exploration expenditure in Australia has steadily declined from levels at around $200 million a quarter in 2012 to under $40 million a quarter through most of 2016 1.

On the international stage, coal producers have been under extreme financial pressure. Companies such as Peabody, Glencore and Anglo American are restructuring coal operations. Large United States producers have filed for Chapter 11 Bankruptcy including Alpha Natural Resources (the largest metallurgical coal producer in the United States), Arch Coal, Patriot Coal, and Walter Energy. It should be noted that most have now restructured and continue to operate.

In Australia, Rio Tinto, Anglo American and others are reweighing their coal portfolios.

In addition to the financial pressures faced by coal producers, activist shareholders are applying growing and conflicting pressures by simultaneously demanding greater immediate returns on their investments in a traditionally long-term industry and also divesting investments in industries such as fossil fuels, particularly coal.


GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES


Global factors With around 54 per cent of international traded volumes, Australia is the leading supplier in the sea-borne metallurgical coal trade. Australia also holds a competitive position in the thermal coal market, supplying approximately 24 per cent of the global trade in thermal coal 1.

As a consequence of Asia’s rapid industrialisation, demand for high quality Australian coal is expected to continue to grow, with Australia anticipated to overtake Indonesia as the world’s largest coal exporter on a tonnage basis, by 2017.

However, growing concern with climate change and commitments made by large coal consumers such as China and India to reduce carbon dioxide emissions at the COP21 summit in Paris, 2015, could potentially slow the growth of Australian thermal coal exports to these countries.

The other key issue is the volatility of the international energy sector which has the ability to change the supply/demand profile and price in a very short space of time. This was evidenced with the Chinese Government decree to limit coal production to five day operations earlier in 2016. This had a major positive impact on export price.

Figure 11: Historic thermal coal prices

200

150

100

50

01986 1996 2006 2016


Coal industry forecastsMetallurgical coal

After remaining steady through 2014, metallurgical spot prices declined significantly in the first half of 2015. After further declines in spot prices in the first half of 2016, spot metallurgical coal prices rallied to five year highs by December 2016, reaching USD$311 a tonne. The boost in prices were mainly driven by restrictive domestic supply-side policies implemented by the Chinese Government on China’s coal and steel industries. Cuts in capacity led to increased import demand which put upward pressure on prices 1.

Sustained low prices encouraged several companies to announce plans to close capacity or reduce output (in North America and Australia). The profitability challenge is highlighted by the example of the sale of Isaac Plains coking coal mine in Bowen Basin for $1 (down from a 50 per cent value in 2012 of $430 million). Australian production of metallurgical coal has been affected by low commodity prices, with Glencore, Peabody announcing reductions in output. However, given the latest spike in metallurgical coal prices, some companies have announced the reopening/restart of mines both in Australia and elsewhere, including Glencore’s Integra mine in New South Wales, and Grand Cache Coal’s, Grand Cache mine in Alberta, Canada 1.

In 2016/2017 metallurgical coal exports are forecast to increase 1.7 per cent to 191 million tonnes, compared to 2015/2016. Export earnings in 2016/2017 are forecast to nearly double relative to 2015/2016, at AUD$40 billion 1.

In 2017/2018, Australia’s metallurgical coal exports are forecast to stay similar to 2015/2016, at 191 million tonnes. However, export earnings are forecast to decline 33 per cent to AUD$27 billion, as prices decline from highs seen in late 2016 1.



Thermal coal

Prior to the second half of 2016, thermal coal prices reached nearly 10 year lows. However, by mid-November 2016, thermal coal prices rallied to more than four-year highs of USD$110 a tonne. The main driver for this price rally was Government mandated capacity cuts in China. These capacity cuts are believed to have led to a shortage in supply in China, putting upward pressure on prices and increasing import demand 1.

Australia’s thermal coal production in 2015/2016 was similar to 2014/2015 levels at 251 million tonnes. Thermal coal production is forecast to increase slightly to 252 million tonnes, in 2017/2018. Export volumes declined by two per cent to 200 million tonnes in 2015/16. Earnings from thermal coal exports declined by eight per cent to $14.7 billion due to lower prices. In 2016/2017 export volumes are forecast to increase 3.6 per cent to 308 million tonnes, with export earnings forecast to increase 25 per cent to $18.4 billion. The forecast slight increase in export volumes in 2016-17 is largely driven by increased demand from China in the latter half of 2016, brought on by a warm summer and Government instigated capacity cuts, similar to those imposed on metallurgical coal. These increased Chinese demand factors from mid 2016 also explain the significantly higher thermal coal prices forecast for 2016-17 1. After peaking at about USD$108 per tonne in October 2016, the spot price has now settled at around USD$90 per tonne. This is up from a low of about USD$45 per tonne in late 2015.

The most recent International Energy Agency (IEA) World Energy Outlook 49 notes that global coal demand declined in 2015 for the first time since the late 1990s, but in its central scenario the IEA projects that world demand for thermal coal for power generation will remain fairly flat over the next two decades. By 2040 the IEA expects increased coal demand for power generation in Southeast Asia and India to be offset by declining coal demand in China, the US and the EU. Despite the projected flat global consumption of thermal coal, an 11 per cent increase in electricity output from coal-fired power generation is projected, reflecting increased fuel efficiency particularly from supercritical and ultrasupercritical power plant technologies. These efficiencies, along with an assumed modest start to carbon capture and storage, help keep projected greenhouse gas emissions from world coal fired power generation in 2040 close to today’s levels. The IEA projects that Australia’s coal production (thermal and metallurgical) will increase by around 14 per cent between 2014 and 2040.

Brown coal

In 2015 the Angelsea brown coal-fired power station on Victoria’s south coast closed, leaving the Low Yang, Yallourn and Hazelwood power stations operating in the Latrobe Valley. Hazelwood is also scheduled to close in March 2017 42. In the near term the use of brown coal in Australia is expected to fall.

Medium to long term scenarios for utilisation of Victoria’s brown coal resources will depend on the extent of availability of cost-effective technologies to cut greenhouse gas emissions from brown coal-fired electricity generation, notably through carbon capture and storage, and to potentially produce alternate fuels from brown coal such as dimethyl ether (DME) or hydrogen 50.


GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES


Australian Uranium IndustryAustralia is the world’s third largest supplier of uranium after Kazakhstan and Canada, and holds the largest proportion (around 30 per cent) of the global reasonably assured resources of uranium.

While known deposits are spread across the majority of mainland Australia, around 80 per cent of Australia’s known uranium resources are found in South Australia.

Australia has approximately 30 per cent of the world’s Reasonably Assured Resources of uranium and produces 11 per cent of global supply. Market prices have been steadily declining since 2011, with spot prices now well below the level required to encourage investment in new mines. Companies have delayed uranium projects that are uneconomic in the current climate. Production increased solidly in 2015/2016 as Olympic Dam and ERA Ranger facilities returned to full operation after supply disruptions the previous year. Export earnings in 2015/2016 were $959 million 1.

The three producing mines are located at: Ranger in the Northern Territory which commenced operations in 1981, producing 1,500 tonnes annually which ceased underground mining due to poor economics but continues to process long term stockpiles through to 2021 when processing must cease after which the facility is to be decommissioned and revegetated by 2026; Olympic Dam in South Australia which commenced operations in 1988, producing 4,300 tonnes annually and is the largest uranium resource globally (note however, uranium is mined alongside copper, gold and silver operations); and Beverley/Four Mile in South Australia which commenced operations in 2000, producing 800 tonnes annually. A further mine, Honeymoon in South Australia was placed into care and maintenance in 2013.

Figure 12: Australia’s uranium deposits and mines



Notwithstanding the recent downturn in uranium demand, a number of potential mines in Western Australia have progressed though the necessary environmental approvals processes. Four new mines have now received State environmental approval. Two of these, Cameco’s Yeelirrie project and Toro’s Wiluna project extension which is centred on the Millipede and Lake Way deposits, are shallow calcrete hosted uranium deposits which will have low mining costs and will bring new extraction technologies to Australia. Currently Namibia is home to the only similar mine in the world. The other two are Cameco’s Kintyre project, which is a narrow pitchblende vein deposit and Vimy Resources Mulga Rock project, which consists of four poly-metallic deposits with commercial grades of contained uranium hosted in carbonaceous material. Both the Mulga Rocks and Yeelirrie projects have been recommended by the Western Australian Government for Commonwealth approval following EPA assessment.

Uranium industry forecastsWorld growth in uranium demand

Australia is well positioned to benefit from the growth in uranium demand as the World Energy Outlook predicts around 80 per cent growth in nuclear power by 2040 49. Between the start of 2015 and late 2016, 19 new nuclear reactors commenced operation (two thirds of them in China), and construction started on nine new reactors in the same period. Currently, some 64 GW of new nuclear capacity is under construction, principally in China (one third) but also in Russia, the United Arab Emirates, the United States, Korea, the European union and India 57. There was also a tentative restart to the Japanese nuclear power industry in 2015 to offset the country’s high reliance on fossil fuels. In 2015, two reactors were restarted and a third in 2016. There are a further 23 reactors with applications awaiting approval to restart. The process has been slow due to political and legal decisions and effects of public opinion. Over the next two years, up to a further six reactors are expected to restart.

Globally in 2016 there are over 60 reactors under construction in 15 countries including two in Japan 51. China is expected to expand its strategic uranium reserve as part of its five-year plan, and currently has 36 reactors with 20 under construction.

Innovation areas

Key areas to bring innovation into the uranium industry are an improved understanding of in-situ recovery; improved understanding of the saline groundwater environment; and improved processing technology to increase recovery from calcrete hosted deposits.

Exploration

Exploration for new uranium deposits has slowed over the past four years but there is much unexplored potential in Australia. The focus for improved methods of exploration undertaken by Geoscience Australia, the Governments of South Australia and Western Australia and the Deep Exploration Technologies CRC 52 should soon deliver measurable cost benefits for exploration in uranium prospective greenfields areas.

Storage and disposal of used nuclear fuel

The findings of the South Australian Nuclear Fuel Cycle Royal Commission 53 identified that an expansion of uranium mining has the potential to be economically beneficial, but the most significant opportunity is storage and disposal of used nuclear fuel. In its response on the Royal Commission’s recommendations 54, the South Australian Government supports the recommendations to grow the mining sector through investment and streamlining of approvals, as well as ensuring responsibility for remediation. However, the South Australian Government considers that more investigation needs to be undertaken on the establishment of a used nuclear fuel and intermediate level waste storage and disposal facility.

This is likely to deliver substantial economic benefits to the South Australian community. However, the consideration of similar storage and disposal of high level nuclear material may meet with community resistance as demonstrated by the findings of the Citizen’s Jury on Nuclear Waste 55.

In a separate process, the Australian Government has committed to the establishment of a National Radioactive Waste Management facility. The National Radioactive Waste Management Act 2012 only provides for an Australian facility to be established exclusively for disposal of Australia’s low-level radioactive waste and interim storage of our own limited holdings of intermediate level waste.


GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES


Legislation and approvals process

The South Australian community has longstanding experience with mining, including uranium mining. Uranium industry participants are well aware of the importance of community consent to maintaining current operations, and the significance of broader support to any new proposal. No additional measures to further regulate community consent or community engagement with respect to new uranium mining projects appear required.

The current Western Australian Government has worked with the South Australian Government to ensure the necessary legislation and approvals processes and learnings are in place to safely manage a new uranium industry development in that State.

Prices

Prices as indicated in Figure 13 held up better than other commodities in 2015, but slumped to historic lows of USD$18.75 per pound in October 2016, well short of high prices established in 2007 (USD$138 per pound).

Global factorsAll Australian uranium production is currently exported, under stringent safeguards agreements, to a range of countries with the United States as the largest single destination. Recently the Australian government has concluded new nuclear cooperation agreements with the UAE, Ukraine and India, providing new market opportunities for Australian producers.

Other large destination countries have traditionally included Japan and South Korea, where demand has significantly declined following the Fukushima Daiichi incident in 2011, when nuclear plants were placed in long- term shut down whilst safety reviews were undertaken to determine whether plants are to be put back into service or permanently shut down.

The nuclear shut down in Japan, and moves to reduce nuclear power generation in other countries such as Germany, has resulted in a global over-supply which placed downward pressure on uranium prices. Nevertheless, demand for Australian uranium is expected to increase with significant nuclear power growth anticipated in China, India, Russia and the United Kingdom over the next decade.

Figure 13: Historic uranium pricing

140

120

100

80

60

40

20

01986 1996 2006 2016




Transition from Rapid GrowthThe Australian energy resources sector is coming to the end of an unprecedented period of rapid growth. Within the energy resources sector this growth has been most apparent in the coal and oil and gas industries.

• Thecoalindustryhasaddedaround25percentofextraproductioninthedecadesince2005.

• Inoilandgas,anentire,worldfirstindustryofconvertingcoalseamgastoLNGhasbeenbuiltinQueensland. Darwin is completing the construction of the INPEX Ichthys facility and Western Australia has seen the construction of multiple new LNG facilities at Pluto, Gorgon and Wheatstone along with the ongoing development of the Shell Prelude FLNG facility.

• Duringthesameperiod,theuraniumindustryhasworkedtodevelopseveralnewprojectsandhasthepotential to add substantial value to the national economy should they proceed with additional opportunities, including the development of a nuclear waste storage and disposal facility in South Australia 53. While some of these projects may take many years to develop, they offer opportunities for growth of the sector.

Construction boom

This boom period sees Australia becoming the world’s leading producer of LNG by the end of this decade but has placed enormous pressure on virtually every link of the energy industry supply chain. Undertaking multiple multi-billion dollar projects concurrently in one sector alone would have been a major challenge, but this expansion coincided with similar expansions in other sectors such as iron ore mining.

During this period of expansion, many projects were delivered late and substantially over budget into a declining market, leaving the operators of the facilities facing the challenges of bringing their new plant into production as quickly as possible to begin recouping their investment but with the additional hurdle of a substantially reduced market for their products.

These same boom times occurred at a time of rapid globalisation of services, with much of the equipment, systems and knowledge that contributed to these new developments being drawn from overseas. This globalisation of the industry placed additional and previously unforeseen pressures on domestic suppliers who struggled to compete.

Operations and maintenance

The new resource facilities in the coal, oil and gas industries will operate for many years into the future. During their operational lifetime they will require ongoing maintenance, regular shutdowns and turnarounds to ensure they operate at peak performance. They will employ thousands of personnel and engage with all sectors of the supply chain. The LNG industry will contribute around $156 billion and the coal industry some $97 billion in direct tax revenue to state and federal governments between 2015 and 2030.

Additional indirect tax of around $70 billion from the LNG industry and $82 billion from the coal industry will accrue via wages, taxes on other business inputs and second order business opportunities.

The primary objectives of the operators of these facilities are to run the plants safely and as efficiently as possible. To remain competitive will require operators to identify, trial and exploit new ideas and new technologies, many of which will be accessed through third parties. For many operators, their own internal systems and processes often inhibit them from accessing the newest technologies. Instead, they wait for those in other jurisdictions to be the first movers (with attendant risks), but relinquishing the opportunity to gain first mover advantage.

With the construction phase virtually over, many local industries and communities are looking to assist in the start-up, optimisation and running of the new facilities. Industries must build long term relationships with operators and, through them develop sustainable industries that will deliver highly skilled, well-paying careers for their workforce.

Long tail period

next phase, the long tail after the project boom, offers many of the potential opportunities for Australian industry. Although the operational life of these facilities is long, the key period for the broader industry and community to collaborate on finding the best ways to achieve these opportunities are in the short term.


GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES


To fully understand the impact of both NERA’s and the broader industry’s activities it is important that consistent benchmarking is undertaken of the energy resources sector and the industries within it. Such benchmarking allows the sector to identify weaknesses to focus on, and to better understand its international competitiveness. As such, NERA commissioned Accenture to produce a series of sector competitiveness assessments, of which the oil and gas and the coal sectors have been completed at the time of writing this SCP.

The assessments focus on the industries of oil and gas and coal and follow a common methodology. A number of similar issues were identified across these energy resources industries. The assessment provides statistical backing to NERA’s strategic goals, allowing for an empirical measure of the progress of the sector as the recommendations of this SCP are put into action.

Sector Benchmarking


MethodologyThe ICA comprises two core components. A framework for measuring competitiveness (ICF), and an index score of country competitiveness (ICS). The ICS is displayed in a dashboard to illustrate Australia’s relative performance (Dashboard), and a leader board to rank the world’s most competitive industries (Leader Board).

To assess competitiveness effectively, a clear definition of the scope of the measurement is required. The business dictionary defines competitiveness as:

“Ability of a firm, Industry, or a nation to offer products and services that meet the quality standards of the local and world markets at prices that are competitive and provide adequate returns on the resources employed or consumed in producing them” 56

This analysis considers competitiveness of the industry in the context of a system of interdependent entities who participate in the industry. Within this context, the extent to which a single actor can excel in terms of overall performance is dependent the capacity and capability of the entire system. The competitiveness framework considers the four phases of the value chain; Exploration, Development, Production and Abandonment. It also considers operators, supply chain entities (including entities that manufacture, and or deliver products and services), as well as the industry regulatory environment.

To identify a collectively exhaustive list of factors that influence industry competitiveness, Value Driver Trees (VDTs) were created for each of the four phases of the value chain, addressing four key questions.

• Capacity – Does the industry have the required skills, infrastructure and equipment to produce its producttomeetmarketdemand?

• Capability – Does the industry, collectively, have the capability (labour, capital and technology) to deliverenergytothemarketatmarketcompetitiveprices?

• Regulatory Environment – Is the regulatory environment contributing to and enabling the success oftheindustry?

• Political and Social Environment – Are the political and social environments conducive to and supportiveoftheindustry?

These broad drivers are further broken down to specific metric level data points. A high-level breakdown of the VDT is shown in Figure 14.

Figure 14: ICF value driver tree

Industry Competitiveness

Capability

Political and Social Environment

Capacity

Regulatory Environment

Public (Social License to Operate)

Regulation

Capital

Knowledge & IP

Infrastructure

Industrial Relations

Taxation System

Labour Force

Assets

SECTOR BENCHMARKING

GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES


Oil and Gas Industry Competitiveness Assessment 2016The oil and gas ICA is based on research conducted over the course of ten weeks from May to July 2016 to create an industry relevant measure of oil and gas industry competitiveness that is robust and repeatable, allowing improvements to be tracked over future releases.

This Australian Oil and Gas Industry Competitiveness Assessment (ICA), includes an Industry Competitiveness Framework (ICF) and Industry Competitiveness Score (ICS). The score provides data-driven analysis of how to effectively allocate and direct effort to deliver maximum industry impact. It also presents a baseline against which the industry can measure its performance in future releases. This report outlines the methodology utilised and the results and insights gained from the ICS.

OIL AND GAS INDUSTRY PEER GROUP AND DATASETSThe competitiveness measurement requires a comparison of Australia’s performance against a peer group of oil and gas producers. This peer group was selected based on two criteria: market size and data availability. Countries were included if they had a greater than 0.2 per cent share of world production for either oil or gas and if they were captured in more than 80 per cent of the data sources. This resulted in an overall peer group of 32 countries.

Data was collected primarily through secondary research from both public and proprietary data sources. The ICS uses 52 specific data points from 14 different sources across all 32 countries. All data is taken from 2015 data sources, although some metrics utilise longer periods. Key data sources used include; Wood Mackenzie 57, International Gas Union (IGU) 58, International Association of Oil and Gas Producers (IOGP) 59, the Fraser Institute Global Petroleum Survey 60,andAccenture’s“ReadyorNot?”Study 61.

Where data on a specific industry group or value chain phase were not available, suitable proxy data points were used. Country specific data and surveys have also been used throughout the report to support findings of the ICS; however, these are not included in the competitiveness score.

INDUSTRY COMPETITIVENESS SCORETo calculate the ICS, data points from the VDTs were logically split into eight components. Measures specific to a single phase of the value chain were included in their respective phase. Metrics that ran across the value chain were split into four industry growth enablers: Supply Chain; Research and Innovation; Workforce; and Government and Public Involvement. These growth enablers represent core capabilities, essential to the operation of a successful oil and gas industry. The structure is illustrated in Figure 15.

Figure 15: ICS structure

Value Chain Exploration Development Production Abandonment

Industry Growth Enables

Supply Chain and Services

Research and Innovation

Workforce

Government and Public Involvement

SECTOR BENCHMARKING


The combination of the 52 separate data points into a single score of overall industry competitiveness is achieved in three steps:

1. All data points are scored relative to the peer group, between zero and ten, (where zero represents the weakest performance, and 10 the maximum achievable score).

2. A weighted average of data scores is taken at the category level (i.e. Exploration or Workforce), generating eight scores for each country.

3. The overall ICS is calculated as a weighted average of the eight components.

This approach takes into consideration the broad definition of competitiveness used throughout this assessment. It also accounts for the interdependencies in the industry between the growth drivers and the different phases of the value chain.

Figure 16: Oil and gas competitiveness dashboard

6.4

7.45.27.5

MEDIANAUSTRALIA

MEDIAN AUSTRALIA BEST MEDIAN AUSTRALIA BEST

MEDIAN AUSTRALIA BEST



1.8 MEDIAN AUSTRALIA BEST



BEST (USA)


Exploration Development & Execution Production Abandonment

Industry Growth Enablers

6.4

6.4

6.2

6.1

Supply Chain Workforce

Research & Innovation

Government & Public

From the baseline results, which are illustrated in Figure 16, Australia has an overall competitiveness score of 6.4 out of 10, ranking it seventh on the leader board of global peers, above the world median of 5.6, and lagging behind the world best, United States, at 7.3. The analysis finds that improvements across four priority areas can improve this score by 15 per cent, in line with the world’s best, and adding approximately $5 billion in value to the industry {note, this figure of $5 billion is determined by applying the 15 per cent potential improvements to the oil and gas share of the nation’s GDP as illustrated in Figure 17.

NERA has commissioned further analysis of Australia’s exploration competitiveness

This Assessment ranks Australia as the most competitive country in the Exploration and Appraisal phase, with a score of 7.5, above the global median of 5.2. This is a combination score for both conventional and unconventional exploration and appraisal wells. Australia drills wells efficiently and effectively, but the large number of unconventional wells introduces a bias into the statistical score so the total score does not accurately reflect the real exploration state of play in Australia and does not analyse the exact nature of exploration or the potential of unrealised exploration. Further, due to low commodity prices and the high cost environment in Australia, exploration activity has almost stopped in the last 18 months.

To address the above, NERA has commissioned Accenture to undertake further analysis of Australia’s exploration and appraisal performance, reflecting conventional and unconventional wells and will provide a report on this over the next months.

SECTOR BENCHMARKING

GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES


Figure 17: Value of potential improvements in competitiveness of Australian oil and gas sector

100%

2.05%

Australian GDP (2014 - 2015)

$1.6 T

O&GshareGDP

$33.3 B

ICA Improvement opportunity (15%ofO&GGDPshare)

$5 B

Legend:T=TrillionB=Billion,O&G=Oilandgas,GDP=Grossdomesticproduct

According to the ICS, although Australia ranks first in the world in the Exploration phase, in the Execution (design and construction of new facilities), Production and Abandonment phases, the country ranks at, or below the world median. For the industry to be truly competitive, excellence must run through the entire value chain. Importantly for Australia, the industry is shifting from Execution to Production: consequently, the focus should primarily be on improving operational performance, with a view to building capability for the Abandonment phase.

To achieve improvements in Australia’s overall industry competitiveness, four priority areas are identified where changes in the short-term have the ability to affect the country’s performance:

• Supplychain:Collaboration between operators and service providers to share resources and infrastructure, as well as setting up regional supply hubs, could see Australia overcome many of its structural supply chain disadvantages.

• Researchandinnovation:Increased collaboration between universities and industry, combined with a focus on commercialisation of research would see Australia become a world leader in oil and gas research and innovation.

• Workforce:Investing in building local capability for the Production and Abandonment phases, so that Australia’s workforce maintains its high quality.

• Regulatoryreform:Increasing engagement between industry and government to reduce the “red tape” that adds costs and extends timelines within the industry.

The ICS provides a comprehensive, data-driven assessment of the Australian Oil and Gas industry from a global viewpoint. The results identify numerous areas for more rigorous study and suggest several innovative and collaborative improvements, that will have a dramatic impact on industry competitiveness if implemented. In future years, the ICS will provide a solid baseline against which the industry can measure improvement.

SECTOR BENCHMARKING


PRIORITY AREAS AND OPPORTUNITIESThe analysis considers the four phases of the value chain, and identifies a number of industry improvements that can boost Australia’s competitiveness. These ideas have been grouped into four priority areas:

• SupplyChain;• ResearchandInnovation;• WorkForce;and• RegulatoryReform.

The analysis suggests that by focusing on innovative and collaborative solutions within these priority areas, a 15 per cent increase in the competitiveness score is achievable. This would place Australia on par with the current world’s best and capture approximately $5 billion per annum in industry value 62.

These priority areas focus on potential improvements achievable within the short term through an industry wide approach to enhancing competitiveness. An “others” category is also included to capture potential improvements outside the four priority areas. There are also areas that the industry is either not able to influence, such as geographical remoteness, or will not be able to improve in the near term, such as the high cost of the Australian labour force.

Detailed modelling of the opportunities was conducted using the Dashboard at the metric level. The Dashboard allows for detailed scenario modelling, with a 15 per cent increase representing the short term plausible scenario. Longer term changes are harder to forecast, however, improvements are potentially much greater. Figure 18 displays the possible increases across each measured category and shows how Australia could move to be on par with the current most competitive oil and gas producer in the world, United States.

Figure 18: Scenario modelling - Australian 15 per cent decrease

Australia (Current)

Com

petit

ivene

ss S

core


OthersSupply Chain

Regulatory Reform

Work Force

Australia (Potential

World Best)

7.5

6.5

5.5

1.92%3.23%

3.34%1.86%

4.57%

SECTOR BENCHMARKING

GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES


Supply chain results and opportunitiesAustralian oil and gas industry score

Australia’s Supply Chain score of 6.4 places the country in the third quartile, leaving significant room for improvement, while the world’s best, Netherlands, scores 8.0. Performance of the supply chain affects the industry over all four phases of the value chain, consequently, improvements can deliver major impact. Analysis suggests that, of the five categories, supply chain improvements and innovations will have the biggest impact on overall competitiveness, with a potential increase in the score of 4.57 per cent.

Rationale for the score

Australia has structural characteristics that hinder the country’s ability to compete with the world’s best, namely, the size and age of the industry, and the remote and challenging environments in which most operations are situated. In recent years, supply chain improvements have focused on procurement processes.

How we could improve the score

Going forward, major gains to industry competitiveness will come from sharing of resources, and finding innovative solutions to alleviate structural disadvantages. Some include:

• LearningfromtheUnitedKingdomoilandgasindustrythatestablishedtheOilandGasAuthority 63. The Authority is tasked with working with government and industry to ensure the United Kingdom gets the maximum economic benefit from its oil and gas reserves. It was established in response to identified challenges facing the sector in the North Sea and is pursuing strategies to enhance the value of the sector. The CRINE initiative, which created a single prequalification and procurement process, consistent throughout the industry, if implemented in Australia, could unlock enormous value 71.

• FindingcollaborativesolutionstothesizeandgeographyoftheAustralianmarket.Industryoperatorsshould work towards sharing infrastructure and developing regional “hubs” to better manage and streamline the supply chain process.

• Investinginadvancedmanufacturing,whichprovidesanenormousopportunityintheDevelopmentand Production phase. The industry should explore opportunities from trialling technologies and advanced manufacturing techniques, creating a technology value proposition to support the broader domestic value chain.

Industry impact

The industry must find innovative and collaborative solutions to overcome the structural disadvantages inherent to Australia. Improvements in this area provide the biggest potential impact on Australia’s competitiveness.

Research and innovation results and opportunitiesAustralian oil and gas industry score

Australia performs well in the Research and Innovation score, well above the world median of 3.7.


This result runs contrary to popular perception. However, rather than a sign of Australia’s strong performance in this area, this reflects the poor state of research and innovation in many other oil and gas producing nations. Australia’s score is still far below the world’s best: the United States, the United Kingdom, and the Netherlands.

SECTOR BENCHMARKING


6.4Research

& Innovation


6.4Supply Chain



Improvements in Research and Innovation will have flow on effects to other priority areas and the industry. Those changes specific to Research and Innovation capability can boost overall competitiveness by around two per cent. Achievable changes in the near term include:

• Increasingengagementbetweenindustryoperators,universitiesandresearchinstitutions.Universitiesand research institutes can play a larger role in developing innovative solutions to solve the latest industry problems. Industry participants should collaborate more effectively to unlock this underutilised resource.

• ImprovingthecommercialisationofresearchinAustraliatofindwaysofturninginnovativeideasacross the entire value chain into commercial successes.

• Buildingworld-classdataanalyticscapability.Australiahassomeoftheworld’smostadvancedproduction facilities. Data analytics needs to be used within these assets to find innovative ways to improve production efficiency. Collaboration is essential as this is a new set of skills for the industry.

• Investinginnewandinnovativemethodsofreducingthecostanddifficultyofdecommissioningfields. Abandonment represents a significant liability for the industry if current technology is used.

Industry impact

A focus on building a successful research and innovation capability will have significant benefits for the rest of the industry. While NERA will pursue building a stronger research and innovation mindset, the industry needs to support this work to translate opportunities into tangible results.

Workforce results and opportunitiesAustralian oil and gas industry score

The measure of workforce competitiveness considers both cost and quality. Australia scores 6.2, behind the world’s best, China, with a score of 8.3.


The balance between cost and quality is vital. While Australia’s costs are among the highest in the world, the current quality is of a high standard. Across the value chain, improvements in the capability of Australia’s workforce have the potential to boost the overall competitiveness score by 3.34 per cent.


As Australia’s industry moves from the Execution phase into Production and eventually Abandonment, there are significant risks and opportunities. The country’s workforce must capitalise on this transition and strive to become the world leader in oil and gas operations. Key changes to achieve this goal include:

• InvestinginfocusedtrainingandeducationtoensuretheindustryispreparedfortheProductionphase. Particularly in maintenance and technical operational knowledge.

• Improvingorganisationalstructurestolimitthelevelofoverheads.Australiahasseensomeoftheworld’s highest execution costs in the recent construction boom. If new greenfield projects are to happen, operators must engage the construction workforce and ensure they are appropriately skilled to deliver projects on budget and on schedule.

• Buildingandscalingabandonmentanddecommissioningcapability.Thiscouldincludeformingpartnerships with organisations outside of Australia and undertaking exchange programs to build local capability.

Industry impact

A high-quality workforce is essential to a competitive oil and gas industry. As the industry moves from execution to operations, maintaining and improving Australia’s workforce competitiveness is paramount.

SECTOR BENCHMARKING

GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES


6.2Workforce


Regulatory reform results and opportunitiesAustralian oil and gas industry score

Australia’s Government and Public Involvement score is 6.1, which is comparable to the world median, and provides ample room for improvement. Australia performs very well in the government policy and perception area: however, the regulatory component is a key area of weakness and presents the greatest opportunity for overall improvement. Changes here could add 3.23 per cent to overall competitiveness, the second largest in this analysis.


Complexity, duplication and “red tape” increase costs and extend timeframes for all participants. While some work has been done to improve the situation, if Australia wishes to become a leader in the industry, there is a pressing need for the regulatory bodies and industry stakeholders to work together more closely.


Specific potential improvements include:

• Streamliningregulatorystatutesandagenciestoreducetheuncertaintysurroundingregulation.Thereare approximately 150 statutes and more than 50 agencies regulating the oil and gas industry 65.

• Providingcleardirectivesonenvironmentalregulation.Thisareaiscurrentlyasignificantdeterrenttoinvestment in Australia. The state and federal governments must end the coal seam gas debate so the industry can move forward with certainty.

• Revisingtheindustrialrelationsframework.Seventy-fivepercentofindustrystakeholdersreportedfeeling the country has an inflexible industrial relations framework 61. {Note – industrial relations do not form part of NERA’s role}

• Providingconstructiveandtangiblefeedbackfromindustry.Governmentandregulatorybodiesneedto do their part by engaging with industry stakeholders to understand the voice of the customer.

Industry impact

Both industry and government have a common goal, to maximise value for Australia. There is significant benefit to be gained from collaborating and improving competitiveness within this area.

Other OpportunitiesCost cutting

Industry operators have spent the past two years slashing costs and reducing workforce numbers. While the cost decreases have allowed operators to stay profitable, it is not a sustainable option and does not help to build Australia’s long term competitive edge.

Operators need to continuously improve and streamline their operations. There is added benefit to increase competitiveness in doing so by collaborating with other operators, suppliers and stakeholders. A significant focus has been placed on these forms of initiatives, so continued effort will provide limited returns, made evident by the 1.92 per cent improvement found in the ICS analysis.

Public perception

Public perception and the Social Licence to Operate (SLO) are a vital component of today’s oil and gas industry. Oil and gas companies cannot function sustainably without the backing of the society in which they operate. Unfortunately, there is currently no reliable data source to measure SLO competitiveness across a broad range of countries on a yearly basis.

Data from the World Bank Public Perceptions Survey on Extractive Industries 73 found that, in Australia, 41 per cent believe the industry does not have a positive impact on the environment and 24 per cent believe the industry does not have a positive impact on local communities. While this data suggests Australia has room for improvement, without a global data set it is not possible to understand the country’s relative performance. The industry should collaborate to define measurable KPIs, and identify opportunities to increase the public’s trust in oil and gas companies.

SECTOR BENCHMARKING


6.1Government

& Public

GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES


SECTOR BENCHMARKING

Coal Industry Competitiveness Assessment 2016The Australian Coal Industry Competitiveness Assessment includes an Industry Competitiveness Framework (ICF) and Industry Competitiveness Score (ICS). The score results and findings are based on research conducted over the course of ten weeks from October to December 2016. The objective was to create an industry relevant measure of the coal industry competitiveness that was robust and repeatable, allowing improvements to be tracked over future releases.

COAL INDUSTRY PEER GROUP AND DATASETSThe competitiveness assessment requires a comparison of Australia’s performance against a peer group of coal producers and exporters. This peer group was selected based on four criteria; market share, growth outlook, industry structure within the country and data availability. Countries were included if they had a greater than 0.5 per cent share of world production or a significant year-on-year growth forecast of the coal industry (i.e. greater than 10 per cent), represented a sizeable share of GDP, and if they were captured in more than 80 per cent of the data sources. The assessment focused on world black coal production; as a result, lower ranked coals were excluded. This resulted in a peer group of 10 countries.

The peer group of 10 countries had a combined share of 85.2 per cent of world black coal production in 2015, making it a strong representation of the coal industry globally. Noticeably, India, which produces 9.5 per cent of the world’s coal, is absent from the peer group due to the lack of sufficient data. Had India been included in the peer group, the combined group would have accounted for 94.7 per cent of world production.

Data was collected primarily through secondary research from both public and proprietary data sources. The ICS uses 75 specific data points from a multitude of reputable sources across all 10 countries. All data is taken from 2015 data sources, although some metrics utilise longer periods. Key data sources used include; Wood Mackenzie, Metalytics, Fraser Institute, World Economic Forum, and Accenture’s internal research. The study uses data in 2015 United States Dollars (USD) with an exchange rate of Australian Dollar (AUD) to USD of 0.75 applied where applicable. Where data on a specific industry group or value chain phase was not available, suitable proxy data points were used.


INDUSTRY COMPETITIVENESS SCORETo calculate the ICS, data points from the Value Driver Tree (VDT) shown in Figure 14 above were logically split into eight pillars of competitiveness, which fall under two categories:

• Industry Value Chain – activities performed by the industry to deliver a valuable product or service to the market.

• Industry Growth Enablers – activities performed to enable and support the industry to deliver a valuable product or service to the market.

Measures specific to a single phase of the value chain were included in their respective phase. Metrics that ran across the value chain were split into the four industry growth enablers – Supply Chain, Research and Innovation, Workforce, and Government and Public Involvement. These growth enablers represent core capability, essential to the operation of a successful coal industry. The structure is illustrated in Figure 19.

Figure 19: Coal industry ICS structure

Value ChainExploration&Development

Extraction& Production

Coal Transportation

Closure& Rehabilitation

Industry Growth Enables

Supply Chain and Services


Workforce

Government and Public Involvement

The combination of the 75 separate data points into a single score of overall industry competitiveness is achieved in four steps:

1. All data points are scored relative to the peer group, between zero and 10, (where zero represents the weakest performance and 10 represents the maximum achievable score).

2. Where possible metrics are broken down into different production types (i.e. underground versus surface mining, and thermal versus metallurgical coal), generating up to four sub-scores for each metric. Each country is then given a weighted average of each sub-score based on the prevalence of that production type within the country.

3. A weighted average of data scores is taken for each pillar (i.e. Exploration and Development or Workforce), generating eight scores for each country.

4. The overall ICS is calculated as a weighted average of the eight pillars.

The overall approach to calculate the ICS takes into consideration the broad definition of competitiveness used throughout this assessment. It also accounts for the interdependencies in the industry between the growth enablers and the different phases of the value chain.

SECTOR BENCHMARKING

Figure 20: Coal industry competitiveness dashboard

5.8

8.45.04.7

MEDIAN AUSTRALIA

MEDIAN AUSTRALIA BEST MEDIAN AUSTRALIA BEST




US$3.4b*

Estimated Australian mine closure liability to 2045 for currently operating mines



BEST (CHINA)


Exploration & Development

Extraction & Production

Coal Transportation

Closure & Rehabilitation

Industry Growth Enablers

6.4

7.1

5.2

5.4

Supply Chain Workforce

Research & Innovation

Government & Public

*US$3.4billionexcludesestablishinglandformandrevegetationcosts

From the analysis completed and shown in Figure 20, Australia has an Industry Competitiveness Score of 5.8 out of 10, behind the world’s best, China, and marginally exceeding the world average of 5.4. Australia performs strongly in the coal transportation phase of the value chain, with a score of 8.4, and also performs better than the world average in three of the four industry growth enablers. However, weak results in both the Exploration and Development and the Extraction and Production phases ultimately undermine the country’s overall competitiveness.

China leads the ICS due to having one of the lowest costs across the value chain. China is the largest consumer and producer of coal in the world and ranks first in the Exploration and Development and Coal Transportation phases, and third in the Extraction and Production phase.

Figure 21, presents the ICS leader board, where Australia ranks as the world’s third most competitive coal producing nation. While Australia ranks only slightly above average, the spread of scores across the peer group is low.

Analysis of the results suggest this is because no single country performs consistently well across all eight pillars of competitiveness. For example, Canada, ranked eighth, scores very highly in the industry growth enabler pillars (i.e. Supply Chain, Research and Innovation, Workforce, and Government and Public Involvement); however, it is among the worst performers in the Extraction and Production and Coal Transportation pillars.

These results suggest all 10 countries within the peer group have significant room for improvement and that, with industry commitment and policy support, Australia has the opportunity to significantly increase its competitiveness ranking.

Figure 21: Coal industry competitiveness leader board

1 China 6 Indonesia

2 South Africa 7 Colombia

3 Australia 8 Canada

4 United States 9 Vietnam

5 Russia 10 Mozambique

GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES

SECTOR BENCHMARKING



PRIORITY AREAS AND OPPORTUNITIESImplementing practical, innovative and collaborative solutions across key priority areas, will make Australia one of the most competitive and sustainable coal producing nations in the world.

Industry improvements and opportunities have the potential to boost Australia’s competitiveness and add significant value to the industry and economy. These ideas have been grouped into four major priority areas:

• SupplyChain;• ResearchandInnovation;• WorkForce;and• GovernmentandPublicInvolvement.

These priority areas focus on improvements to the industry that are achievable within the short term across each phase of the value chain.

To quantify the impact of the detailed initiatives, three separate measures were utilised: the change in Australia’s competitiveness score against the global peer group, cost savings to industry mining operations, and the industry value added increases. Each measure provides an alternate view of the potential benefit to the industry and country as a whole. The analysis suggests Australia could become the world’s most competitive coal industry, while unlocking AUD$4.5 billion in value for the economy.

To understand the potential improvements to Australia’s coal competitiveness score, detailed modelling of the opportunities was conducted using the dashboard at the metric level. Figure 22 displays the possible increases across each measured priority area. Due to Australia’s uncompetitive mining and processing capability, priority areas that impact on the Extraction and Production phase of the value chain where found to have the largest impact. Overall the solutions detailed have the ability to increase Australia’s coal competitiveness score by 18 per cent. Based on 2015 figures, the industry has the ability to overtake China to become the world’s most competitive coal producer.

Figure 22: Scenario modelling – Australian 18 per cent decrease

Australia (Current)

Com

petit

ivene

ss S

core


OthersSupply Chain

Government & Public

Involvment

Work Force

Australia (Potential

World Best)

7.0

6.0

5.0

1.0%3.8%4.6%

3.7%5.1%

SECTOR BENCHMARKING

GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES

SECTOR BENCHMARKING



7.1Research

& Innovation

6.4Supply Chain


Supply chain results and opportunitiesAustralian coal industry score

Australia’s Supply Chain score of 6.4 places the country above the peer group average, but shows there is significant room for improvement compared to the world’s best, United States, which scores 9.0. The performance of the supply chain affects the industry over all phases of the value chain, so improvements can deliver major impact. Analysis suggests that supply chain improvements and innovations will increase Australia’s overall coal competitiveness standing by 5.1 per cent.


For Australia to remain above the peer group average and be competitive in this area, it needs to consider a number of innovative solutions. Two possible solutions include:

• Creatingadditionalregionalsupplyhubsandservices,liketheHunterValleyCoalChainCoordinator(HVCCC), to support the industry. The HVCCC is an excellent example of industry operators collaborating to form a joint-partner entity that focuses solely on managing a component of the supply chain in a particular region. Additional joint-partner entities should look at managing warehousing, logistics and transportation needed to support mining operations, allowing operators to focus on core mining capability. This could reap several benefits including the creation of new jobs, and the standardisation of supply chain operations.

• Coordinatingkeyoperationalactivitiessuchasshutdownsormajormaintenanceacrosstheindustry.The coal industry can learn how to set this up from the coal seam gas industry in Queensland. Coal operators can form better partnerships with service providers to facilitate a more effective and efficient flow of people and materials. This provides the opportunity to optimise resources, equipment, and ultimately increase overall utilisation.

Industry impact

These potential solutions would require organisations to shift from the conventional “way of working” and adopt new operating models. Given the risks, the overall benefits would still outweigh them and allow Australia to increase its Supply Chain competitiveness.

Research and innovation results and opportunitiesAustralian coal industry score

Australia performs well in Research and Innovation with a score of 7.1, well above the world average of 5.1, and only behind leaders, the United States with a score of 8.2.


Since 1992 the coal industry has funded major research and innovation through the Australian Coal Association Research Program (ACARP) 8. The organisation is a strong and active research vehicle owned and funded by Australian coal producers. In combination with NERA, the coal industry has sufficient capacity to drive research, innovation and collaboration across the industry.


Although Australia performs well in this area, there is still considerable room for the industry’s Research and Innovation capability to improve, in order to remain competitive with the United States. Possible focus areas include:

• Solvingindustryissuessuchasreducingoverburdenremoval.Operatorsmustbewillingtoshareinformation and invest in collaborating with research institutes and universities to solve key industry challenges together. Once a solution has been determined, commercialisation can easily take place because all stakeholder groups have been involved and engaged throughout the process. The industry should leverage both ACARP and NERA to grow and drive innovation and its commercialisation forward.


SECTOR BENCHMARKING


5.4Government

& Public

5.2Workforce


• Investingintechnologytocreatetheworld’smostadvancedcoalminingoperations,includinglinkingsystems to equipment and vehicles to drive automation and integration. Additionally, the industry should leverage data analytics capability to increase productivity and utilisation. To implement these programs, the coal industry should look to other resources industries, such as iron ore, to leverage their knowledge and speed up adoption. NERA is well placed to facilitate this cross industry collaboration, and assist in the commercialisation of these technologies.

Industry impact

Analysis estimates that there can be a 3.7 per cent increase in the Research and Innovation score should these actions be implemented successfully. The entire industry needs to support the research and innovation agenda. NERA has an important role in helping to accelerate and translate opportunities into tangible results and benefits for the nation.

Workforce results and opportunitiesAustralian coal industry score

With a score of 5.2, Australia performs just below the peer group average for Workforce, trailing well behind the peer group best, the United States, with a score of 7.3.


Australia’s training, education infrastructure, and labour productivity (measured by marketable tonnes per employee), are world-leading; however, labour costs are by far the highest in the world.


Major improvements to Australia’s Workforce coal competitiveness ranking are unlikely to come from cost reductions. Instead, the industry must focus on utilising the country’s high skilled labour to boost productivity. Initiatives in this area have the ability to increase Australia’s overall Workforce coal competitiveness score by 4.6 per cent. Key solutions include:

• Embracingthe“new”wayofworking.Leveragingthecountry’shighlyqualifiedworkforcetoutilisedigital, disruptive technologies and methodologies that have the potential to provide major increases to operational efficiency and productivity.

• Improvingtheworkingpartnershipbetweenoperatorsandserviceprovidersandcontractors.Focuson outcome and value-based incentives rather than headcount to execute specific scopes of work. This also promotes collaboration and innovation.

• Buildingcapabilityrequiredfortheupcomingwaveofclosureandrehabilitationactivities.Thisincludesinvesting in relevant training and potentially organising work secondments to countries with coalmines undergoing end-of-life closure and rehabilitation.

Industry impact

An agile, competent and engaged workforce is essential to building a competitive coal industry. The ability of Australia’s workforce to continually evolve and be on the forefront of technology will be critical to its overall success.

Government and public involvement results and opportunitiesAustralian coal industry score

The Government and Public Involvement industry growth enabler measures a number of factors such as regulatory climate, government policies (including taxation and royalties), and social licence and community perception. Overall, Australia scores 5.4, putting it just above the peer group average and behind the best, Canada, with a score of 6.3. Analysis suggests there is opportunity to improve Australia’s Government and Public Involvement coal competitiveness score by 3.8 per cent.

This industry growth enabler concentrates on two very important areas of the industry: regulatory reform, comprising government involvement; and social licence, comprising community and public involvement.

GLO

BAL A

ND

NATIO

NA

L CHA

LLENG

ES

Regulatory reform

Considering the regulatory climate, and government policy and involvement specifically, Australia ranks third with a score of 5.7, behind Canada and the United States, with scores of 7.3 and 5.9 respectively. Australia seemingly does well in this area; however, consideration of the peer group needs to be taken into account. Against the other developed nations in the peer group, Australia’s performance suggests there is significant room for improvement.

An estimated 1.7 per cent increase in the coal competitiveness score is possible through the implementation of regulatory reform opportunities. These include:

• Redefiningtheinteractionbetweengovernmentbodiesandtheindustry.Shiftingtoamorecollaborativeand partnership-orientated model would reduce industry time and money spent dealing with red tape, and allow better channelling of resources to value adding activities.

• Workingwithstakeholderstoestablisharobust,clear,consistentandtransparentsetofdirectivesonrequirements and regulations e.g. environment and land usage.

Australia has a stable, developed government, and provides a reliable supply of coal to key markets, placing the country above many of its competitors. If policy and regulation can align together with the strategic needs of the industry, Australia will climb the ranks of competitiveness in this area, overtaking other developed nations.

Social licence

Breaking down the Government and Public Involvement industry growth enabler score, Australia scores 5.0 in social licence. This is just above the peer group average of 4.7, and trailing behind the best, the United States, with a score of 6.8.

Public support for the coal industry lies heavily on the industry’s use and management of the environment. The general public has a poor view of the coal industry, which if not addressed appropriately, will continue to weaken the coal industry’s competitive position. Several opportunities exist to increase Australia’s social licence ranking and overall competitiveness score by an estimated 2.2 per cent through:

• Promotingthe“cleanenergytransition”message,andengagingcommunitiestounderstandtheglobal view. The industry can also set up a single platform to build a consistent message to increase coal mining literacy and education across the nation, ensuring that the modes of communication are relevant to today’s generation.

• Forminganindependentbodymadeupofindustry,government,andsupplierstomanageheritagemines not previously closed or rehabilitated properly. This will increase jobs, increase collaboration, improve the environment, and ultimately improve community satisfaction. Taxes and royalties potentially could be directed towards this initiative, which promotes involvement and participation from all parties.

Involvement and support from the community is vital to the coal industry’s sustained success. The current poor social licence within the country suggests that a well-coordinated approach by all industry participants has the opportunity to make significant gains.

Other opportunitiesThe industry has spent the last few years cutting costs through direct initiatives and headcount reductions. While there were immediate results at that time, it does not translate to significant benefit today, and will not be sustainable for operations going forward. There are many opportunities both internally within the coal operator organisation, and externally to pursue incremental and transformational improvement initiatives. Improving collaboration between operators, suppliers, government bodies and other industry stakeholders can unlock hidden and significant value for the coal industry. Estimates made from the ICS analysis suggest a potential increase of 1.0 per cent in improvement is possible in the near term.

SECTOR BENCHMARKING


SECTOR CHALLENGES AND KNOWLEDGE PRIORITIES

Section 3 begins by identifying and discussing the challenges faced by the sector, and the opportunities and initiatives that the sector as a whole, and the industries individually, can pursue to make improvements in efficiency and productivity to create new market opportunities. It then goes on to discuss in detail each of the nine knowledge priorities identified by the SCP as the key areas that need to be addressed by the sector to ensure a globally competitive, innovative, sustainable and diverse future.

These knowledge priorities are broken into three major categories or levers: capability and leadership; business and operating models, technology and services; and regulatory environment. By systematically addressing these knowledge priorities is the sector going to be able to retain its position as one of the world’s pre-eminent suppliers of energy and of the knowledge, services, technologies and skills that support the sector.

3



Growing energy demand in Asia, increased environmental awareness and an evolving global energy mix, create immense opportunity and not insignificant challenge for the Australian energy resources sector.

Major shifts are expected in the ways in which power is generated, distributed, controlled and consumed as the world moves to incorporate more renewable energy in the broad energy mix. This shift will force sector-wide adaptation, as new infrastructure needs to be built and integrated, and new operational frameworks are created. Despite these challenges, there are significant opportunities for Australian energy resources, particularly in meeting growing Asian demand.

Sector Wide Challenges and Opportunities


SECTOR WIDE CHALLENGES AND OPPORTUNITIES

Sector WideA number of challenges and opportunities are sector wide and, while impacting each sector in different ways, have potentially many common causes and solutions:

Low commodity prices

Low commodity prices due to major structural changes in global supply and a short-term (up to 2022) oversupply in the global market.

Water management

Concerns and challenges associated with the ongoing management of water, ensuring it is equitably available for all land users including agriculture, human settlement and industry.

Carbon emissions

Understanding how best to manage carbon emissions from both the primary production of energy resources and their consumption.

Sovereign risk

A perception that Australia is becoming a nation of greater sovereign risk for capital investment by operators due to the increasingly restrictive regulatory burden, and restrictions on developments, both in place and being threatened in various states.

Regulatory environment

A restrictive and onerous regulatory environment, which is particularly difficult in respect of the approvals process within many states, restricting operators’ ability to undertake the exploration activities that underpin the long-term viability of the Australian energy resource sector.

In addition to these sector wide challenges, there are also a number of more discrete challenges and opportunities that will be faced by the industries making up the sector over the coming decade.

PHOTO

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES


Australian oil and gas industryThe Australian LNG industry’s capacity has increased more than four-fold over the past five years to supply the anticipated increase in demand. This rapid growth has created challenges and opportunities for the still-maturing industry.

Key challenges

High cost operating environment

Australia’s relatively high cost operating environment due to labour costs, remoteness of operations, and distance from global supply chains results in many aspects of the Australian oil and gas industry being substantially more expensive than other jurisdictions. For example, the cost to explore and develop a shale gas well in Australia is believed to be around 250 to 300 per cent higher than to develop a similar well in the United States.

Declining exploration

The unstable oil price combined with newly imposed moratoria and regulatory restrictions, has resulted in a significant reduction in exploration investment. An investigation into the east coast gas market by the Australian Competition and Consumer Commission (ACCC) 67 found that it was unclear whether new reserves would be developed in a timely fashion, noting that:

• “Themagnitudeofgasflowstotheliquefiedgasprojects,whichareremovinggasfromthedomesticmarket”;

• “Thelowoilprice,whichisresultingindeclininginvestmentingasexplorationandlowerproductionforecasts for domestic and LNG projects”; and

• “Moratoriaandregulatoryrestrictions,whichareaffectingonshoreexplorationanddevelopment”.

Sector Specific Challenges, Constraints and Opportunities


SECTOR SPECIFIC CHALLENGES, CONSTRAINTS AND OPPORTUNITIES

Many new discoveries, particularly offshore, are often in remote areas, and expensive to develop with limited existing infrastructure. Success rates are low. Geoscience Australia indicates a 28 per cent success rate between 1955 to 2011, with 14 per cent commercial success (585 wells from 4,248 wells drilled). Long-term growth in the Australian oil and gas industry is dependent on consistent levels of exploration.

Slow commercialisation of oil and gas reserves

There are substantial numbers of identified oil and gas discoveries not yet producing 68 for reasons such as difficulty of access (such as deep water, remote, offshore fields), lack of commercially suitable development opportunities, and technologies or regulatory issues impeding commercialisation of the fields. In the offshore basins, the cycle time from discovery to production is usually greater than 5 years. The length of time from discovery to production reported by Geoscience Australia demonstrates that the development cycle time often exceeds 10 years.

• 16fieldsgreaterthan20years;• 32fieldsgreaterthan10years;• 52fieldsgreaterthan5years.

Lack of current pathway to develop skills required for integrated teams and operations

Limited availability of process technicians and operators with the high-level skills required to run increased numbers of integrated teams and operations. Technological change will require multiskilling in the future, which will need to be supported by significant changes to current training regimes, and the articulation of skills development pathways to ensure a sufficient number of suitably skilled personnel for future needs.

Potential shortage of specialist skills for maintenance activities

A potential shortage of specialist skilled and experienced labour for maintenance and turnarounds of Australia’s 21 LNG trains within the LNG sector. This could be heightened by parallel maintenance activities in the broader energy and resource sectors, if a parallel recovery in commodity prices occurs and drives demand for those skills across other industries.

Social licence to operate

Challenges to the industry’s social licence to operate, including negative community perceptions of the social and environmental impacts of unconventional developments, concerns over the potential development of new offshore basins and increasing community expectations around the transition to renewable energy sources. This will require the sector to operate through high levels of community engagement, corporate transparency and exemplary social citizenship.

High cost reputation

Based on both a 2013 McKinsey report 69 and work by the Oxford Institute for Energy Studies 70, the cost of building new LNG plants has increased significantly in the past decade, with Australia now 20 to 30 per cent higher than in North America and East Africa.

Even if all compressible differences are resolved, Australian costs will remain higher than North American costs, so Australia needs to strive for best-in-class construction and operations performance to be competitive.

A reputation as a high cost environment, resulting from the many project budget and schedule overruns experienced during the recent expansion phase of the industry is contributing to operators deferring future major capital investment in Australia in favour of other jurisdictions. To help restore Australia’s reputation, the industry needs to demonstrate that it can operate and maintain the new and existing facilities to world’s best standards.

Abandonment costs

Uncertainty over capital and regulatory costs of abandonment, as many operators plan for the end of life of their facilities; and given that, to date such abandonment activities have been relatively few, the need to establish and test an appropriate regulatory framework.

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES



International competition

The emergence of the United States as a new and materially low cost LNG supplier into both the Atlantic and Pacific basins, with the United States seen as a low risk jurisdiction for delivery and sovereign risk – a position which Australia has held for many years.

• TheexpansionofgasexportsintoChinafromRussianandBalticnations.• TheunknownbutpotentialriseofadomesticChineseunconventionalsourceofgassupply.• Difficultyoflocalserviceproviderstointegrateintotheinternationalsupplychain.

Collaboration

Increasing collaboration to reduce overall operating costs, with operators and the service sector working to find ways to reduce costs through sharing of knowledge, equipment and facilities. Where appropriate, this collaboration may need to be ratified through discussions with the Australian Consumer and Competition Commission (ACCC).

Key opportunities

Increasing and improving collaboration

Increasing collaboration amongst operators to maximise asset productivity.

Improving collaboration between operators and technology and engineering service providers to increase innovation and productivity.

Develop an export-oriented service sector

Leveraging the critical mass emerging in Australian operations to develop an export-oriented service sector.

Ensure future capital investment

Addressing cost, regulatory and social licence concerns to ensure Australia continues to be perceived as a politically stable and economically reliable destination for future capital investment.

Develop shale and tight gas basins

Developing shale and tight gas basins to support domestic demand, and potentially for export (note, that without the scale of a large market such as export LNG, domestic only unconventional gas may not prove economic using current indicators).

Investigate emerging markets

Investigate opportunities in growing and emerging new markets such as India, and explore and pursue alternate markets for existing products such as the use of gas as a transport fuel.

Increasing capacity and critical mass of the LNG industry

Based on the 2015 Accenture report 61, key performance measures in the oil and gas industry are expected to increase in the next five years, but the size of the services sector and direct employment numbers in the oil and gas industry will decline.

The total capital investment, including capital and operating expenses, will rise to over $750 billion by 2040, significantly overshadowing project capital investment. This is a major opportunity for the services industry to reshape itself to manage the long tail of operations and maintenance associated with LNG projects. However, the total size of the oil and gas services market is expected to decline from its high of $29.3 billion in 2014 to $23.1 billion in 2020. Strong growth in demand for operational, maintenance and turnaround services will offset some decline in construction services.



Domestic gas market growth

A number of opportunities to grow the domestic market for oil and gas such as those identified by McKinsey 71. These include: using natural gas to power Australia’s trucks; converting mining trucks to run on LNG; run Australia’s public transport busses on compressed natural gas (CNG); use LNG as bunkering fuel for domestic ships and ultimately international shipping; switch to LNG for rail; switch off-grid oil-fired power generation to gas; switch on-grid power generation to gas; and increase the utilisation of existing efficient gas plants.

These changes will require financial investment and some changes in usage expectations. However, McKinsey are also forecast substantial ongoing cost savings and CO2 emissions reductions. Adoption of many of these opportunities are currently constrained by a combination of low costs for traditional liquid fuels and the pace of renewal of vehicle fleets which would need to be changed to use LNG.

Such changes could decrease our national reliance on imported oil products but also assist in meeting Australia’s CO2 emissions obligations under COP21 17.

Australian coal industryIncreased pressure to reduce CO2 emissions and a switch towards renewable energy sources locally means that domestic demand for thermal coal is forecast to decline over the next 10 years. However, reduced domestic demand will be offset by increased export demand from Asia and an anticipated overall growing global demand 4. Demand for metallurgical coal is expected to increase in the medium term with reinvigorated demand from China and other developing nations.

Key challenges

Market volatility

Sub-optimal asset productivity and costs in a volatile price environment.

Inefficient rail transport

High cost and inefficient infrastructure contracts impacting some producers.

Pressures on land and water use

Overlap of coal mining tenements with agricultural land in New South Wales and Queensland, leading to conflicting pressures on land and water use.

Water availability

Effective management of both surface and ground water consistent with environmental requirements.

Societal concerns

Increasing social concern with climate change and the environmental impact of resource extraction, which will limit the industry’s social licence to operate.

Regulatory burden

Increasing Government regulation and ‘green tape’.

Cost effective closure plans

Development of coherent and cost effective mine closure and rehabilitation plans.

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES


Key opportunities

Technology

Technological advances and implementation of operator assist and decision support technologies used in other bulk commodities to unlock productivity improvements.

Ongoing utilisation of high efficiency low emission (HELE) technologies, control of fugitive emissions and carbon capture and storage (CCS) to minimise carbon footprint.

Mine water storage capacity

Improved mine design and operations to facilitate reduced consumption and compliance with regulatory scrutiny of water use.

Service industry utilisation

Improving utilisation of the service industry to leverage existing capacity of workshops, skilled personnel and equipment.

Product mix

Product mix evolution with the development of new superior products.

Asian demand

Strategic targeting of increasing Asian demand for higher quality coal with a higher specific energy and lower ash content.

Australian uranium industryThe uranium industry will need to overcome regulatory hurdles, perceived radiation safety concerns and social licence to operate issues in order to participate fully in the energy future of Australia and the world.

Key challenges

Public awareness

Lack of informed public literacy around the science associated with uranium and nuclear energy generation, and the different risks associated with different energy sources and technologies.

Limited port access

Limits to the ports from where uranium can be exported, with only Darwin and Adelaide currently licensed for the export of uranium; and limits to the ability of the industry to access ports elsewhere in Australia whilst carrying cargoes of uranium, thereby restricting the options available to the domestic uranium industry to transport its products to international customers.

Regulatory environment

Legislative and policy restrictions at the Federal and State levels on mining uranium e.g. in New South Wales, Queensland and Victoria, and on the development of nuclear power and other parts of the uranium value chain (e.g. waste management and disposal), which limit the growth of the industry.

Better processing knowledge

Building a comprehensive understanding of how to better and more efficiently process the challenging ore bodies in which much of the known Australian uranium is found.


SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES

Equipment and skill shortages

Equipment and skills shortages which limit the capacity of Australian mines to respond quickly to an increase in demand.

International competition

Strategic development of uranium production capacity by Kazakhstan 5 through counter-cycle investment has positioned them ahead of Australia to respond to any increase in uranium demand, although Australian uranium is regarded by many customers as their preferred product.

Key initiativesGiven the drive to reduce carbon emissions globally, Australia’s uranium could acquire a much more significant position as a source of export revenue for the nation. To realise this potential Australia needs to pursue the following initiatives:

Energy literacy

As part of a broader energy literacy initiative, the sector needs to help enhance the overall level of public understanding of how energy resources are produced, how power is generated, the risks associated with different energy sources and technologies, and the role energy resources play in the nation’s economy. The sector needs to continue to engage with the community and test evolving attitudes towards uranium mining and other aspects of the nuclear value chain.

Regulatory change

Review restrictive legislation, and reform and replace with robust, risk and outcomes based, efficient, and fit for purpose regulation.

Testing new technologies

Test technological improvements such as reagent advances, heap leaching and in-situ leaching to improve production capacity with low operating expenditure.

Work skills

Improve the attractiveness of the uranium mining sector to the workforce, in terms of salaries and skill development for radiation safety.

Cross Sector Challenges and OpportunitiesMany opportunities and challenges span two or more sectors or are broader than the energy resources sector, and these are likely to have profound influences and impacts on the energy resources sector in the coming years.

This includes factors such as the rapid emergence of renewable energy technologies that, when added to the global and domestic energy mix, will drive markets in unanticipated directions. An example of this can be currently seen in the deployment of domestic solar power technologies to meet household electricity needs, which are causing substantial disruption to the generation and distribution networks, as well as increased levels of pricing instability. The impact of large scale uptake of solar panels, combined with emerging domestic battery storage and smart grid technology, will cause even greater disruptions.

An ageing working population and declining numbers of students pursuing science, technology, engineering and mathematics (STEM) subjects in schools and universities is a challenge not only for the energy resources sector, but for Australia as a whole. This will add to the challenges the energy resources sector faces in ensuring it has access to a highly skilled and competent workforce to pursue future development, and to meet the requirements to develop innovative solutions and technologies, such as use of digital and diagnostic analytics, automation and advanced manufacturing technologies and processes.




The three levers to a strong futureTo remain competitive and build future markets and customers, the sector will need to address three primary levers: a suitable business model; a contemporary and future focussed operating model incorporating technological capabilities; and the right capability, skills and culture to succeed.

How the Australian Energy Resources Sector Should Respond


HOW THE AUSTRALIAN ENERGY RESOURCE SECTOR SHOULD RESPOND

1Business models

The energy resources sector needs to find new markets to supplement those it currently serves, secure new customers and provide alternate forms of services that more deeply engage with the value chain. This can potentially include providing turnkey solutions to customers rather than simply the products used to generate energy, delivering clean technologies and the gasification of coal to produce hydrogen. This could also include the provision of knowledge and skills in specialist areas such as LNG operations, remote operations and modular construction.

The sector also needs to build stronger, collaborative relationships within the entire energy resources value chain, global partnerships to access global supply chains, and with other industry sectors such as advanced manufacturing, defence and shipping, where the synergies and common challenges may lead to novel and valuable solutions.

2Operational models and technology capabilities

The last two to three years have seen significant cost cutting across businesses but there are still significant efficiencies to be captured by reconsidering existing operating models and exploring new ways of reducing process complexity and waste, finding ways to collaborate more broadly, sharing logistics demands through consolidation, reduce unnecessary and expensive bespoke standards and conditions around contracts, inductions, training and qualifications and seeking ways to use common, industry wide substitutes. Businesses need to be open to sharing environmental and other research and data which is non-competitive and of benefit to the sector as a whole.

Businesses in the sector could also increase their efforts to optimise their operations through ongoing development and deployment of automation, the adoption of advanced manufacturing such as 3D printing, the use of alternate materials and the adoption of lean systems.

To drive innovation across the value and supply chains, the sector should support greater collaboration between the operators/miners, research sector and SME’s, through, for example, research/industry precincts and living labs to allow faster prototyping and testing, multi-user facilities and industry and innovation clusters (clusters can force-multiply investment, reduce risk for the participants and commercial contributors and speed innovation, whilst vendors can collaborate to achieve critical mass and improve ease of access for export opportunities).

The sector could further collaborate to optimise processes through the development and adoption of disruptive technologies such as machine learning and diagnostics, 3D printing, advanced materials and new ways to build small scale, economically viable plants that contain the capital investment required to maintain production. There are also further opportunities for the sector to share non-competitive and pre-competitive information such as environmental and meteorological data.

3Capacity, skills and culture

For the sector to be competitive in a disruptive and rapidly changing environment with operations that are becoming more automated, integrated and digital, it must have the capacity, skills and culture to be agile, adapt and innovate. The sector must define and develop the skills required for the ‘operations of the future’, spread digital competencies more broadly throughout the workforce so that members of every organisation have the skills to leverage the volume and quality of data available.

The sector must invest in the development of enhanced commercial skills to identify and respond to new market, customer and service opportunities, and reward innovation and the uptake of new technologies, through creating a more agile and adaptable workforce ad operating environment where the risks of deploying new technologies can be quickly calculated and innovative decisions made.

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES


RegulationsWhilst addressing all of the levers above is essential to achieving a competitive, sustainable and innovative industry and maximising the value to the Australian economy, the full potential benefits cannot be delivered unless the regulatory environment supports industry, and costly and unnecessary barriers are removed. Regulation should provide stakeholders and the community with confidence that the industry is operating to, and held accountable by, governments for the achievement of clear, transparent and high standards of performance that take into account the proportionate risk associated with the activities being controlled. Regulations should not increasingly create sovereign risk that inhibits domestic and inward investment. In particular, the regulation of exploration activities across the sector requires review to ensure the sector can identify, access and develop future resources to support the last decade’s massive investment in infrastructure with future production, and to provide Australia with diversity in energy supply and secure, affordable and reliable energy into the future. Finally, businesses themselves also must review their own internal requirements and remove or streamline those self-imposed requirements that simply add cost to the business without delivering any ongoing benefits.


• Leaneroperations,asexemplifiedbythemanyoperatorsalreadyfocusingonincreasingassetutilisation.

• Bettermanagementofhighcostactivities,particularlyinnewprojectsandothermajorcapitalinvestments.

• Increasingmovementbyoperatorstowardsharinginfrastructurebothattheirfacilitiesandinlocations such as maintenance and supply bases.

• Collaborativeplanningoflabourandresourceintensiveplannedmaintenanceandupgradeactivitiesto avoid competition over labour and shop time.

• Staffreviewsatfacilitiesandinvariousnationalheadoffices.



• Developoperatingmodelsfocusingonnewandinnovativeexecutionapproachesandbetterleveraging of existing capacity. Build on Australia’s highly regarded existing capabilities in, for example, remote operations and data analytics for process optimisation and decision making, to support operational and value chain optimisation.

• Expandourstrengthsinthedevelopmentofalternativeenergysourcesandactasabaselineenergysource for Asia.

• Assistdevelopingnations,particularlythosetransitioningfromfossilfuels,tomeettheiremissionsreduction commitments by providing energy diversification and reliable electrical grids and systems.

• Increase‘energyliteracy’ofcommunities,governments,regulators,companiesandotherstakeholders.

• Becomeanexporterofcleantechnologiestodevelopingcountries.Thiscouldincludelowcarbonemission technologies, hybrid power generation, battery storage and carbon capture and storage (where Australia’s geology provides a strong competitive advantage). Leading the development and adoption of these clean technologies is likely to help the sector win social licence, drive up the demand of our existing energy resource portfolio, as well as opening up new markets (i.e. gasification, utilising lower ranked coal deposits with low ash fusion temperatures).

HOW THE AUSTRALIAN ENERGY RESOURCE SECTOR SHOULD RESPOND

107

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES


While many of the actions required to address the sector challenges and opportunities are relatively well known and understood, there are other issues which are less well defined or where known knowledge gaps exist.

Knowledge priorities were identified during the consultation period in preparation of this SCP and have been aligned with NERA’s key themes. These knowledge priorities are the areas where additional work is required to understand the sector’s current challenges and choices.

The knowledge priorities will change over time as new challenges and breakthroughs arise; however, it is through systematically addressing these knowledge priorities now, that the industry will build and maintain its globally competitive edge and thrive into the future.

Sector Knowledge Priorities


SECTOR KNOWLEDGE PRIORITIES

Knowledge priorities have been grouped into three categories:

1Capability and leadership

Capability and leadership includes those priorities that require the development of work skills, either at the specific workplace level or more holistically across the industry, along with the development of a more mature and comprehensive knowledge of areas such as resource databases, specific research driven work, and, working with the broader community to develop a greater level of energy literacy.

2Business and operating models, technology and services

Business and operating models, technology and services considers how the sector can develop and deploy new and emerging technology to enhance its productivity and effectiveness in areas such as remote operations, the use of unmanned aerial and marine vehicles (drones) and exploring new and alternate marketplaces and uses of its products.

3Regulatory environment

Regulatory environment considers how a better and more balanced regulatory framework in which the energy resources sector can develop into the future.

Many of the knowledge priorities, set out in Table 13, encompass multiple challenges and opportunities. Each of the knowledge priorities are broken down into focus areas and initiatives. The focus areas, developed following consultation workshops and industry research, are the major areas of opportunity for the sector and the initiatives highlight activities that are either already underway or under consideration.

These knowledge priorities and initiatives will be periodically reviewed against NERA’s vision, mission, strategic outcomes and strategic views and revised periodically to ensure an ongoing focus on the most beneficial and relevant outcomes for the energy resources sector.

The knowledge priorities action plan set out in Table 14 identifies the relationships between the nine knowledge priorities with the constraints facing the sector and, identifies both initial ownership and stewardship for addressing each of the related actions, along with timeframes to initiate activities. By addressing these priorities in a structured way, the sector will be able to build progressively toward its future.

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES





Capa

bilit

y an

d le

ader

ship























Busi

ness

and

ope

rati

ng m

odel

s, te

chno

logy

and

ser

vice

s

























Regu

lato

ry

envi

ronm





international best practice







Capa

bilit

y an

d le

ader

ship























Busi

ness

and

ope

rati

ng m

odel

s, te

chno

logy

and

ser

vice

s

























Regu

lato

ry

envi

ronm





international best practice



SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES



Challenges

Improve adoption of Innovation



Manage water

stewardship

Address high cost

environment


Reduce sovereign

riskCa

pabi

lity

and

lead

ersh

ip




.


.

Busi

ness

and

ope

rati

ng m

odel

s, te

chno

logy

and

ser

vice

s


6New markets, New technologies, New business models



Regu

lato

ry

envi

ronm

ent



KEY PARTIES: Operator Supplier Research Government Education



Challenges

Improve adoption of Innovation



Manage water

stewardship

Address high cost

environment


Reduce sovereign

risk

Capa

bilit

y an

d le

ader

ship




.


.

Busi

ness

and

ope

rati

ng m

odel

s, te

chno

logy

and

ser

vice

s


6New markets, New technologies, New business models



Regu

lato

ry

envi

ronm

ent



SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES

WHEN: Short Medium Long


Capability and Leadership

1. WORK SKILLS OF THE FUTUREThe recent rapid growth in the industry and the technological evolution occurring in the energy resources sector are causing substantial changes in the nature, makeup and profile of skills required to design, build, operate and maintain facilities now and into the future. Adapting the role of education in supporting this “fourth industrial revolution” 71 is key to the sector’s ongoing success. Ongoing collaborative investigation is required to identify, develop and deploy the work skills required to maintain the Australian sector at the forefront of operational competitiveness, and to provide well paid, safe and productive jobs for future generations.

Integrated operations of the futureWithout an operations workforce of critical mass that is suitably skilled in new technology, the Australian energy resources sector will struggle to achieve high productivity and global competitiveness.

New practices and evolving technologies are changing the maintenance and operations requirements of industrial facilities. The operations and maintenance must adapt in order to allow the sector to get the most benefit from these changes.

The sector needs to build a comprehensive understanding of the requirements for future operations in terms of scope, scale, skills and experience and, in parallel, identify how the next generation of operations and maintenance staff will be attracted to the industry and where they will receive the training and preparation required.


CAPABILITY AND LEADERSHIP

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES

Workforce capabilityThe sector must continue to drive development of a consolidated sectoral perspective on skills needed to meet future industry requirements. It is possible such a perspective may involve the transition to a multi-skilled workforce able to work across functional disciplines (e.g. multidisciplinary operations and maintenance providers) as well as Australian based subject matter experts to support the operation and maintenance phases of the facilities. This will include aspects such as training and competency development and labour retention in all workforce categories.

Research could also focus on the requisite future skillsets required for uranium mining. This could include nationally consistent and recognised formal education and training pathways for radiation safety officers to support not only the potentially growing uranium industry, nuclear waste disposal and the operation of nuclear power stations, but also those industry areas dealing with naturally occurring radioactive materials such as the mineral sands industry, and industries who use radiation sources for metering purposes.

Project management skillsWhile the Australian energy resources sector is well regarded internationally for its technical and operational expertise, there is a definite and urgent gap in the depth of project management skills. Some of these deficiencies were apparent in the project delivery timeframes and costs experienced during the recent construction, development and expansion phase, where many projects across the sector were delivered late and substantially over budget. This has in part contributed to the perception of Australia as a high cost and difficult place to do business, and which may impact on international investment in any new future projects in Australia.

The need to address these deficiencies has been considered and outlined in a number of research publications, including the work of the International Centre for Complex Project Management (ICCPM), which made specific recommendations 73 around delivery leadership, collaboration, benefits realisation, risk opportunity and resilience, culture, communication and relationships, sustainability and education which, if addressed will go some way to ensure future project delivery is world class.

The issues in this area sit both at the operators’ level, where those shaping the projects may lack the experience, training and support to understand their roles in establishing the project framework 74, and with the organisations within the value chain, where pressures to deliver multiple projects concurrently, often mean personnel are placed in roles for which they are not fully prepared. With the energy resources sector, highly sensitised to costs, it is vital that future projects are delivered to time and to budget, if not better.

Collaborative Training ProjectResearch undertaken by Deloitte on behalf of the Resources Industry Training Council 75 identified that within Western Australia and the Northern Territory alone, savings of up to $22 million per annum could be made through the development of a collaborative employee training approach.

Such an approach would see the adoption of industry wide training standards and certification for new personnel accepted by all employers, after which employers would provide specific additional training to bridge the gap to meet their requirements.

The reports found the delivery of training for common competencies at an industry level is more cost effective than the delivery of training by each operator and the pooling of training resources allows operators to access higher quality training infrastructure and programs.

The report goes on to suggest that further savings are available through the development of quality training infrastructure through pooling of training resources. Increased confidence in training would be evident through development of a pool of recognised training providers. Such an approach could offer improved business outcomes and success in this initiative could pave the way for further collaborative training programs.

CASE STUDY



Initiatives to support the development of future works skills

Identify future skills requirements

To effectively plan for its future workforce, the energy resources sector first needs to know what skills will be required to operate the plants of today and tomorrow, with existing and emerging technologies. These workforce requirements will span the business and leadership skills required to enable the sector to adapt, innovate and be globally competitive, the engineering and design skills required to conceptualise, design, test and construct new technologies and new facilities, and the operator and maintenance skills required to run the plants using innovative and new technologies. Many of these skills will already be present to some degree in the workforce, and can provide the base on which to build. The gaps need to be identified and strategies for developing appropriate skills established to build a skilled workforce of an appropriate scale and quality to serve the industry as a whole. This is likely to deepen implementation of new learning technologies to support skills development such as technology enabled learning and virtual/augmented reality.

Identify and develop appropriate and accredited training to meet future skills needs

As the skills requirements for the future workforce are identified, it is necessary to ensure the appropriate education, training and development resources, technologies and facilities are in place. This will include both the vocational training and tertiary education sectors either developing new programs or modifying existing material, and identifying the most appropriate skills development methodologies and technologies (e.g. virtual, simulated and interactive).

Research undertaken for the Resources Industry Training Council (RITC) suggests that there is the opportunity for the resources sector in Western Australia and the Northern Territory alone to save up to $22 million per annum through the development, deployment and adoption of common standards 75. Similarly, in the engineering space, the recently completed Australian Pipelines and Gas Association (APGA) Pipeline Engineer Competency Standards 76 which benchmark pipeline engineering skills and the Petroleum Engineering Guidelines 77 jointly administered by the Society of Petroleum Engineers (SPE) and Engineers Australia are examples of where standardisation will give rise to greater industry confidence in outcomes and drive efficiencies. From a skills development delivery perspective, learner demands are forecast to substantially alter, causing training providers and universities to reconsider learning strategies and adopt more innovative ways of delivery.

Ensure a future focussed training and education sector

Those tasked with meeting the training needs of the workforce will need to recognise the diverse and rapidly changing employment landscape. Research into jobs of the future 78, 79 is increasingly identifying that the workforce of the future will need to continually refresh its skills to keep pace with technological change and allow for horizontal, vertical and diagonal movement into new roles. To support this need, training organisations and universities must continually explore future skill needs and develop new and evolving material and training opportunities to service the skills requirements of the workforce.

It is expected this may further blur the boundaries between vocational education and training and university based higher education programs. Energy resources sector participation in processes established by the Australian Industry and Skills Committee 82 to review and refine vocational education and training programs is a tangible way of achieving a greater match between work skills of the future and the formal education and training sector.



Explore new opportunities to export knowledge

There is a real and growing opportunity to grow and develop Australia’s specialist and niche skills export capability. During the resource sector’s recent expansion there was a focus on ensuring a sufficient skills depth to meet demand from both the construction and operational phases. The investment in this capability now presents an opportunity for Australia to export this “know how” to other countries and sectors.

Exploiting these opportunities should focus on those areas where Australia has a competitive advantage and where demand exists in the global market. Further exploration of how these skills can be developed, commercialised and marketed, within and across sectors both domestically and internationally, will be key to achieving competitive advantage. Potential candidates for further exploration include: remote operations, operations in hostile and challenging environments, robotics and automation, and data and analytics for process optimisation and decision making.

The export of Australia’s skills development capability can be achieved by large providers of education and training services through their global alliances and networks. For many small and medium enterprises this access is extremely difficult to build, presenting a case for government bodies such as Austrade to provide specific international support in the export of these capabilities.

2. ENABLING EFFECTIVE COLLABORATIONIt is broadly acknowledged within all areas of industry that a combination of competitive pressures and the culture of the sector has prevented meaningful collaboration to date on issues that are of benefit to everyone. This lack of collaboration has resulted in duplication of infrastructure and wasted opportunities to reduce costs of project development and operations, while at the same time limiting opportunities to form strong partnerships between operators/miners, the service sector and research organisations to drive innovation and technology.

There is a shortage of opportunities for protagonists in the industry to meet in non-competitive, truly independent environments where they can share their problems and work together to identify the best solutions, regardless of their position in the value chain. Collaboration and strong innovative partnerships focus on key strategic challenges such as sharing critical infrastructure, developing common safety and operating practices, sharing research and development investments and communicating learnings, and in the areas of new technologies, new approaches and cross industry sharing of knowledge so that the industry and the economy can benefit. If such independent and collaborative forums could become more common, there is a great potential to seed and nurture new ideas, innovations and solutions and to significantly improve the global competitiveness and export potential of the energy resources supply chain in Australia.

Clearly, in the current tight marketplace, substantial collective benefits could be achieved through targeted collaboration, whether in contributing information, resources or infrastructure. Such collaboration could occur in several ways: amongst operators within a sector; between operators and the research sector; between the service providers; between service providers and the research sector; and, between different industry sectors. Such approaches also need to consider potential impacts on competition and would require early engagement with the Australian Competition and Consumer Commission (ACCC).

The participants in the sector need to continue to open their doors to one another and actively explore ways to grow together.

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES



Cross company collaborationCollaboration between organisations working in the same value chain could offer substantial cost savings in logistics, workshop and stores space and stock levels. Historically, operators and their suppliers of goods and services have operated their own value chains, resulting in duplication of materials and effort. Finding safe, independent mechanisms for collaboration across the value chain could result in substantial cost savings for all parties.

Organisations potentially seeking to collaborate could work together, and with the ACCC, to establish clearly defined and sanctioned areas for collaboration. These would be areas where, through working on common issues, the industry would provide a greater level of benefit for the nation and for themselves without jeopardising their corporate competitive advantages or being considered as anti-competitive. Once a consensus has been clearly established and, if necessary ratified, of where collaboration can occur, other areas where there is less clarity, that emerge as the industry evolves can be given specific consideration on a case by case basis. Such agreements would make ongoing discussions much easier and clearer since issues of anti-competitive behaviour would have been removed.

Intergenerational and interdisciplinary engagementAs the Australian energy resources sector seeks to embrace new and emerging technologies, a deeper and stronger engagement is needed with all generations, particularly the emerging generation of digital citizens entering the workforce.

New methods for engaging with new potential sources of, and partners to, ideas, innovations and solutions, such as hackathons and crowd sourcing, have already emerged and have strong early industry support.

Such engagement may not be easy for all participants in the industry, particularly where the culture has often been about guarding ideas and knowledge within a business, with the perception that this knowledge constitutes a key strategic asset or advantage. In an environment of rapid change, this view is being challenged. Experiences in other sectors have demonstrated that fully unlocking and transferring knowledge, as well as pooling data held by multiple organisations, can ultimately create a more resilient and agile industry essentially growing a bigger pie, which will benefit those involved.

Industry and applied research collaborationAustralia has a very strong and accomplished research community, spanning government research organisations such as CSIRO and the Australian Nuclear Science and Technology Organisation (ANSTO), along with many public and private research centres in universities and business. These groups are conducting world leading research in many areas that would be of benefit to the energy resources sector. Similarly, the energy resources sector is often in need of independent, cutting edge research to better deal with the challenges faced in improving the sector’s global competitiveness and adapting to clean and low emissions technologies. Yet the issue of understanding the opportunities to collaborate and then leveraging them into meaningful outcomes is an ongoing challenge for many researchers and industry representatives.

Australian society invests more than two per cent of GDP in the research sector, a percentage which has been declining in recent years. Nationally, Australia ranks only twenty-sixth 2 on the global innovation index, having slipped three places in the previous 12 months, placing the nation behind many other major energy producing nations. Building stronger ties between industry and researchers is a major priority for the community and is an area where the nation ranks poorly at thirty-third on the global innovation index. Several capability areas identified in the National Research Infrastructure Roadmap 81 translate directly into the energy resources industries: environment and natural resource management; advanced physics, chemistry, mathematics and materials; and understanding cultures and communities and underpinning research infrastructure. These priorities need to be pursued and the relationships strengthened.



Initiatives to enhance cooperation and collaborationImproved collaboration amongst industry and sector participants will lead to sharing of innovative solutions, development of synergies to drive value creation, reduction in duplication and create further cost saving opportunities. The following initiatives have been identified to enhance collaboration amongst operators and/or between operators and suppliers to harness existing capabilities and identify solutions that will improve the supply chain and operations, drive deeper engagement and improve overall sector competitiveness.

Establish regional industry and innovation clusters

Historically, the Australian energy resources sector has relied on a combination of local vendor representatives and workshops, major city based vendor and engineering hubs and international supply chains to support their operations. This situation existed in part due to the sub critical mass in any one location of sufficient operations to provide a sustainable client base for organisations in the supply chain to establish facilities local to the operations.

This situation has resulted in extended supply lines, long turnarounds for equipment servicing, difficulty accessing critical, but only intermittently required skills, and increased costs and risks on the operators who increase their own spares inventories to mitigate their exposure to potential long shutdowns while sourcing appropriate supplier support.

International experience is that once established, clusters can become thriving industry innovation centres. In the technology arena, they are a way to nurture strong growth by bringing start-ups together with academia and research 82. In the resources sector, cities such as Aberdeen and Stavanger in Europe, clusters employ tens of thousands of personnel in supporting the North Sea offshore oil and gas industry. Local skills and service centres are supported by educational infrastructure that both trains the workforce to support the industry and undertakes industry focussed research that has resulted in numerous spin off businesses and innovations.

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES

Toowoomba and Surat Basin Enterprise (TSBE) supports job growth across 24 sectorsToowoomba and Surat Basin Enterprise Pty Ltd (TSBE) is a unique, industry funded, multi sector cluster that exists to help businesses of all sizes grow and promote the sustainable economic growth of the region. Established in 2012 to give support for coal seam gas, TSBE has now expanded across other sectors with appropriate focus on investment attraction, economic growth and infrastructure development. TSBE has contributed to bringing more than 60 businesses and hundreds of investors to their local region. TSBE support has increased job growth and its 24 industry sector members deliver $4.6 billion turnover for the region.

TSBE has a growing membership of 460 businesses across 24 industry sectors working in the Toowoomba and Surat Basin. Industry sectors include for example: coal seam gas, coal, water, agriculture, and food processing. Each industry sector has multiple business segments with common areas for collaboration linked by TSBE to support new regional projects.

TSBE assists businesses grow in the region by delivering a diverse membership offer with direct and indirect assistance tailored to suit business needs at their chosen level. Business membership is tiered to suit business size and the services needed. TSBE links business with opportunity to achieve sustainable growth and diversity for the Toowoomba and Surat basin region. TSBE has a unique cluster model, allowing collaboration across multiple sectors and technical business segments for issues such as water management and regional projects requiring collaboration.

A recent initiative of TSBE is the development of a Water Cluster combining an extensive group of businesses using economies of scale to overcome regional challenges, build opportunities for growth, drive costs down, find efficiencies of scale and realign costs with risk 141.

CASE STUDY



Industry clusters

The footprint of the Australian energy resources sector has grown over the past decade, and there are new developments that will enhance the performance of the sector, such as development of new and improved techniques for remote diagnostics and on-demand manufacturing through 3D printing technology. An emerging opportunity exists to establish industry clusters and regional multi-user facilities that could provide substantial levels of local support to the growing clusters of operations and supply chain. Such clusters could be linked to multi-user facilities and established local to regional population centres within close proximity to new and existing operations, shortening of the supply lines, enhancing access to skills that are otherwise held in major cities and boosting local employment.

Innovation clusters

In parallel with industry clusters, there is also an opportunity for sections of the energy resources industry to gather in innovation clusters. These innovation clusters would form around a common industry problem or opportunity and include: operators of the plant experiencing the problem or for whom resolving the issue could unlock future potential; technology providers and innovators who may have insights to help address the challenge; research and academia to provide the deep research capacity to explore major issues causing the problem; and government to lend regulatory guidance and support together with potentially resolving access issues. These clusters would include both co-located and virtual membership, with some personnel being located close to the problem and others located in regional centres, research facilities and international offices.

Such clusters would offer a new business model for both the organisations participating in them and their prospective customers. For the customers it would offer a potential alternative to their reliance on relatively generic products from their traditional and, generally, large scale suppliers, instead providing direct access to those developing the products who could then develop solutions specific to the customer needs. For the cluster members it would offer scale, access to like minded manufacturing and research collaborators and improved ability to access customers, allowing them to compete on a more level playing field.

Establishing industry and innovation clusters will require commitment from operators/miners, service and research sectors and governments. To be successful, clusters will require operators of the various plant to provide ongoing support, and a willingness to work with the cluster members to take up solutions and innovation. It will require cluster members to agree on how they will operate and compete within the cluster, and to make a commitment to sharing and transferring knowledge and skills within that cluster. Governments need to support the establishment of clusters by providing a supportive regulatory and research and development tax incentive environment e.g. of SMEs and innovation, and through trade agreements and access to Australian trade missions. For multi-user facilities, governments might identify and provide suitable land. Businesses and the employees of those businesses participating in regional clusters need to be prepared to relocate to the location of the cluster.

Asset and equipment sharing

Direct, tangible, tactical opportunities are available to enhance cooperation between operators through asset and equipment sharing to maximise efficiencies and improve sector competitiveness. Initiatives in this area may include the development of a platform and business model to allow the sharing of spare parts and equipment to reduce costs and inventory. Other opportunities could include collaboration on transport logistics for equipment and personnel, sharing of ex-mine gate coal infrastructure including wash-plants and other cooperative opportunities. There is also a significant coordination role for operators to assist with initiatives to standardise operating standards and compliance requirements.



Infrastructure sharing

Building an increased willingness to share infrastructure could deliver substantial gains to the sector. The infrastructure servicing mines and processing facilities within the energy resources sector represent a substantial capital and operational cost to the industry. This cost could be reduced into the future through more open planned sharing. Enhancing cooperation between operators of facilities to enable sharing of infrastructure and reducing duplication of effort during the design phase is ideal; however, post start-up and during operation there are still opportunities to identify benefits. Sharing of service infrastructure and equipment, transport facilities for personnel and equipment (particularly in the offshore environment) and even sharing of non-critical and, on occasion critical spares would offer potential savings.

Similarly, there is an opportunity for significant collaboration in the coal industry on post mine gate infrastructure and the optimisation of rail transport arrangements. These include addressing current “take or pay” arrangements to access rail infrastructure used to transport production from mine sites to ports for export, where rates were often fixed during times of higher coal prices. Other areas include controlling fixed operating costs of the mines and increasing asset productivity to ensure the long-term viability of many mines currently facing severe financial pressure 83.

Shut-down scheduling

Enhancing cooperation between operators to optimise coordination of major shut-downs will assist with maintenance planning, minimise impact on labour requirements and ensure service provider availability. This model was initiated by the east coast coal seam gas operators as their projects transitioned to the operations and maintenance phase and could be replicated for west coast oil and gas operations and other industries. With Australia moving toward 21 operational LNG trains, the need to maintain a skilled workforce capacity ready to undertake regular maintenance turnarounds is an increasing challenge to the industry. To be able to balance personnel across a levelled workload will reduce risks and provide surety of workload to maintenance providers and personnel, safely enabling a more sustainable, long term prospect for investment.

Collaboration in coal transportationTransportation of coal, both by land and sea, is a key strength for the Australian coal industry. Quality infrastructure, structured collaboration and comparatively short distances to key markets place Australia among the world’s best in this component of the value chain. Key attributes are:

• Australia’stransportinfrastructureiscurrentlyclusteredaroundcoaloperationsinQueenslandand New South Wales.

• Significantfocusoverthepastfewyearshasbeenplacedonimprovingproductivityandutilisation of transportation assets in Australia e.g. regulated collaboration and coordination.

• Australiahastheworld’sleadingportutilisationrateofgreaterthan75percent,whichinturntranslates to the country having one of the lowest global port costs among the peer group.

• Closeproximitytotheworld’sfourlargestcoalimporters(China,Japan,India,andKorea)leadsto Australia having lower than average shipping costs compared to its peer group.

CASE STUDY

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES



Industry specific collaboration

While there are many initiatives within the energy resources sector where organisations are actively collaborating, some are still in the formative stages and need support to help them grow. One example where this type of early collaboration could be expanded is for operators in the uranium sector to work with government research agencies, such as ANSTO and CSIRO, to better understand the geology specific to the formation of uranium deposits.

Additionally, there is scope for many organisations to build better internal integration and relationships, thus allowing for enhanced exchange and uptake of ideas across different segments within an organisation that may have been blocked in the past due to internal barriers and sector separation.

Cross industry collaboration

Much of the sector collaboration occurs between peers, where oil and gas, coal or uranium focussed organisations at various levels meet to discuss issues. Typically, these meetings are restricted to organisations at a peer level within whichever sector they represent. This type of collaboration could be improved in two areas. Firstly, engaging the entire value chain in any given sector, as otherwise the whole problem will not be understood and an incomplete solution reached. Secondly, by not engaging outside of a sector, the opportunity to learn from the activities in other sectors are lost, resulting in duplication of effort, repeated mistakes and an overall loss of opportunity.

Appropriate forums a need to be established and fostered to allow open, entire sector value chain and cross sector networking. This will provide opportunities for communication of learnings and problems to improve the efficiency of the broader industry, especially in new and emerging areas of digital technology.

Common facility inductions

Historically each plant and facility has operated with its own unique induction processes. These processes cover a variety of matters from very general activities and behavioural expectations through to highly specific requirements and issues. Each induction costs both the inducting organisation and the employer of the inductee time and money. Often many facets of the induction will be similar or even identical to inductions required to enter similar sites owned by the same operator or operating the same equipment or processes. Yet these inductions are generally not transferable. Developing a more common, transferable induction that

RISKGATE collaboration: improving safety across the coal industryRISKGATE – an Australian Coal Industry Research Program (ACARP) funded initiative, is an interactive online risk management tool designed to assist in the analysis of priority unwanted events unique to the Australian coal mining industry.

The primary mission of RISKGATE is to focus the coal industry on prioritising control management to achieve acceptable risk. RISKGATE was developed in collaboration across coal operators, research institutes and supply chain. RISKGATE is designed to assist the coal mining industry improve minimum standards for safety performance, efficiency, operating practice, and training.

The online system is an innovative platform built on a foundation of industry expert knowledge gathered through action research workshops, which is further supported by a broad array of industry, academic and technological resources.

In operation, RISKGATE offers a continuum for knowledge transfer and redefining best practice in risk identification, assessment, and management in the coal industry. Future RISKGATE work will increase collaboration between the coal equipment supply chain and coal operators. RISKGATE provides a platform for the coal industry to standardise new mining methods and solve infrastructure integration challenges. ACARP is funding the innovation precinct, Mining3, expand RISKGATE to develop communication standards for future automation projects 140.

CASE STUDY



reduces the impost of time and cost on both operators and the inductee, topped up with shorter, local, site specific addendum inductions has the potential to substantially reduce the overall cost to the sector.

Developing such induction processes will require operators in an industry to work together to establish acceptable induction procedures and timeframes, develop their own supplemental requirements and then undertake a mutual recognition program on which all inducted personnel can be registered.

Shared operational practices

Many organisations have developed their own, unique, set of operating practices and procedures. These practices and procedures are unique due to the nature of their plant: however, opportunities exist for these organisations to share best practice and potentially develop some common, transferable operational practices.

Having such common practices would simplify the training process for new personnel as it would allow courses to incorporate more generic material, with the smaller remaining portion then being delivered on a plant-by-plant basis. It would conceivably, also allow organisations to learn from one another in terms of how they each operate identical equipment, often from the same supplier, improving the overall productivity of the industry.

Weather research and modelling

Many of Australia’s resources are in extreme climatic environments. Locations where, for instance, cyclones can have substantial impact on operations and the safety of both the personnel and facilities. Consequently, it is very important that focussed research is conducted to enhance the prediction of these extreme environmental events, to forecast with greater certainty the timing, scale, exact location and track the potential impact of cyclones. Establishing this enhanced understanding of these events will provide benefits for both the energy resources sector operating within the cyclone areas but also to the broader industrial and societal community, such as farming, transport, mining, education, health care and emergency response groups.

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES

Tropical cyclone predictionsNERA is supporting a collaborative project with the Bureau of Meteorology to better understand potential tropical cyclone impacts.

The project will deliver significant benefits not just across the offshore oil and gas sector, but also across multiple industry and government sectors in Australia.

The project, which includes key industry partners Chevron, Shell and Woodside along with the Australian Bureau of Meteorology (BOM) as project lead, involves the re-analysis of tropical cyclone data in Australia since 1981.

The re-analysis will improve on existing tropical cyclone data by incorporating recent advances in algorithms that extract key information from geostationary satellite data.

The data will be used in wind, wave and current modelling and is expected to lead to greater certainty in engineering design, not just across the oil and gas industry, but across all tropical cyclone-related engineering. This certainty will deliver efficiencies in construction, maintenance and operating costs for a wide range of infrastructure.

By providing the ability to better understand tropical cyclone risk, this project will assist in improving safety for Australia’s infrastructure through better design and response strategies and provide substantial cost savings.

The project, which involves collaboration with leading researchers in the field of tropical cyclone analysis, is an opportunity to put Australia at the forefront of international efforts in tropical cyclone analysis.

Once success with this approach in Australia can be demonstrated, it will be replicated in other basins affected by similar weather patterns around the world.

CASE STUDY



3. UNDERSTANDING AUSTRALIA’S RESOURCE BASEDespite the moderately long history of the energy resources sector in Australia, there is still significant room for improvement in the understanding of its resource base outside of the sector’s established areas of operation. Understanding the nation’s natural resources and geology is critical to identifying the future supply that will underpin the sector’s operational sustainability. Nation-wide and priority driven frameworks are for the acquisition, evaluation and distribution of pre-competitive information that will promote a thorough understanding and evaluation of Australia’s unexplored resource base.

Developing a greater understanding of prospective basin geology across both the minerals and energy sectorsUnderstanding the geology of prospective energy resource regions is critical to identifying areas for prospecting and future production. While Australia has a great deal of historical data in this area, much of it is fragmented across multiple businesses and organisations. In addition, the data was often captured for one purpose but may in fact be applicable across multiple sectors. Understanding the scale, scope and transferability of existing data, coupled with improving the nation’s abilities to interpret new and existing data, and improve access to that data, will help the energy resources sector and the broader mineral extraction industries become more competitive.

To support the development of the onshore oil and gas industry, there is a pressing need for ongoing research to enhance the understanding of reservoir geology. Expanding this knowledge will allow operators and regulators to make well informed decisions on the future trajectory of the onshore industry, and to use the information to select the most viable areas to explore and develop, in the most environmentally and economically effective manner.

Initiatives to help understand Australia’s resource baseIndustry data initiative

Large volumes of data are currently held in local, state and federal databases that, if made available in a searchable and consistent manner, could support desk top and field research by organisations into prospective resource areas. These data sets have accumulated over many years through numerous projects and initiatives, and represent substantial untapped value.

The Federal Government, through the National Map Open Data initiative 84 is working to build a common portal for organisations to access and search all obtainable data. As this portal becomes available, it will be possible for resource companies to examine and use the data to support their future exploration plans. The data will also be available to start-ups to access through events such as Hackathons and Gov. Hacks.

Share non-competitive data

Non-competitive data is often generated at numerous stages in the development and operation of a resources facility. This can include environmental data, weather data, health and safety initiatives and many other types of information. Often an organisation will generate the data from first principles. This can result in either full or partial duplication of existing data, or in multiple organisations paying for the same work to be performed. In both cases, there is wasted effort, a reduction in productivity and potentially lost opportunities.

The energy resources sector needs to find ways to share non-competitive data and information to assist in the ongoing pursuit of productivity and efficiency gains.



4. ENHANCE SOCIAL LICENCE TO OPERATEThe social licence to operate of the energy resources sector is under increasing scrutiny and challenge, largely due to its perceived negative environmental impact. For the community to recognise and support the social and economic benefits of the sector, a number of factors need to be addressed. The industry must genuinely and transparently engage over the short to long term with its stakeholders and the community, and demonstrate and be accountable for the highest standards of environmental performance at all times. Environmental regulation needs to provide a sensible framework that provides for genuine environmental outcomes and supports industry activities, whilst providing stakeholders and the community with confidence that there is independent and objective oversight of those activities.

Social and economic benefitsWhile the energy resources sector has been responsible for establishing and sustaining many local communities, as well as changing the lives of the world’s population, its societal impact often goes unrecognised or is misunderstood. It is important that the energy resources sector continues to work to build a better scientific understanding of its social impact, and that this information is shared as part of an overall energy literacy program.

At its most visible, the sector provides 89,800 jobs in Australia 10, generating both direct and indirect taxation revenues and economic benefits to government, and to the businesses which rely on the sector and its employees for their revenue. With many of the sector’s jobs being in rural locations, they also help to sustain local communities where employees live and shop, and where their children are educated. Many organisations in the sector also support academic research through the provision of projects and funding to universities and ongoing employment of skilled personnel who require training and education on an ongoing basis to perform their roles.

Infrastructure closure and rehabilitation As assets in all three industries in Australia’s energy resources sector approach their end of asset life, and owners look toward closure or divestment, it is apparent that many gaps in the industry’s knowledge and regulations exist that must be addressed to ensure a safe, orderly and cost effective closure and rehabilitation of the facilities. These knowledge gaps are present in three principle areas:

1. The science around the challenges;2. The technical solutions to address the scientific challenges; and3. The regulatory landscape that establishes the required work and ongoing monitoring of the facilities.

The following knowledge priorities aim to use leading science to deliver improved environmental outcomes to better inform and engage with communities, regulators and governments and develop an improved social licence for the energy resources sector.

Building scientific understandings around closure and rehabilitation

The industry must engage in ongoing scientific and technical studies to develop best practice guidelines for managing asset end-of-life to ensure closure procedures are transparent, fit-for-purpose and outcomes based. Best practice asset closure and rehabilitation, based on leading science, and through working together with initiatives such as the Cooperative Research Centre for Contamination Assessment and Remediation of the Environment (CRC:CARE) 85, will help secure stakeholder support and recognition of the sector’s environmental sustainability and facilitate the move from prescriptive to fit-for-purpose closure regulation. One such example is to explore the use of Source Zone Natural Attenuation (SZNA) 86 as an endpoint for ceasing liquid hydrocarbon recovery operations.

Evaluation and refinement of rehabilitation science and technological advancements will be essential to identify leading practice for this very important element of the project life-cycle.

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES



Addressing the technical challenges of closure and rehabilitation

The closure of both onshore and offshore energy resources sites each present many technical challenges. These must be identified and understood so they can be addressed to satisfy both the specific issues present for the location, and the societal and regulatory expectations around rehabilitation. There is a need to undertake the necessary ongoing technical work alongside the scientific research to be able to implement appropriate and acceptable solutions.

Establishing an appropriate closure and rehabilitation regulatory regime

To provide both society and asset operators clarity into the future, the continued development and application of appropriate, risk-based and transparent regulatory processes for closure and rehabilitation are needed. Establishing appropriate regimes will also help secure stakeholder support and recognition of the sector’s environmental sustainability, as well as facilitating a move from prescriptive to fit-for-purpose closure regulation.

Water management Water is one of our nation’s most precious resources. Understanding how the different users of the finite available quantities of water can coexist constructively, now and into the future, is essential if the energy resources sector is to continue to grow.

It is essential the industry continues to pursue collaborative and openly accessible research into water management and conservation, and develops improved technologies to better address these important issues.

Significant community concerns exist with water management in onshore gas production, uranium and coal mining. Concerns over depletion of reservoirs and water quality contamination are impacting the social licence to operate of all the energy resources industries. For example, in 2013/2014, potential water contamination in the Great Artesian Basin 87 was the most significant concern for landholders in respect of the Coal Seam Gas (CSG) industry, creating community concerns over the industry and resistance to its development. However, it should be noted that development in Queensland continued relatively unabated, while in New South Wales CSG has effectively halted while the State works through its new gas plan 88.

At the national level, in 2013 the water trigger legislation was introduced as an amendment to the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) 89 to facilitate the review by the federal environment minister of the impact of any new coal seam gas or major new coal developments on the water in the location of the proposed development, in addition to State review.

The use of independent, openly accessible, leading science and innovative technologies to address water management concerns will positively impact social licence to operate in these areas.

Tailings managementA major challenge to mining based process operations, including both coal and uranium, is the management of tailings from the facilities. Environmental, social and operational requirements and expectations for the management of tailings are evolving, in respect of water management and disposal of solids, and impacts on the entire life of the plant.

To meet these evolving requirements, there is an ongoing need for focussed and collaborative research for the safe design, management and decommissioning of tailings dams, to develop better, cleaner and more efficient, techniques and technologies and to continue the work of the Department of Industry, Innovation and Science 90.

Initiatives to enhance the social licence to operateCommunity engagement and education

Community support is integral to the success of resource projects, and to the success of the sector, particularly in a time of growing environmental awareness. The initiatives described below aim to enhance the broader societal understanding of the benefits and impact of the energy resources sector, to build energy literacy and allow more informed community debate on the future of Australia’s energy supply, while also overcoming existing scepticism and popular misconceptions.


SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES

Research social, economic and environmental consequences of the activities of the energy resources sector

Community support is integral to the long-term viability of the energy resources sector, particularly in a time of growing societal environmental awareness. As the sector expands its footprint in Australia, overcoming existing scepticism and popular misconceptions will be integral to accessing future resources and markets. This makes it essential for the sector to:

• Identifybetterwaystoengagewiththecommunity;

• Ensurethatthecommunityunderstandshowitdirectlyandindirectlybenefitsfromthesector’sactivities; and

• Demonstratethesector’scommitmenttoenvironmentalsustainability.

The sector must develop robust frameworks to build a better level of community awareness of the value of the energy industries in Australia and, through that, gain greater community support to sustain the industry’s social licence to operate. Key to this is to create trust and understanding of stakeholders through transparency of all actions (good and bad), including the development of an environmental performance dashboard. For several parts of the sector improved and more open engagement approaches are required to address community concerns relating to social and environmental impacts. The Western Australian Marine Science Initiative (WAMSI) model 91 is widely seen as a successful approach to deep and enduring stakeholder engagement and is one potential model on which to develop such engagement.

Further opportunities for industry to actively support community environmental groups include working collaboratively to ensure community questions and goals are supported, and for industry to work to build more open, trusting relationships with these groups.

Whilst building trust is paramount, engagement may also include educating stakeholders on the broader benefits of the energy resources sector, and discussing the distribution of benefits such as direct and indirect employment opportunities, the value and distribution of royalties and equity with impacted stakeholders (see energy literacy below).

Energy literacy

A major objective is to develop a program of work to improve the energy literacy across the community, to deepen the understanding of the energy value chain, life-cycle, energy economics, choices, benefits and impacts. For society to fully engage in an informed discussion on Australia’s energy future, there needs to be awareness of the trade-offs in energy choices and better understanding of the context in which they are made. To enable full, open and informed debate and understanding of the issues around the Australian energy resources sector, NERA aims to promote ongoing discussions and information sharing for all forms of energy, oil and gas, coal, uranium and the emerging range of renewables.

This will include: promoting public discussion and literacy around how these energy resources are produced, used and safely managed: how they contribute to the nation’s economy; how they combine into the overall energy mix; and what alternatives exist. Such activity will help improve overall understanding of the implications of new developments, such as the electrification of transport, and how the nation’s power generation will be managed as demand increases and sources of supply expand.

Information stewardship

To augment the development of a deeper level of energy literacy in the community, it is important that steps be taken to support the development of “trusted and independent custodians of scientific data and information.” Currently there is a lack of trust between industry, their stakeholders and the public, with each believing the other parties manipulate information to suit their purposes. An organisation (or group of such organisations and bodies) that is seen by all parties as a genuine independent custodian of information would provide a trusted “source of truth” and could potentially arbitrate on disputed science matters.



5. UNLOCK FUTURE RESOURCESThe Australian energy resources sector needs to improve its ability to identify, appraise and develop marginal resources in a cost effective and sustainable way. Development of marginal resources will require government and non-competitive corporate data to be more widely accessible to allow operators sufficient information to allow them to assess potential and known resources for future development.

The sector must review national and state based regulations and restrictions that heavily influence the costs associated with, and the ability to undertake new exploration. New technologies and approaches continue to make significant impacts to energy resource extraction, which enable new resources to be developed and recovery maximised. While the regulatory burden is discussed elsewhere in this SCP, there are opportunities to unlock marginal resources in providing access to geological information and through greater cross industry collaboration.

Integrated geological information Development of nation-wide priority driven frameworks are required for acquiring, evaluating and distributing pre-competitive geological and geophysical information to enable companies to identify and assess onshore and offshore geological basins. This will enhance the understanding of Australia’s natural resources and geology and help identify new projects to underpin the sector’s operational sustainability. As an illustration, only 12 per cent of Australia’s marine territories are properly mapped, with deep water exploration of new zones expected to identify additional petroleum acreage.

Additionally, operators in all resources industries must continue to explore alternate and more cost-effective ways to acquire new geophysical data to allow them to build accurate models of prospective formations for future exploration.

Business and Operating Models, Technology and Services


BUSINESS AND OPERATING MODELS, TECHNOLOGY AND SERVICES

Cross industry collaborationThe ability to amortise the costs of exploration between organisations within one sector, or even between sectors, could provide a further way to control exploration costs and unlock access to more marginal resources. Establishing a National Exploration Research Programme similar to that proposed by AMIRA 92 could help in unlocking some of the benefits of such collaboration.

Managing ageing assetsMany of Australia’s energy resources sector facilities, mines and reservoirs are beginning to reach the later phases of their production lives. As they move into these phases, production becomes increasingly difficult and the volumes and quality of extractable product declines. In many instances, these assets are then sold on to smaller operators who, through lean operations and focussed production can still operate the facilities profitably and effectively.

As ageing assets are passed along the chain from one operator to the next, there is the risk that new owners will need to minimise some compliance commitments to ensure profitability. Commitments for closure and rehabilitation may prove to be too expensive and may be undertaken in marginal ways.

As the broad array of resource facilities begin to reach the ends of their lives, it is important that the industry ensures the best possible standards of closure and rehabilitation be fully understood, that safe and economically viable solutions be researched and embedded in regulations, and that all members of the industry comply to these requirements. The acts of each organisation reflects on the entire sector and the industry as a whole must work together to maintain standards and reputation.

Environmental science collaborationThe role and value of ongoing environmental science is critical to the long-term commercial and societal sustainability of the entire energy resources sector.

Environmental scientists assist in building a better understanding of the impact of operating facilities on the natural environment. They provide understanding on how mines and wells can be optimised to operate productively and maximise recovery during their entire lifecycle, with minimal environmental impact and how to return the landscape to its former condition at the end of the facility’s operational life. For the sector to maintain its social licence to operate it is imperative that the strong relationship between environmental science and energy production is maintained, and that both groups continue to support each other’s activities.

An example of this can be seen in the offshore oil and gas industry, which relies heavily on marine science to support its operations safely and effectively, and to ensure the marine environment is managed appropriately. As such, enhancing the knowledge and use of environmental science is critical to the industry’s future from a technical, operational and social licence perspective. The offshore oil and gas industry needs to continue to collaborate with organisations such as the Western Australian Marine Science Institute (WAMSI) 91 to progress the development of understanding of the marine environment for current operations and into the upcoming abandonment phase for some facilities.

Initiatives to assist in unlocking marginal resourcesMarginal resources are those which cannot be accessed in economic ways using presently available technologies and approaches. As such, the energy resources sector needs to either access these marginal resources using novel approaches or less costly means, or wait until either the value of the resources increases relative to the cost of extraction or new or existing technology is available.

Work with technology suppliers to identify new ways to access resources

Resource development companies need to work with technology suppliers to identify technologies being used in other locations and fields, that can be transferred for use in marginal resources. They need to consider how best to cooperate on the design, development and deployment of new technologies.

Examples of such technologies could include advances in heap and in-situ leaching for uranium projects and long subsea tiebacks for offshore oil and gas, both of which could help to unlock potential in their respective industries.

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES



Subsea tieback technology

Research and development of innovative technologies will continue to unlock marginal resources in oil and gas, for example, targeted research into subsea tieback technology as a mechanism for developing stranded oil and gas assets, or allowing existing subsea tieback infrastructure (such as manifolds and pipelines) to be used to develop other fields in the vicinity (e.g. in the Carnarvon Basin).

Reagent chemistry

Research and development of innovative technologies will continue to unlock marginal resources in mining, for example, research into reagent chemistry for uranium leaching to support cost effective in-situ or heap leaching in an Australian geological context. This will increase yield and reduce the cost per pound of uranium extraction, and as a result increase the viability of a number of uranium projects.

Computational geoscience

Computational geoscience entails the use of advanced computational technology and software to undertake increasingly complex analysis of seismic imaging data. The techniques involved enable energy resources companies to build a greater understanding of the properties of their existing and potential deposits as well as identify potential locations for future carbon geosequestration.

Computational geoscience depends on access to supercomputer capacity, appropriate seismic data and cutting edge software. Leading the development of the techniques offers both an opportunity for Australia’s resources companies to exploit the insights gained in the growth of the sector while at the same time building a computational centre of excellence that can be marketed to other locations.

Guidelines for prediction of geotechnical performance of spudcan foundations during installation and removal of jack-up unitsInSafeJIP provided new guidelines for engineers for use in their daily analysis of whether a jack-up unit is safe to install, operate or remove from an offshore oil and gas site.

InSafeJIP was a Joint Industry Project (JIP) established by three universities – The University of Western Australia (UWA) through the Centre of Offshore Foundation Systems (COFS), University of Oxford (Oxford) and National University of Singapore (NUS), and the engineering consultant RPS Energy – to work with 19 offshore oil and gas companies and government regulators.

There is a perception within the industry that modern jack-ups have lower reliability (safety from structural failure) than traditional fixed offshore platforms, with the majority of the accidents attributed to geotechnical failures. These can lead to rig damage, lost drilling time, and injury to personnel. The consequential cost to industry is estimated to be between USD$10 million and USD$30 million per geotechnical incident which occurs on a scale of between five and 10 times per year.

Under the JIP, the universities reported on the benchmarking of the latest research on jack-up installation and extraction of jack-up platforms against the offshore data sets provided by the project participants. This two-year project was funded by 19 oil and gas partners and was dependent on data sharing between the partners. In an industry first, companies – including operators hiring jack-ups, jack-up owners, jack-up builders, engineering consultants and government regulators – shared data to create a single point of information.

This resulted in better guidelines to bring about safer installations going forward. These guidelines are now being widely used across the oil and gas industry.

CASE STUDY



Unmanned aircraft systems geophysics

Historically, geophysical data has been acquired through the deployment of either fixed-wing aircraft or helicopters equipped with the technology needed to undertake the surveys. However, with advances in both the technological capability and payload capacity of unmanned aerial systems (UAS) or drones, it is now possible to undertake this data collection work using unmanned aircraft. These aircraft can operate autonomously, programmed to automatically cover only the area required, do not require access to large runways, can operate much closer to the ground than conventional aircraft and can be very flexibly deployed, as they operate without a pilot. They are low risk and can operate for extended periods, only pausing for fuel and maintenance.

6. NEW MARKETS, NEW TECHNOLOGIES, NEW BUSINESS MODELSFor the sector to plan effectively for the future there is a strong and immediate need to look to new markets, consolidate and expand the sector’s presence in existing markets, and exploit the use of new technologies.

Australia has established trade agreements with most nations in the Asia Pacific Region, under which it has for a long time exported both energy resources and the technologies used to consume them. Australia also has strong trade ties, and is a signatory to, many trade agreements with nations outside the region. Many opportunities exist for Australia to leverage these trade agreements and relationships to sell the nation’s resources and the associated knowledge, skills and technologies, and to partner with other nations or organisations in the energy resource sector. Such opportunities would facilitate the commercial innovation in Australia’s energy resources value and supply chains, and growth in globally competitive exports from the sector.

With the proliferation of renewable and alternative power generation, there is a need to more fully understand the impact that widespread adoption of these technologies pose, and to identify opportunities for the energy resources sector stemming from these changes. The energy resources sector needs to be able to adapt quickly to the growing market share of these alternative energy sources, and find and seize new opportunities.

Both incremental and transformational change across the energy resources sector are required. Incremental improvements include leaner, smarter operations to improve productivity and drive down costs. Transformational change includes new operating models and a focus on new and innovative approaches to project execution and leveraging existing capacity more fully. The increased awareness of society’s environmental impact, along with disruptions in the energy market from the increased deployment of renewable energy technologies, present an opportunity for Australia to develop and adapt clean technologies. Australia can potentially commercialise these technologies and become an exporter of clean technologies to developing countries as they transition from fossil fuels.

While global demand for Australian energy resources remains strong, there is a movement toward cleaner ways to consume this energy. As the supplier of energy commodities there is an opportunity for Australia to be a major player in the world’s development of enabling technologies such as Carbon Capture and Storage (CCS).

Asian trade agreementsAustralia holds many trade agreements with other nations in the region 93, including those recently concluded with China, Japan and South Korea, older agreements with Thailand, Singapore and Malaysia and the ASEAN – New Zealand free trade area. Future agreements are being considered with Indonesia, India, the Gulf Co-operation Council and the European Union. These trade agreements provide strong and agreed frameworks for the exchange of goods and services and may facilitate the Australian energy resources sector to increase its level of trade in the sale of energy resources, and the export of technology, know-how and skills. The Australian energy resources sector has recently undergone a substantial expansion that has resulted in the development of new and highly sophisticated skills, such as the design and construction of large modular plant, skills that may have strong applications in many of the nation’s regional trading partners.

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES



Develop international technology partnershipsWhile many Australian energy resource businesses are already members of international technology projects, the sector can leverage significant additional international relationships. These relationships can be partnerships to develop and deploy new technologies and practices in Australia, and to develop technologies for export to other locations.

Such partnerships can enable Australia to improve its global performance in the commercialisation of innovation, drive deeper partnerships between the research sector and the Australian value and supply chains, and place Australia at the forefront of the deployment and export of new technology. This in turn can enhance domestic productivity, identify new markets for Australian technology and build a stronger and more diverse export portfolio, including beyond the energy resources sector.

Commercialisation of operational technological developmentsMany Australian operators and service companies invest heavily in developing technologies for internal use where either the suitable commercial technology is unavailable or not suitable for their applications. In many instances these developments are either only used internally or given away for free. Only in a few instances will the developing organisation attempt to commercialise their technology. Often the failure to commercialise internal technology results from such efforts being seen as external to core business. If the company is a supplier of energy resources, the sale of software or specialised hardware is frequently considered a distraction. If they are a service company they may either see the development as a commercial advantage or an evolutionary tool they do not consider as commercialisable.

However, with the current instability of energy resources and many organisations looking to diversify their base, seeking to commercialise existing operational technological developments or developing new concepts with a view to commercialisation presents a substantial new market opportunity.

Carbon capture and storage (CCS)Research and development should continue into Carbon Capture Storage (CCS) technology for both pre and post combustion phases in the use of fossil fuels for power generation through mechanisms such as Coal21, Australian Coal Association Low Emissions Technology (ACALET), Australian National Low Emissions Coal (ANLEC) research and development organisation and the CO2CRC 94, as well as developing cost effective and efficient technologies that could be incorporated into new facilities or retrofitted into existing plants. The success of this technology has the potential to enable a zero to low carbon emission process for the coal and gas industries, and reduce carbon dioxide (CO2) emissions by up to 90 per cent 95, thereby strengthening the resources market.

Low emissions technologiesResearch and development should be targeted at low emissions technologies, particularly for the coal and gas industries. Development of such technologies will build technical expertise in Australia and open the opportunities to export these technologies and skills to the rest of the world.

Areas where such technologies are currently being developed include gas processing at the well head and the reinjection of CO2 for geosequestration, as implemented on the Chevron Gorgon project 34. Ongoing research into this technology is also underway as part of the National Geosequestration Laboratory 96.

Significant work is being undertaken into developing low emission fossil fuel technologies in Australia and overseas. The coal industry has partnered with governments and the private sector to invest in the demonstration of such solutions through its Coal21 Fund 97, which funds the industry’s low emission research and development programs (ACALET and ANLEC). The fund, through ACALET, has directly invested $300 million and leveraged a further $550 million in significant low emission technologies since 2006.



LNG as a fuelSignificant opportunities exist to expand the use of LNG as a general transport fuel and to support the development and use of LNG bunkering facilities for marine vessels, following on from the Sulphur emissions (SOx) limitations set by the International Maritime Organisation (IMO) under MARPOL Annex VI 98. DNV GL reported that there were 77 LNG fuelled vessels operating worldwide in early 2016 with a further 85 vessels either under construction or on order. The majority in operation are in Europe with 69 per cent in Norway while those on order are split 72 per cent in Europe, 25 per cent into the United States, with the balance distributed around the rest of the world 99. Research has commenced into the use of LNG as a transport fuel for trucks and ships with potential economic and environmental benefits compared to diesel and fuel oil.

Other uses include powering locomotives, uses in the mining sector and industrial applications as well as in operations. Modelling by McKinsey 71 indicates that by adopting LNG and Compressed Natural Gas (CNG) as fuels for a proportion of transportation trucks, mining trucks, public transport buses and locomotives, together with using it as a bunkering fuel for Australian shipping could generate savings in excess of $1 billion. Further benefits would be reduced emissions of Sulphur Oxides (SOx), Nitrous Oxides (NOx) and particulates found in the combustion of conventional fuels such as marine bunker oils, together with a reduction of the nation’s CO2 emissions by up to 1.7 million tonnes equivalent.

Such developments would have multiple potential benefits to the Australian energy resources sector and the nation’s economy such as:

a) Opening up new domestic markets through the development of additional small scale LNG facilities;

b) Underpinning potential spin-off uses of LNG around the ports and other locations where LNG is stored;

c) Reducing the emissions of many heavy transport vehicles such as bulk cargo carriers and locomotives; and

d) Potentially allow for adjustments in current fuel tariffs and tax concessions, whilst allowing Australia to remain at the forefront of the development of technologies and skills needed to undertake such a development.

Another opportunity to monitor is the provision of small electricity generation capacity in less well served locations, to infill gaps in the network and avoid the costly need to install traditional pole and wire infrastructures. This could be undertaken as part of a collaborative exercise with the Institute of Sustainable Solutions at the University of Technology, Sydney 100 who maintain Network Opportunity Maps showing locations where there is a potential need for such supply.

Hybrid technologiesResearch and development should be considered in respect of new fossil and renewable hybrid technologies, such as renewable/ gas hybrids. Building on the growing interest in low emission technologies, hybrid fossil/renewable electricity generation merits further investigation to capitalise on Australia’s natural resource base. Australia has abundant solar energy and coal resources with 80 per cent of the nation’s electricity generation currently based on coal 101. In 2015, CSIRO (through ARENA funding) completed a pilot of the world’s first practical demonstration of pilot scale post-combustion carbon dioxide capture (PCC) processes integrated with solar thermal energy, at coal-fired (and gas) power stations 101. Despite the success of the pilot, commercialisation of renewable hybrids has been limited because it is not currently price competitive in the absence of a price on greenhouse gas emissions.

Enabling technologiesThe industry needs to consider the impact of enabling technologies, such as battery storage, on the Australian energy resources sector over the next ten years. At commercial scale, battery storage technology could allow under-utilised energy to be captured during off-peak periods, and utilised during on-peak periods. Such energy storage technologies would address the inherent intermittency of renewable energy supplies, such as solar generating its output during peak midday sunlight hours while peak demand for electricity is typically during mornings and evenings. An efficient, stable and reliable integration of energy sources and technologies to supply electrical systems should be a significant consideration for the future of the Australian energy resources sector.

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES



Adapting to the changing energy mixWorld-wide the energy sector is undergoing significant change as renewable power and alternative energy sources become economically and commercially viable on a large scale. The Australian energy resources sector must consider the disruptive impact that widespread adoption of renewable power will have over the next ten years, as well as the changing dynamics in the demand for energy exports to key markets such as Asia.

The sector needs to find constructive ways to participate in this evolving power mix, which will create export opportunities for clean, reliable energy supply, and help address the challenges of providing energy security in parallel with clean energy initiatives. Within Australia, there are issues of integration between initiatives at state and federal levels which impact on energy supply, affecting consumers and increasing the perception of risk for investors. An example is South Australia 102, where 45 per cent of power generation is produced by renewable sources of energy (mainly wind and solar). The intermittent generation has put a significant strain on the transmission system, which had been designed for base load thermal generation, and resulted in a higher reliance on interconnectors to access power from other states, which in turn has escalated power prices in that state.

The interaction between renewable energy and thermal energy sources, and their impact on transmission systems, together with the interaction between energy policy and climate policy at a state and federal level need to be considered in a consistent framework, such as the ‘energy trilemma’. The energy trilemma 29 underpins the World Energy Council’s definition of energy sustainability, it uses the three counter-posing drivers of affordability, environmental sustainability and energy security to determine an overall index on a national level. From a practical perspective, finding solutions to integrate alternative energy sources with more conventional sources will improve the depth of the market, and offers opportunities in both domestic and export markets.

Initiatives to support the development and adoption of new technologiesExtend the network of small scale LNG facilities

To leverage opportunities presented through expanded domestic use of LNG, it will be necessary to extend the existing network of small scale LNG production facilities to provide comprehensive national coverage and security of supply for organisations wishing to adopt LNG as their fuel source. Existing domestic LNG facilities currently comprise one each in Chinchilla, Queensland; Newcastle, New South Wales; Dandenong, Victoria; Westbury, Tasmania; Kwinana and Dampier, Western Australia; with capacities of between 50 and 200 tonnes per day. An expansion of the network could incorporate shipment of similar volumes of LNG from the major export production facilities.

With this expansion, marine operators would be guaranteed supply around the nation’s coast, and other potential consumers, such as mine sites, could then further explore the use of LNG as an alternate to their current dependence on imported diesel.

As the impact of the International Maritime Organisation (MARPOL) 98 legislation becomes better understood, there is a strong likelihood that increasing numbers of ocean going vessels will convert to LNG as their primary fuel source. These vessels will require security of supply either in Australia or in the region and, as the region’s principal producer of LNG, there is an opportunity for Australia to be both a major supply hub and a supplier of LNG to other ports in the region.



Broader support for focussed innovation

For any economy to be globally competitive, to support a diverse and healthy economy for its citizens and to have the capacity to quickly adapt to change, it must continually seek new and improved ways to do existing work and find new commercial opportunities. Progressive innovation in the Australian economy requires strong collaboration between industry and the research sector. In the energy resources sector it requires new partnerships and ways of working between large operators/miners and their supply chain, and between the supply chain and the research sector to drive innovation.

To foster innovation in the energy resources sector it is critical Australia’s policy and regulatory framework facilitates industry led research, supports collaboration between the operators and supply chain, encourages commercial risk taking, and concurrently provides strong environmental oversight.

While the innovation ecosystem in Australia is growing rapidly, much of the focus is outside the energy resources sector. The findings in the Western Australian Start-up Ecosystem Report 103 show that major economic opportunities for innovation are in automation of knowledge work, advanced robotics and the internet of things. The focus of many start-ups is in mobile internet and cloud computing. There is a strong need to provide mentoring, facilities and focussed support to those in the start-up and innovation community to develop ideas and technology which could have positive impacts on the future productivity and sustainability of the Australian energy resources sector. This support should come from industry and government in the forms of investment, access to data and existing knowledge, tax incentives and customers for the ideas that emerge.

7. COMMERCIALISATION OF RESEARCH AND DEVELOPMENTAustralia currently faces challenges in capitalising on the nation’s significant research and development capability. Identifying industry requirements to better focus both academic and industry research and ensure uptake and commercialisation will be key to increasing supply chain capability and commercialisation of research in the sector.

Australia is a world leader in many areas of technology research, ranking in the top 10 Organisation for Economic Co-operation and Development (OECD) nations for academic publications, yet regularly stumbles when trying to commercialise these developments, where the nation ranks at the bottom for collaboration between industry and academia 104. The operators of many Australian facilities continue to require international demonstrations of equipment before they deploy new technology, making it an ongoing challenge for many Australian innovators to reach commercial outcomes especially given the difficulties in securing capital to upscale pilot projects and implement international trials. The result of which means many Australian businesses are unable to capitalise on their cutting edge work.

Identifying and leveraging the research and industry connections between end users, research institutions and product developers is critical in defining and developing new technology, and yet many organisations still struggle to find the right linkages. Building these linkages and leveraging this knowledge into the broader sector is a major role of NERA. It is critical to the future competitiveness and sustainability of Australia’s energy resources sector that research and industry build stronger ties, and establish ways to effectively communicate emerging science on technical and socio-economic challenges of the sector. This requires all parties to provide leadership and actively seek opportunities to collaborate and to innovate together. Industry must work with the research sector to address its pressing current and future challenges. In turn, Australian universities and research organisations need to achieve greater consistency and engagement in knowledge and technology transfer.

If we are to maximise the impact and utility of research and innovation spend, Australia needs to build on the work undertaken by programs such as the Australian Research Council, Co-operative Research Centres and Co-operative Research Centre projects to ensure research is assessed for its impact including social, economic, environmental and health. Energy resources related research and innovation should have a clear pathway to commercial impact in that sector. Australia also needs to further explore the use of incentives, including financial, for the research sector to engage in knowledge transfer.

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES



Living laboratoriesThe commitment of the National Research Infrastructure Council 105 to build public collaboration facilities sufficiently large enough to provide a test bed for exploratory work, testing, certification and qualification and international engagement, provides significant support for innovation, product development, skills and services in Australia. Private organisations with testing facilities can also build breadth and depth into the system by developing clusters of organisations, small and large, around an industry discipline, and in effect developing the “living lab” concept 106. Using Australia’s existing facilities, whether public and private, enables continuous learning and development and creates an environment of trust and shared risk.

Using infrastructure as a tool to build collaboration, knowledge, skills, new and improved products has been shown to be successful in clusters around the world. Clusters based on infrastructure draw in start-ups, small to medium enterprises, universities and large industries all supporting the science and innovation supporting the maturation of the idea to market.

Understanding and developing commercialisation pathwaysWhile many large organisations have the capacity to access commercialisation pathways for their new products and innovations, it remains difficult for smaller, less established organisations to understand how best to commercialise their ideas. Many innovations developed within organisations, whether large or small, are developed without the pathway to commercial outcomes clearly identified or understood upfront by the developers. This leaves many innovative business ideas and products unexplored or unrealised, and many smaller organisations are unable to exploit their ideas to their full potential. Many new and innovative ideas will be progressed to the point of feasibility only to fail at the development stage, through lack of funding or the inability to secure the support of potential clients and users willing to undertake trials. Bridging this gap between technology readiness and commercialisation readiness is, often an almost insurmountable challenge in the energy resources sector, where the high capital cost environment makes participants risk averse.

To address these challenges, organisations seeking to innovate need assistance to identify the commercial potential and how to take their ideas, innovation and products to the global marketplace. There are a number of existing tools that could be extended to assist with this process, for example, concepts could be evaluated and assigned the accepted Technology Readiness Levels (TRL’s) 107 and Commercial Readiness Index (CRI’s) 108 and then supported through the product development funnel process shown in Figure 25 until they are capable of becoming self-sustaining commercial successes. The relationship between TRL’s and CRI’s is set out in Figure 23 109.



Figure 23: A pictorial representation of the relationship between TRL’s and CRI’s (from Technology Readiness Levels for Renewable Energy Sectors, ARENA 109)

CRI

Bankable Asset Class

System test, Launch&Operations

TRL

6

5Market competition Driving widespread development

4 Multiple Commercial Applications

3 Commercial Scale Up

2 Commercial Trial, small scale9

System / Subsystem Development

8

1Hypothetical Commercial Proposition

7Technology Demonstration 6

Technology Development

5

4Research to Prove Feasibility 3

Basic Technology Research

2

1

Figure 24: The pathway from TRL to CRI (from Technology Readiness Levels for Renewable Energy Sectors, ARENA 109)

Research and Development

Demonstration Deployment

Pilot Scale

Commercial Scale

Supported Commercial

Competitive Commercial

Technology readiness

1 2 3 4 5 6 7 8 9

Commercial readiness

1 2 3 4 5 6

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES



Figure 25: Product development funnel

Commonwealth funding, university & industry support resources along the research to market funnel

Identify Problem, Unproven Concept

NERA guidance and assessment support CRC, CRC-P, ITRP, GIL

NERA publication – Research Ready

• CRC,CRC-P• ARCLinkage,ITRP• Collaborations• StudentProjects• iPrep• ATSEMentoring• Hackathons• FedexDays• Accelerators

Proven Concept Tested

NERA financial support for thePhDATSEmentoring Program

• PhDs,ECRs,CSIRO• CRC,CRC-P• University&CommercialLabs• Consulting

Validated Concept

NERA Innovation Voucher

• University&CommercialLabs• TechnologyQualification• IPAustralia• R&DTaxIncentives• StateGovernmentFunding

Programmes

Prototype NERA support for COREHub&SMEnetworking events

• EntrepreneursProgramme• InnovationWA• Accelerators• Austrade• University&CommercialLabs• AngelInvestors• VentureCapital• ClassificationSocieties

Environment & System Tested

NERA support for the formation of clusters, living labs, technology competitions&promotion

• Facilities&ExpertsforTesting• University&CommercialLabs• Austrade• Marketing• CommercialLabs• AngelInvestors• VentureCapital• ClassificationSocieties

System Installed & Field Proven

NERA identification ofR&Dcommercialisation gaps, barriers and investment channels

• Customers• Clients• Sales• Marketing• ProductCycle• EFIC• Austrade• AustralianLandingPads• InternationalClusters

Market

Ideas

Ideas

IdeasIdeas

IdeasIdeas

Ideas

Ideas



Initiatives to assist in the commercialisation of Research and DevelopmentStrengthen industry-led research stewardship

Enhanced collaboration and research stewardship between industry and research organisations will provide greater research and development focus on industry requirements, increasing solution uptake and commercialisation. Mechanisms to support this include the ongoing use of the Cooperative Research Centre Association scheme (CRC) 110 and the Australian Research Council scheme (ARC Linkage) 111.

Enhance industry engagement with research institutions

The sector needs to understand and adopt, where appropriate, world’s leading practice for the adoption of research translation, i.e. transferring research into industry practice 112. This includes both industry and the broader research community working to fully and holistically understand sector challenges and opportunities and identifying key business people to actively manage the research engagement. These personnel need to understand the potential barriers and pathways to ensure research outcomes are efficiently transferred into business practice.

Research and development funding models

There is an opportunity to better coordinate, achieve efficiencies of effort and maximise the value from industry research by investigating collaborative funding models. This may include, for example, a research funding trust in the oil and gas sector similar to the highly effective model operated by ACARP and the Coal21 fund (ACALET) discussed elsewhere in this SCP. Such an initiative could be solely industry funded, with research and development tax concessions, or jointly funded by industry and government to support research and development in identified fields.

A range of research opportunities are currently available, but information on them is scattered across multiple private and government bodies, making it difficult to identify the best source of funding and best capability to undertake the research. The result is duplication of effort, with multiple institutions often undertaking parallel research where, with better sharing of information, the effort could be combined and the monies streamlined. Money that would otherwise have been used to support the parallel efforts could be redirected to other research.

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES

Assisting in the delivery of safer, more efficient and reliable pipelines to meet Australia’s growing energy needs The Energy Pipelines Cooperative Research Centre (EPCRC) provided the Australian energy pipeline industry with the technology necessary to extend the life of the existing natural gas transmission network, and build better, cheaper and safer networks to support increased demand for energy.

EPCRC is a collaboration involving the Australian Pipelines and Gas Association Research and Standards Committee (APGA RSC), the University of Adelaide, Deakin University, the Royal Melbourne Institute of Technology and the University of Wollongong.

APGA RSC consists of approximately 60 companies from across the pipeline supply chain including pipeline owners, designers, constructors, pipe suppliers, contractors and consultants.

Pipelines are technologically advanced and complex systems required to operate continuously, efficiently and safely. Pipeline failure or outage can have significant, far-reaching consequences including impacting the security of supply for export and domestic markets and consequently the Australian economy. Moreover, the existing pipeline network was largely constructed in the 1970s and 1980s with large portions nearing end of life. Combined with a huge increase in the demand for domestic energy and export gas, urban sprawl and a changing pipeline ownership landscape, the pressures on the pipeline network have never been greater.

The EPCRC collaboration received strong industry support and project teams were made up of actively engaged industry personnel and researchers. It has provided significant value to the Australian pipeline industry and has been recognised for its world leading research into pipeline innovation and improved safety.

CASE STUDY



Improve understanding of Intellectual Property

Ownership of, and access to, intellectual property emerging from new research is often problematic and can pose additional barriers to the effective exploitation of new ideas. This situation can be particularly complex when multiple businesses, research centres and universities are involved. Tension exists between industry’s desire to either own and/or capitalise on any advantages the research offers, while the research community can be more motivated to publicly share findings and continue investigations. Furthermore, many operators are generally most interested in having new technology available for their use, rather than any opportunities to earn royalties. While resolving this tension can be a relatively simple task, it is one that is typically addressed individually for each project, causing delays and adding potential barriers to timely research.

Support living labs and pilot plants

Living labs and pilot plants need to be developed and supported in Australia, allowing all levels of industry and researchers to test and demonstrate their technologies and products in a readily accessible environment prior to product launch. Such facilities would allow the developers of new technologies to prove their products to potential clients without needing to negotiate their deployment into full scale operating industrial plant. Without such facilities it remains extremely difficult for new technology developers to prove their products to clients who frequently demand demonstrated use prior to adoption.

8. EFFICIENT OPERATIONS AND MAINTENANCEAustralia’s reputation as a high cost jurisdiction to develop, execute and operate projects means that improving efficiency of operations and maintenance is critical to maintaining and enhancing our competitive advantage. Identifying appropriate avenues to improve the efficiency of operations and maintenance, and improve asset utilisation, is critical to the sector’s future competitiveness.

Operators must continually explore, test, develop and adopt new and different innovative solutions, in some cases becoming early adopters rather than followers. Given the constantly evolving technological environment, ongoing work is required, particularly in respect of utilisation of service sector capacity, system standardisation and coordination of major shut downs.

Operating models for remote operationsThe Australian mining sector is recognised globally as a leader in remote operations of process plant. This is a position that has been built over the past decade through innovative changes to operations in both the mining and energy resources sectors. However, the sector needs to continue to push the boundaries of what can be safely and effectively monitored and controlled remotely. The focus needs to be maintained developing effective operating models for remote operations (including those in hostile and challenging environments) and understanding and adopting ‘smart operations’ to drive performance improvements and potential costs savings. Co-location of remote operations centres may help improve knowledge transfer and enable sharing of functional activities.

Understanding the future labour requirements in these new operating models, and ensuring training and development of relevant skills will be essential, requiring ongoing open collaboration between operators, service sector companies and education providers.



Data, digitisation and predictive analyticsThe ongoing gains possible through advanced process modelling, diagnostics and data analytics are becoming well recognised and in recent years these facilities have been increasingly adopted by many operators. New gains will continue to be found as technology develops. To exploit these opportunities, the energy resources sector must push boundaries, support focussed research and develop the use of data and digital technology to support better decision making and bring about a step change in operating performance to drive more efficient operations.

To make the most of the opportunities presented by advancing automation, dynamic modelling and real time predictive control may require investment in new control systems and metering for older facilities. These changes could include the development of open architecture control systems, such as that proposed by the Open Process Automation Forum 113, in place of traditional closed systems currently in use in many plant. This would be accompanied by open technology, plug-and-play measurement equipment. It would also be necessary to ensure all of the right measurements are being made in the right way to allow the level of advanced control anticipated in the future. Essentially, operators must ensure they are measuring the right variables correctly so they can move beyond the conventional DCS or PLC level. Without meeting these needs it will not be possible to build accurate analytical models or undertake realistic and meaningful advanced modelling. Without ensuring the right technology is in place to make and maximise the measurements, millions of dollars could be wasted trying to grapple with predictive analytics from using the wrong approach.

Data and digital enablement will result in lower operating costs and enhanced productivity for facilities, while supporting improved performance analysis. Industry benchmarking of Australian facilities against international best practice should be considered while developing a local technology industry that can then export these skills and knowledge to the rest of the world.

Such technologies could include machine learning, artificial intelligence and the use of supercomputers. A focus on effective decision-making technology will support data analysis to drive value chain optimisation.

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES



Robotics, sensors and automationFor decades, process plants have relied on traditional monitoring and control equipment along with human operators and maintenance personnel. The emergence of remote and autonomously controlled machines and sensors has meant that new, more efficient technological options are available. This technology includes such things as Unmanned Aerial Vehicles (UAV’s also known as drones) and their marine counterparts, which are being adopted for inspection roles across projects in the energy resources sector.

To exploit the opportunities presented by advances in sensing, automation and monitoring, focussed research into applications and technology, supported by commitments to test and deploy the resulting advancements in the areas of robotics, drones, sensors and automation to deliver a step change in operating performance, is required from all parts of the value chain.

The calculated use of automation and robotics will help to improve plant safety, drive down costs, improve productivity and allow better access and operations in hostile environments. Focussed development of leading edge technologies and applications could result in the development of domestic, world leading businesses which are able to export their technology to the world.

Develop a greater understanding of decommissioning techniquesEach of the uranium, coal and oil and gas industries undertake decommissioning, abandonment and mine closure in safe and environmentally responsible ways as their assets reach the end of their productive lives. These activities are costly and complex, exposing the businesses to greater expense and risk. It is important that Australia remains at the forefront of relevant knowledge and technology and undertakes research to build the national capabilities and also monitors the international practice and technology used in decommissioning, abandonment and mine closure activities being undertaken in other jurisdictions and other industry sectors.

Initiatives to enhance efficient operations and maintenanceExplore ways to build the industry’s skill base in remote operations and facility life extension

Australia is a leading proponent of remote operations. This has been driven by the extreme distances and harsh environments where facilities are located. Australia is leading the deployment of semi-autonomous and, increasingly, fully autonomous vehicles and machinery on mine sites as well as ‘not normally manned’ offshore facilities. However, these steps are just the beginning of increasingly autonomous operations. While Australia is currently a world leader in this field, we must keep pushing the technology to deliver increasing benefits in productivity, efficiency and safety, by establishing collaborative agreements and research centres focussed on the continuing development of remote operations.

Focussed research and early deployment of new technologies

New technologies continue to emerge which are relevant to the energy resources sector, although they may first be deployed in other industries. This technology includes drones used for surveys and inspections, 3D printing technology used to manufacture components and prototypes, initially in plastics but increasingly in metals, virtual reality (VR) technology used to provide immersive training and developmental environments, and machine learning and advanced computing techniques used to deliver process plant optimisation. The sector must seek out emerging technologies wherever they are developed and consider innovative ways to quickly deploy them within the sector in order to deliver productivity and safety gains together with leading edge capability.



Research into life extension for ageing facilities

Across the world, many energy resource facilities are facing their end of design life while resources remain to be extracted. This is occurring in both the mining and oil and gas industries. Substantial research is being undertaken into ways of extending the life of these ageing assets to enable safe and efficient operations to continue without the need to invest in new and potentially cost prohibitive equipment or to close the facility while resources remain untapped.

Such projects result in the development of new guidelines and alternate strategies for the ongoing use of these ageing facilities, and include numerous Joint Industry Projects (JIP) which are being conducted to identify and address various challenges faced by ageing assets.

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES

Innovation precinct for coal remote operating centresThe Remote Operating Centre (ROC) provides a central location for coal operators to coordinate and increase value across the complete coal supply value chain. BHPBilliton, University of Queensland and NERA have collaborated to start an innovation precinct aimed toward improving remote operating centres. Coal operators need to extract more value from the ROC operating model and believe additional collaboration with innovative research partners will speed value generation and enhance the Australian economy. The potential value of this initiative is increased sector exports and improved performance, commercialisation of new technology and reduced debottlenecking of capital cost for operators.

The first step in this collaboration will be an alignment of strategic themes across ROC controlled value chains, providing an early opportunity to consolidate and align research work effort. For example, a high-speed value trial to build and deploy a cyber-physical fleet control system conducted in a collaboration hub could transform this technology and develop a new knowledge base. A multi-objective optimisation of open-pit trucking operations could consider factors including energy efficiency, change in demand signals and downstream process performance. This one collaboration idea alone would yield:

•Considerablevaluechainbenefit;•Anewcommercialisedproduct;•Increasedinnovation;and•Seamlessinnovationintegrationbetweenacademiaandindustry.

The learnings from this innovation precinct could be more broadly applied across other industry remote operating centres.

CASE STUDY


9. REGULATORY FRAMEWORK OPTIMISATIONHarmonising regulations across the States, Territories and Commonwealth and between Commonwealth regulations, together with the establishment of outcomes-based regulatory frameworks, would remove duplication, inconsistencies and inefficient complexity. It would ensure best practice regulation that supports the Australian economy by supporting industry, innovation and flexibility whilst providing the Australian community with confidence in the independent, transparent and objective oversight of industry activities and environmental impacts.

Regulations which currently act as barriers to industry innovation, or inhibit Australia’s ability to access new resources or develop technology for export markets should be identified and streamlined, but within the context of maintaining consistency and stability and reducing sovereign risk for investment decisions.

The development of regulations and adoption of standards governing the energy resources sector can be a protracted undertaking and, if prescriptive in approach, will often be out of date before enacted. Prescriptive regulation stifles innovation and flexibility, so when coupled with long timelines, creates further barriers to the deployment of new technologies that might deliver improved performance and better outcomes. The focus needs to be on risk based and outcome focussed regulation which requires strong demonstration of performance but allows for changing environments.

Regulatory Environment


REGULATORY ENVIRONMENT

Encouraging sensible regulatory frameworks to allow ongoing explorationAcross Australia a number of states are currently imposing highly restrictive regulations around energy resource activities, and in some cases moratoria on exploration. These restrictions are impeding the industry’s ability to identify, access and develop new prospects. This is placing the long-term future of the Australian energy resources sector and Australia’s energy security in jeopardy. The identification and assessment of new reserves is necessary to maintain production by existing facilities as well as for new projects. There is an urgent need for the industry and governments across Australia to work cooperatively to address community concerns, and to establish a sensible and broadly acceptable regulatory framework under which unnecessary restrictions are removed and exploration can proceed with the support of the community.

Harmonisation of standardsThe energy resources sector is a global industry. Organisations at all levels are required to navigate multiple local, national and international standards. These differing standards impact on productivity and create difficulties in moving personnel and material around the world, and inhibit access to global export markets for Australia’s energy resources technologies. The harmonisation of domestic and international standards to a single globally acceptable standard is a critical step, one that is needed for the energy resources sector to continue to improve productivity and access new global expert markets for the supply chain.

Review of industry self-imposed regulationsWhile the external regulatory framework establishes a large number of limitations and restrictions on businesses, it is important also to review self-imposed regulations that may inhibit productivity. In its 2014 report 114, Deloitte estimated that self-imposed rules and regulations cost business up to $21 billion per year to administer, and a further $134 billion a year in compliance costs. While this same research found that the overall compliance requirements in the mining sector (of which the energy resources sector is a sub set), was relatively low at around eight per cent, they also found that the rate of growth of these self-imposed requirements was the highest in the country, at around 17 per cent between 2006 and 2011. Many of the new regulations are in respect of workplace safety improvements and, are very important, but other self-imposed regulations are simply administrative in nature and unnecessarily add to the cost of business.

Industrial relations and workplace reformIssues in respect of industrial relations and workplace reform are recognised as a major point of interest for all members of the energy resources sector, and a prudent and equitable industrial relations landscape is vital to the viability of the industry. However, such issues do not form part of NERA’s charter nor are they part of the scope of this SCP.

Resource management reform and review of the existing permitting systemsMany areas of potential activity by the Australian offshore oil and gas industry are currently constrained by the current permit and retention lease system which is based on a historical ‘permit by permit’ approach. At present, an operator making a discovery must decide whether they can commercially develop their find or apply for a retention lease. Too often they apply for retention leases which provide generous timeframes to develop the commerciality of the project. However, a combination of factors could enable earlier development of a field if an operator was able to gain access to existing infrastructure and processing capacity. These include: the manner in which the regulations covering permitting operate; the Joint Authority (JA) of the relevant Australian Government Minister and state/Northern Territory Government Minister or their delegates; and the incumbent operators holding titles to adjacent areas where they may already be operating existing facilities and infrastructure.

It is recommended that the Australian regulators and offshore oil and gas industry review the current resource management framework to determine whether the adoption of a process similar to that set out in the Maximising Economic Recovery strategy (MER) 115 in place in the United Kingdom sector of the North Sea may be appropriate, and whether such a policy could serve to unlock current offshore discoveries through the sharing of appropriate infrastructure.

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES



Initiatives to support the optimisation of the regulatory frameworksMany areas of the Australian energy resources sector are currently heavily constrained by state and federal regulations that limit exploration to provide new supply and underpin long-term sector viability, restricting operational development and stifling innovation. For the sector to be able to deliver the value of its full potential to the economy and community it is critical that the regulatory framework is reviewed. Regulation needs to be flexible and outcome focussed, and provide a more stable and predictable policy environment. Exploration can then proceed in a safe and sustainable manner, and potential new projects can be planned and initiated without sudden policy changes being imposed.

One example of where additional focussed research is needed to support and underpin regulation and secure community acceptance is understanding the scope, scale, sources and impact of fugitive emissions, particularly in the unconventional gas industry. In the natural gas industry, fugitive emissions are considered to include all greenhouse gas emissions from exploration, production, processing, transport and distribution of natural gas, except those from fuel combustion 116. However, certain combustion processes like flaring and waste gas incineration are also counted as fugitive emissions. One of the key drivers of increased demand for gas is that greenhouse gas emissions from gas utilisation are usually lower than other fossil fuels 117. However, because of the much higher global warming potential of methane compared to CO2, even relatively small proportions of fugitive methane released during the production, processing and distribution of natural gas can reduce this advantage relative to other fuels 118, 119.

At present, the debate in Australia around fugitive emissions is largely driven by sentiment, supposition and inferral from other jurisdictions such as the United States. There is currently limited Australian data or research that specifically addresses Australia’s industry activities and environmental conditions and this is limiting the ability for informed debate and decisions. As the natural gas industry grows there is a need for clear, data driven and scientific evidence to improve understanding of the scope of fugitive emissions, so that the broader society can be provided with independent peer reviewed science based information, regulators can manage compliance and reporting in a transparent and meaningful manner, government can make fully informed decisions, the operators of the facilities can monitor and address any issues in a planned and organised manner and, potentially, Australian technology companies can engage to develop technologies that reduce or eliminate fugitive sources on facilities. This should include extending the recent work undertaken by CSIRO on field measurements of fugitive emissions from equipment and well casings in Australia’s coal seam gas production facilities 120.

Adopt and harmonise international standards

An area of focus to achieve greater alignment is for Australia to adopt trusted international standards and review regulations to remove references to local bespoke standards. Regulations may need to bridge any gaps between international standards and standards required for genuinely local conditions, such as environmental issues. The energy resources industries operate within a global supply chain and the issue of international standards is a critical one. The industry uses standards to enhance technical integrity, improve safety, enable cost reductions and reduce the environmental and health impacts of operations worldwide. Aligning with international standards would facilitate local industry to compete in an international market, and enhance performance.

This initiative is likely to reduce unnecessary and inefficient regulatory burden, duplication of health, safety and training requirements, and ultimately drive down cost. Standardisation is recognised as a key factor in the Australian Government’s Innovation and Competitiveness Agenda released in 2014 121, with alignment to international standards set to deliver significant competitiveness, productivity and efficiency gains to the Australian supply chain.

Standardisation will support the mobility of personnel both within Australia and globally, helping grow the local supply chain and enabling Australia SMEs and tier one companies to compete globally whilst achieving greater local workforce participation. The international oil and gas sector has estimated productivity gains in the order of 20 per cent for service sector procurement on the basis of applying a more consistent set of standards and requirements across the industry and service sector.


Regulatory reform to support ongoing sector growth

To avoid energy supply disruptions such as those experienced in South Australia during 2016, and those predicted for much of Australia’s eastern seaboard in the later part of this decade, it is important that government look to harmonise regulations across the states and territories and with the Commonwealth 122. Such harmonisation would allow the sector to plan its future in a more structured manner and to supply the energy needs of the community and manufacturing industries in a stable and economically sensible manner.

Considerable work has been undertaken at each jurisdictional level to streamline regulation and identify best practice approaches. However, Australia still suffers from duplicative, inconsistent and complex regulations across and within multiple jurisdictions which cause confusion and result in duplication, extended and costly timelines, and waste of government(s) resources in activities such as the granting of approvals. This ultimately impacts the attractiveness of Australia as an investment location. Governments in Australia should work together to harmonise and simplify regulation. Priorities for reform include adoption of trusted international standards across all jurisdictions, adoption of outcomes based regulation that facilitates innovation and early adoption of new technology, and reform of regulations to promote exploration and development of new supplies of energy resources for Australia.

One specific area to pursue is the harmonisation, alignment and rationalisation of state and federal regulations in the uranium industry, giving clarity to developers of new and identified resources, and ensuring the safe export of product through Australian ports, with a view to developing an optimised and consistent national regulatory framework.

Review the regulatory frameworks

The Australian energy resources sector must conduct a comprehensive, overarching review of the national and state regulatory frameworks that govern the industry, and their interaction. The goal should be to streamline and simplify. Many of the current regulations are extremely onerous and duplicative or have the consequence of preventing the movement of plant and equipment across borders or impeding the movement of skilled personnel between states, as illustrated by the emerging requirement for state by state registration of engineers, led by the introduction of the Queensland registration scheme 123. Regulations are placing a disproportionate level of expense on operators before they are able to determine the extent of potential reserves.

In the area of approvals, work by the Mineral Council of Australia 124 found that in the thermal coal industry, the average Australian project experiences an additional 1.3 years of delay due to the regulatory regime, as compared to other jurisdictions. This confirms that regulations are hampering the sector’s ability to bring new capacity on line in a cost effective manner, and are pushing international businesses to look to other jurisdictions in which to invest.

The situation is made more difficult by the imposition of moratoria on development of potential new coal seam gas assets in several states including New South Wales 125 and the Northern Territory 126. Victoria has imposed a permanent ban on all future unconventional gas developments 127. The banning of shipment of uranium through various Australian ports 128, is forcing producers to transport the yellow cake thousands of kilometres overland to other ports, severely limiting their ability to export their products in a cost effective manner.

National performance or outcomes-based regulatory frameworks should be established across the energy resources sector, ensuring fit-for-purpose regulation that facilitates innovation and high standards, clear pathways to compliance and reduces regulatory overlap.

SECTO

R CHA

LLENG

ES AN

D K

NO

WLED

GE PRIO

RITIES



Creating opportunities for Australia’s energy resources sector to become globally competitive, innovative, sustainable and diverse.

Glossary

DEFINITIONSFor the purpose of this document, the following definitions will be used:

Collaboration is defined as a joint effort, which involves pooling of resources and information, by two or more organisations (companies, universities, training institutes) in the sector towards a well-defined goal to improve sector competitiveness.

Competitiveness is defined as the ability of the sector to produce and sell energy commodities and related services competitively in comparison to other similar sectors world-wide.

Competitiveness plan is defined as a structured and evolutionary plan to progressively work to identify and implement mechanisms to improve the global competitiveness and sustainability of, in this case, the Australian energy resource sector. This competitiveness plan will continually evolve as the issues and solutions change, and will be characterised by the focussed identification and pursuit of specific projects.

Industry refers to the sub components of the sector e.g. oil and gas, coal and uranium.

Knowledge priority is defined as an inadequacy in the depth and/or breadth of knowledge relating to an aspect of an industry or industries of the Australian energy resources sector. Addressing these will help improve the competitiveness of the sector, or one or more of its industries.

NERA is an independent, third party, incorporated entity with a mandate to assist the energy resources sector achieve sector wide improvements in competitiveness and to help secure a sustainable future for the sector. NERA provides an independent and neutral setting where individuals and organisations from across the energy resources sector can participate directly or indirectly to consider, discuss and resolve issues that are currently restraining the sector from achieving global competitiveness and sustainability.

Sector is defined as the energy resources sector comprising the oil and gas industry including both conventional onshore and offshore oil and gas, coal seam gas and shale oil and gas, the coal industry and the uranium industry, and related services.

SMEs are defined as small to medium sized firms which employ up to 250 employees.

STAKEHOLDER CONSULTATION PROCESSAn extensive consultation process involving key stakeholders has been undertaken across the country during the development of the Sector Competitiveness Plan. These stakeholders included:

• Producersandexplorers;• Serviceproviders;• Researchinstitutions;• Industryassociations;• Governmentagencies.



ACRONYMSACALET Australian Coal Association Low Emissions TechnologyACARP Australian Coal Industry’s Research ProgramACCC Australian Competition and Consumer CommissionAPGA Australian Pipelines and Gas AssociationANLEC Australian National Low Emissions CoalANSTO Australian Nuclear Science and Technology OrganisationAPPEA AustralianPetroleumProduction&ExplorationAssociationASEAN Association of Southeast Asian NationsAUD Australian DollarBOM Bureau of MeteorologyBt Billion tonnesCCS Carbon Capture and StorageCNG Compressed Natural GasCSG Coal Seam GasCO2 Carbon dioxideCOAG Council of Australian GovernmentsCOAL21 Fund based on a voluntary levy on coal productionCOP21 2015 Paris Climate ConferenceCRI Commercial Readiness IndexCSIRO Commonwealth Scientific and Industrial Research OrganisationEPCRC Energy Pipelines Cooperative Research Centre FOB Free On BoardGDP Gross Domestic ProductGJ GigajouleHELE High Efficiency Low Emission technologyICA Industry Competitiveness AssessmentICF Industry Competitiveness FrameworkICS Industry Competitiveness ScoreIEA International Energy AgencyIOT Internet of ThingsJIP Joint Industry ProjectKPI Key Performance IndicatorLNG Liquefied Natural GasLPG Liquefied Petroleum Gas MARPOL International Maritime OrganisationMM MillionMt Million tonnesMtoe Million tonnes of oil equivalentNOx Nitrous OxidePCC Post-combustion carbon dioxide captureRITC Resources Industry Training CouncilROC Remote Operating CentreSOx Sulphur Oxide STEM Science, Technology, Mathematics and EngineeringTcf Trillions of cubic feetTRL Technology Readiness LevelTSBE Toowoomba and Surat Basin EnterpriseUSD United States DollarVDT Value Driver Trees


Bibliography

1 Office of the Chief Economist, “Resources and Energy Quarterly December 2016”.

2 WorldEconomicForum,“TheGlobalCompetitivenessReport2016-2017,”2016.[Online].Available:http://reports.weforum.org/global-competitiveness-index/.

3 APPEA,“Disturbingtrendoffallingexplorationcontinues,”16December2016.[Online].Available:http://www.appea.com.au/media_release/disturbing-exploration-decline-continues/.

4 InternationalEnergyAgency(IEA),“WorldEnergyOutlook2015,”November2015.[Online].Available:http://www.worldenergyoutlook.org/weo2015/.

5 WorldNuclearAssociation,“UraniumandNuclearPowerinKazakhstan,”May2016.[Online].Available:http://www.world-nuclear.org/information-library/country-profiles/countries-g-n/kazakhstan.aspx.

6 ChiefScientist,“Science,Technology,EngineeringandMathematics:Australia’sFuture,”AustralianGovernment,2014.[Online].Available: http://www.chiefscientist.gov.au/wp-content/uploads/STEM_AustraliasFuture_Sept2014_Web.pdf.

7 BPPlc,“EnergyOutlook2016,”2016.[Online].Available:www/bp.com/energyoutlook.

8 AustralianCoalResearchLimited,“WhatisACARP?,”2016.[Online].Available:http://www.acarp/com.au.

9 AustralianCoalResearchLimited,“PeopleandProjectsReport2015,”2015.[Online].Available:http://acarp.com.au.

10 OfficeoftheChiefEconomist,“EnergyinAustralia,”2015.[Online].Available:http://www.industry.gov.au/Office-of-the-Chief-Economist/Publications/Documents/energy-in-aust/Energy-in-Australia-2015.pdf.

11 UnitedNationsDepartmentofSocialAffairs,“WorldPopulationProspects:2015,”2015.[Online].Available:https://esa.un.org/unpd/wpp/publications/files/key_findings_WPP_2015.pdf.

12 OECDDevelopmentCentre,“TheEmergingMiddleClassInDevelopingCountries,”January2010.[Online].Available:http://www.oecd.org/dev/44457738.pdf.

13 UnitedNations,“WorldUrbanisationProspects,”2014.[Online].Available:http://esa.un.org/unpd/wup/Publications/Files/WUP2014-Report.pdf.

14 The Economist, “Power to the people,” 2010.

15 K. Schwab, The Fourth Industrial Revolution, World Economic Forum, 2016.

16 WorldEconomicForum,“Thefourthindustrialrevolution:whatitmeans,howtorespond,”2016.[Online].Available:https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/2016.

17 UnitedNationsClimateChangeCouncil,“Paris2016COP21,”2015.[Online].Available:http://www.cop21.gouv.fr/en/.

18 EuropeanCommission,“Renewableenergy:Movingtowardsalowcarboneconomy,”2016.[Online].Available:https://ec.europa.eu/energy/en/topics/renewable-energy.

19 BrookingsInstitute,“Theemergingmiddleclassindevelopingcountries,”June2011.[Online].

20 InternationalEnergyAgency,“IndiaEnergyOutlook2015,”[Online].Available:http://www.worldenergyoutlook.org/weowebsite/2015/IndiaEnergyOutlook_WEO2015.pdf.

21 Mineral Council of Australia, “Asian Demand for Australian Coal,” 2016.

22 AsianDevelopmentBank,“ADBPapersonIndonesia-SummaryofIndonesia’sEnergySectorAssessment,”December2015.[Online].Available: http://www.adb.org/sites/default/files/publication/178039/ino-paper-09-2015.pdf.

23 KPMG,“TheEnergyReportPhillippines,”2013/14.[Online].Available:https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Documents/energy-report-phillippines.pdf.

24 TheWarrenCentre,“TheCopperTechnologyRoadmap2030;Asia’sgrowingappetiteforcopper,”July2016.[Online].Available:https://thewarrencentre.org.au/wp-content/uploads/2016/wc3488-1-the-copper-technology-roadmap-2030.pdf.

25 J.Gifford,“Australia’sbatterypilotonagrandscale,”December2015.[Online].Available:http://www.pv-magazine.com/archive/articles/beitrag/australias-battery-pilot-on-a-grand-scale-_100022649/.

26 TasmanianGovernment,DepartmentofStateGrowth,“TasmanianEnergySecurityTaskforce,”2016.[Online].Available:http://www.stategrowth.tas.gov.au/tasmanian_energy_security_taskforce/consultation_paper.

27 Council of Australian Governments Energy Council, “Independent Review into the reliability and stability of the National Electricity Market,”October2016.[Online].Available:http://coagenergycouncil.gov.au/independent-review-reliability-and-stability-national-electricity-market.

28 UKGovernment,DepartmentofEnergyandClimateChange,“EnergySecurityStrategy,”November2012.[Online].Available:https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/65643/7101-energy-security-strategy.pdf.

29 WorldEnergyCouncil,“WorldEnergyTrilemma,”[Online].Available:https://www.worldenergy.org/work-programme/strategic-insight/assessment-of-energy-climate-change-policy/.

30 WorldEnergyCouncil,“EnergyTrilemaIndex,”[Online].Available:https://trilemma.worldenergy.org.

31 US Energy Information Administration, “US energy imports and exports to come into balance for the first time since 1950s,” 2015. [Online].Available:http://www.eia.gov/todayinenergy/detail.cfm?=id=20812#.

32 TheConversation,“FactcheckQ&A:isAustraliatheworldleaderinhouseholdsolarpower?,”March2016.[Online].Available:https://theconversation.com/factcheck-qanda-is-australia-the-world-leader-in-household-solar-power-56670.


33 CSIRO,“ChangeandchoiceTheFutureGridForum’sanalysisofAustralia’spotentialelectricitypathwaysto2050,”2016.[Online].Available:https://publications.csiro.au/rpr/download?pid=csiro:EP1312486&dsid=DS13.

34 GlobalCCSInstitute,“GorgonCarbonDioxideInjectionProject,”2016.[Online].Available:https://www.globalccsinstitute.com/projects/gorgon-carbon-dioxide-injection-project.

35 Department of Energy, Resources and Tourism, “Australia’s Uranium Industry,” Australian Government, 2012.

36 OfficeoftheChiefEconomist,“ResourcesandEnergyQuarterlySeptember2016,”[Online].Available:http://www.industry.gov.au/Office-of-the-Chief-Economist/Publications/Pages/Resources-and-energy-quarterly.aspx#.

37 Australian Bureau of Statistics, “Mineral and Petroleum Exploration, Australia, cat. no. 8412.0”.

38 TheFraserInstitute,“SurveyofMiningCompanies2015,”2015.[Online].Available:https://www.fraserinstitute.org/sites/default/files/survey-of-mining-companies-2015.pdf.

39 APPEA,“IndustryStatistics,”2016.[Online].Available:http://www.appea.com.au/wp-content/uploads/2016/06/Key-Stats_2016.pdf.

40 AustralianGovernment,“AustralianEnergyResourcesAssessment,Interimreport,”February2017.[Online].Available:http://www.ga.gov.au/aera.

41 MineralsCouncilofAustralia,“Australia’sCoalIndustry:Productionandresources,”[Online].Available:http://www.minerals.org.au/resources/coal/production_and_resources.

42 GeoscienceAustralia,“Australia’sidentifiedmineralresources2016,”2016.[Online].Available:http://www.ga.gov.au/metadata-gateway/metadata/record/100121.

43 QueenslandGovernment,“Totalcoalexportsbytype,”December2016.[Online].Available:https://data.qld.gov.au/dataset/coal-industry-review-statistical-tables/resource/6a4b92fc-b277-40d2-af6c-26ea14cad6f6.

44 NewSouthWalesGovernment,DepartmentofIndustry,ResourcesandEnergy,“CoalinNSW,”2016.[Online].Available:http://www.resourcesandenergy.nsw.gov.au/investors/investment-opportunities/coal/coal#_exports.

45 Department of Natural Resources and Mines, “Queensland coal - mines and advanced projects,” Queensland Government, August 2015.[Online].Available:http://www.dnrm.gov.au.

46 GeoscienceAustralia,“Australia’sidentifiedmineralresources2016,”2016.[Online].Available:http://www.ga.gov.au/metadata-gateway/metadata/record/100121.

47 The Sydney Morning Herald, “Two thirds of world’s coal output is loss-making, Wood Mackensie estimates,” 10 December 2015. [Online].Available:http://www.smh.com/business/mining-and-resources/wood-mackenzie-estimates-that-65pc-of-world-coal-output-is-lossmaking-20151209-gljxj4.html.

48 ABC,“BHPBillitontargetsanother$US600millionfromcoalarmbyJune2017,”21June2016.[Online].Available:http://www.abc.net.au/news/2016-06-21/bhp-billiton-targets-another-$us600m-from-coal-arm-by-mid-2017/7528390.

49 InternationalEnergyAgency,“WorldEnergyOutlook2016,”16November2016.[Online].Available:http://www.worldenergyoutlook.org/publications/weo-2016/.

50 BrowncoalinnovationAustralia,“Take2initiative,”[Online].Available:http://www.bcinnovation.com.au/Assets/1032/1/BCIATake2pledge-webaddress.pdf.

51 InternationalAtomicEnergyAuthority(IAEA),“UnderConstructionReactors,”[Online].Available:https://pris.iaea.org/PRIS/WorldStatistics/UnderConstructionReactorsByCountry.aspx?.

52 DeepExplorationTechnologiesCRC,[Online].

53 GovernmentofSouthAustralia,“NuclearFuelCycleRoyalCommissionReport,”May2016.[Online].Available:http://nuclearrc.sa.gov.au.

54 GovernmentofSouthAustralia,15November2016.[Online].Available:http://www.premier.sa.gov.au/index.php/jay-weatherill-news-releases/1417-government-delivers-response-to-nuclear-fuel-cycle-royal-commission-report.

55 Citizen’sJury2,“SouthAustralia’sCitizens’JuryonNuclearWasteFinalReport,”November2016.[Online].Available:http://assets.yoursay.sa.gov.au/production/2016/11/06/07/20/56/26b5d85c-5e33-48a9-8eea-4c860386024f/final%20jury%20report.pdf.

56 BusinessDictionary,“CompetitivenessDefinition,”[Online].Available:http://www.businessdictionary.com/definition/competitiveness.html.

57 WoodMackenzie,“UpstreamDataTool,”2016.[Online].Available:http://www.woodmac.com/web/woodmac/data-tools.

58 International Gas Union, “World LNG Report,” 2016.

59 InternationalAssociationofOil&GasProducers,“SafetyPerformanceIndicators–2015,”2015.

60 T. Jackson, K. Green and K. Ransbotton, “Global Petroleum Survey 2015,” Fraser Institute, 2015.

61 Accenture,“Readyornot?CreatingaworldleadingoilandgasindustryinAustralia,”2015.[Online].Available:https://www.accenture.com/au-en/_acmedia/accenture/conversion-assets/dotcom/documents/global/pdf/dualpub_14/accenture-australia-LNG-report.pdf.

62 APPEA,“Redtapeshackleseconomicgrowth,”2014.[Online].Available:http://www.appea.com.au/2014/02/red-tape-shackles-economic-growth.

63 UKGovernment,[Online].Available:https://www.gov.uk/government/organisations/oil-and-gas-authority.

64 F.Wallace,“CostReduction,CRINE,andtheUKcontinentalshelf,”TheEnergyBoardroom,2014.[Online].Available:http://www.energyboardroom.com/article/cost-reduction-crine-and-the-uk-continental-shelf.

65 B.Cullinane,“Thesupplychain:thekeytoAustralia’ssuccessinresources,”GasToday,2013.[Online].Available:http://gastoday.com.au/news/the_supply_chain_the_key_to_australias_success_in_resources/84552..

66 WorldBankInstitute,“PublicPerceptionsSurveyonExtractiveIndustries,”2014.[Online].Available:https://riwi.com/wp-content/uploads/2014/01/gei-extractives-summary-findings.pdf.

67 Australian Competition and Consumer Commission (ACCC), “Inquiry into the East Coast gas market,” 2016.

68 DepartmentofIndustry,GeoscienceAustralia,BureauofResourcesandEnergyEconomics,[Online].Available:http://www.industry.gov.au/office-of-the-chief-economist/Publications/Documents/GA21797.pdf.

69 McKinsey&Company,“ExtendingtheLNGboom:ImprovingAustralianLNGproductivityandcompetitiveness,”2013.[Online].Available: http://www.mckinsey.com/global-locations/pacific/australia/en/latest-thinking/extending-the-lng-boom.

70 OxfordInstituteforEnergyStudies,“LNGPlantCostEscalation,”February2014.[Online].Available:https://www.oxfordenergy.org/wpcms/wp-content/uploads/2014/02/NG-23.pdf.

71 McKinsey&Company,“TheroleofnaturalgasinAustralia’senergyfuture,”2016.[Online].Available:http://www.mckinsey.com.

72 WorldEconomicForum,“WhatrolewilleducationplayintheFourthIndustrialRevolution?,”January2016.[Online].Available:https://www.weforum.org/agenda/2016/01/what-role-will-education-play-in-the-fourth-industrial-revolution.

73 International Centre for Complex Project Management, “Complex Project Management: Global Perspectives and The Strategic Agendato2025.,”[Online].Available:www.iccpm.com.

74 EngineersAustralia,“Whitepaper:Masteringcomplexprojects:Principlesforsuccessandreliableperformance,”2014.[Online].Available:https://www.engineersaustralia.org.au/sites/default/files/shado/Divisions/Victoria%20Division/Groups/ACEs/mcp_whitepaperfinal.pdf.

75 Resources Industry Training Council, “Strengthening the foundations of collaboration: Oil and Gas sector collaborative training project,”November2015.[Online].Available:https://s3.amazonaws.com/wix-anyfile/JeTTwF90RYWKstvktFrF_Oil%20and%20Gas%20Collaborative%20Training%20Project%20-%20Executive%20Summary.pdf.

76 APGA,“Aboutthecompetencystandards,”2016.[Online].Available:http://www.apga.org.au/training/pipeline-engineer-training-project/about-the-competency-standards/.

77 Engineers Australia, “Eligibility Criteria and Procedures for Registration in the Specific Area of Practice of Petroleum Engineering,” August 2015.[Online].Available:https://www.engineersaustralia.org.au/sites/default/files/petroleum_guideline_issue_1_rev_0-24aug2015.pdf.

78 World Economic Forum, “Realizing Human Potential in the Fourth Industrial Revolution An Agenda for Leaders to Shape the Future of Education,GenderandWork,”January2017.[Online].Available:https://www.weforum.org/whitepapers/realizing-human-potential-in-the-fourth-industrial-revolution/.

79 UKGovernment,“TheFutureofWorkJobsandSkillsin2030,”February2014.[Online].Available:https://www.gov.uk/government/publications/jobs-and-skills-in-2030.

80 AustralianIndustryandSkillsCommittee,“NationalSchedule,”2016.[Online].Available:https://www.aisc.net.au/content/national-schedule#schedule-view-all.

81 AustralianGovernment,“NationalResearchInfrastructureCapabilityIssuespaper,”2016.[Online].Available:https://docs.education.gov.au/documents/national-research-infrastructure-capability-issues-paper.

82 WorldEconomicForum,“Forgetthestart-upgaragemyth.Weneedgoldentrianglesandsuperclusters,”3November2016.[Online].Available: https://www.weforum.org/agenda/2016/11/the-startup-garage-myth/.

83 Mondaq,2013.[Online].Available:http://www.mondaq.com/australia/x/282052/Mining/Take+or+Pay+contracts+in+the+mining+and+energy+sectors+a+doubleedged+sword.

84 DepartmentofEnvironment&Energy,“NationalMap,”AustralianGovernment,[Online].Available:http://nationalmap.gov.au.

85 CRC:CARE,[Online].Available:http://www.crccare.com.

86 SERDP&ESTCP,[Online].Available:https://www.serdp-estcp.org/News-and-Events/Blog/DNAPL-Source-Zone-Natural-Attenuation.

87 GasIndustrySocial&EnvironmentalResearchAlliance(GISERA),“TheGreatArtesianBasinandcoalseamgas,”2014.[Online].Available: http://www.gisera.org.au/publications/factsheets/csg-gab.pdf.

88 NewSouthWalesGovernment,“NSWGasPlan:Protectingwhatsvaluable,Securingourfuture,”[Online].Available:http://www.resourcesandenergy.nsw.gov.au/__data/assets/pdf_file/0005/534830/NSW-Gas-Plan.pdf.

89 Department of Environment and Energy, “Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act),” Australian Government,[Online].Available:https://www.environment.gov.au/epbc.

90 DepartmentofIndustry,Tourism&Resources,“TailingsManagement:LeadingPracticeSustainableDevelopmentProgramforTheMiningIndustry,”2007.[Online].Available:http://www.industry.gov.au/resource/Documents/LPSDP/LPSDP-TailingsHandbook.pdf.

91 WesternAustralianMarineScienceInstitute,[Online].Available:http://www.wamsi.org.au.

92 AMIRA,“UnlockingAustralia’shiddenmineralpotential:Anindustryroadmap–Stage1,,”[Online].Available:http://www.uncoverminerals.org.au/__data/assets/pdf_file/0018/31590/uncover-flyer.pdf.

93 AustralianTradeandInvestmentCommission,“ForExporters:FreeTradeAgreements,”AustralianGovernment,2016.[Online].Available: http://www.austrade.gov.au/Australian/Export/free-trade-agreements.

94 CO2CRC,[Online].Available:http://www.co2crc.com.au.

95 WorldCoalAssociation,“Thepowerofhighefficiencycoal,”2016.[Online].Available:www.worldcoal.org.

96 National Geosequestration Laboratory, “Delivering innovative research solutions to support Australia’s carbon storage, energy and resourcesindustries.,”[Online].Available:http://ngl.org.au.

97 Coal21,[Online].Available:http://www.minerals.org.au/resources/coal21/about_coal21.

98 International Maritime Organisation, “IMO sets 2020 date for ships to comply with low sulphur fuel oil requirement,” 28 October 2016.[Online].Available:http://www.imo.org/en/MediaCentre/PressBriefings/Pages/MEPC-70-2020sulphur.aspx.

99 DNVGL,“LNGfuelledvessels:Shiplist–Vesselsinoperationandvesselsonorder,”April2016.[Online].Available:www.dnvgl.com/LNGi.

100 UniversityofTechnology,Sydney,[Online].Available:http://www.uts.edu.au/research-and-teaching/our-research/institute-sustainable-futures/our-research/energy-and-climate-1.

101 Australian Renewable Energy Agency, “Evaluation of hybridisation of concentrated solar thermal technology with carbon capture and storageprojectFinalreport:projectresultsandlessonslearnt,”AustralianGovernment,2015.[Online].

102 DecarboniseSA,“TheunfoldingenergycrisisinSouthAustraliawasforeseeable…andforeseen,”2016.[Online].Available:https://decarbonisesa.com/2016/07/15/the-unfolding-energy-crisis-in-south-australia-was-foreseeable-and-foreseen/.

103 StartupWA,“WesternAustralia2015-16StartupEcosystemReport,”[Online].Available:www.startupwa.org.

104 J. Ross, “Measured growth in innovation,” The Australian, p. 30, 2 December 2015.

105 NationalResearchInfrastructureCouncil,[Online].Available:https://www.education.gov.au/national-research-infrastructure-council-nric.

106 Alcotra Innovation project, “Best practices Database for Living Labs: - Overview of the Living Lab approach - Living Lab Best Practice DatabaseSpecification,”[Online].Available:http://www.alcotra-innovation.eu/progetto/doc/Best.pdf.

107 J.C.Mankins,“TechnologyReadinessLevels,”NASA,6April1995.[Online].Available:http://www.hq.nasa.gov/office/codeq/trl/trl.pdf.



108 ARENA,“CommercialReadinessIndexforRenewableEnergySectors,”February2014.[Online].Available:http://arena.gov.au/files/2014/02/Commercial-Readiness-Index.pdf.

109 ARENA,“TechnologyReadinessLevelsforRenewableEnergySectors,”February2014.[Online].Available:http://arena.gov.au/files/2014/02/Technology-Readiness-Levels.pdf.

110 CooperativeResearchCentresAssociation,[Online].Available:http://crca.asn.au.

111 AustralianResearchCouncil,“AustralianResearchCouncil,”[Online].Available:http://www.arc.gov.au.

112 J. D. Bell, “World’s Best Practice in Research Translation, Securing Australia’s Future Expert Working Group 9 (SAF09),” Cooperative ResearchCentresAssociation,2016.[Online].Available:http://crca.asn.au/wp-content/uploads/2016/03/JohnBell.pdf.

113 TheOpenGroup,“OpenProcessAutomationForum,”2017.[Online].Available:http://www.opengroup.org/open-process-automation.

114 Deloitte,“Getoutofyourownway|Unleashingproductivity,”2014.[Online].Available:www.buildingtheluckycountry.com.au.

115 UKOilandGasAuthority,“MaximisingEconomicRecoveryStrategyfortheUK,”2016.[Online].Available:https://www.ogauthority.co.uk/media/3004/a4_mer_uk_strategy_document-3.pdf.

116 IntergovernmentalPanelonClimateChange(IPCC),“2006IPCCguidelinesfornationalgreenhousegasinventories,”2006.[Online].Available: http://www.ipcc-nggip.iges.or.jp/public/2006gl/index.html.

117 S. Day, D. Etheridge, N. Connell and T. Northgate, “Fugitive greenhouse gas emissions from coal seam gas production in Australia,” CSIRO, 2012.

118 T. M. L. Wigley, “Coal to gas: the influence of methane leakage,” Climatic Change, vol. 108, no. 3, pp. 601-608, October 2011.

119 R. A. Alvarez, S. B. Pacala, J. J. Winebrake, W. L. Chameides and S. P. Hamburg, “Greater focus needed on methane leakage from natural gas infrastructure,” Proceedings of the National Academy of Sciences of the United States of America, vol. 109, no. 17, pp. 6435-6440, 2012.

120 CSIRO, “Field Measurements of Fugitive Emissions from Equipment and Well Casings in Australian Coal Seam Gas Production Facilities,”June2014.[Online].Available:http://www.environment.gov.au/climate-change/greenhouse-gas-measurement/publications/csg-fugitive-emissions.

121 Department of Industry, Government and Science, “Industry Innovation and Competitiveness Agenda,” Australian Government, 2014. [Online].Available:https://www.dpmc.gov.au/sites/default/files/publications/industry_innovation_competitiveness_agenda.pdf.

122 K. Loussikian, “Gas crisis fears drive reform,” The Australian, 18 August 2016.

123 BoardofProfessionalEngineersQueensland,“TheRPEQSystem,”[Online].Available:http://www.bpeq.qld.gov.au/BPEQ/Registration/BPEQ/Navigation/Registration/Registration_-_the_RPEQ_system.aspx?hkey=906af6b0-d2d3-43d5-acf1-e64b38fdfe39.

124 MineralCouncilofAustralia,“Opportunityatrisk:Regainingourcompetitiveedgeinmineralsresources,”2012.[Online].Available:http://www.minerals.org.au/file_upload/files/presentations/mca_opportunity_at_risk_FINAL.pdf.

125 TheConversation,2015.[Online].Available:https://theconversation.com/the-future-of-coal-seam-gas-after-the-nsw-election-38904.

126 ABCRural,2016.[Online].Available:http://www.abc.net.au/news/2016-03-09/fury-over-possible-fracking-ban-partner-could-take-legal-action/7233738.

127 OfficeofthePremierofVictoria,30August2016.[Online].Available:http://www.premier.vic.gov.au/victoria-bans-fracking-to-protect-farmers/.

128 TheAustralian,2012.[Online].Available:http://www.theaustralian.com.au/national-affairs/state-politics/no-port-in-a-storm-for-wa-yellowcake/story-e6frgczx-122636624737.

129 IMF,“WorldEconomicOutlook,“TooSlowfortoolong”,”2016.[Online].Available:http://www.imf.org/external/pubs/ft/weo/2016/01/.

130 AustralianBureauofStatistics,“8412.0-MineralandPetroleumExploration,”March2016.[Online].Available:http://www.abs.gov.au/ausstats/[email protected]/mf/8412.0.

131 M. Chambers, The Australian, p. 20, 3 March 2016.

132 Department of Resources, Energy and Tourism, 2011.

133 WorldNuclearNews,“India-Australiaagreementcomplete,”November2015.[Online].Available:http://www.world-nuclear-news.org/NP-India-Australia-agreement-complete-1611157.html.

134 CornellUniversity,INSEAD,andWIPO,“TheGlobalInnovationIndex2015:EffectiveInnovationPoliciesforDevelopment,”[Online].Available: http://www.wipo.int/edocs/pubdocs/en/wipo_gii_2015.pdf.

135 OfficeoftheChiefEconomist,“AustralianEnergyStatistics,”October2016.[Online].Available:http://www.industry.gov.au/Office-of-the-Chief-Economist/Publications/Pages/Australian-energy-statistics.aspx#.

136 DepartmentofIndustry,InnovationandScience,“ExploringfortheFutureProgramme,”AustralianGovernment,May2016.[Online].Available: http://www.industry.gov.au/resource/Programs/Pages/Exploring-for-the-Future.aspx.

137 IEA, “World Energy Outlook 2015,” International Energy Authority, 2015.

138 Unearthed,“Acceleratinginnovationintheresourcessector.,”[Online].Available:http://unearthed.solutions.

139 NERA,“Oil&GasIndustryCompetitivenessAssessment,”2016.[Online].Available:http://www.nera.org.au/Chapter?Action=View&Chapter_id=9.

140 RISKGATE,“AboutRISKGATE,”[Online].Available:http://riskgate.org.

141 ToowoombaandSuratBusinessEnterprise,“TSBE-Linkingbusinesswithopportunitysince2012,”[Online].Available:http://www.tsbe.com.au/about/overview.html.

142 Office of the Chief Economist, “Resources and Energy Quarterly March 2016”.

143 CouncilofAustralianGovernments(COAG),[Online].Available:https://www.coagenergycouncil.gov.au.

144 IEA,“Medium-TermCoalMarketReport2016,”December2016.[Online].Available:http://www.iea.org/bookshop/735-Medium-Term_Coal_Market_Report_2016.

145 Energy Information Association, International Energy Outlook 2013 with projectsing to 2040, Energy Information Association.

www.nera.org.au

Registered office:Australian Resources Research Centre Level 3, 26 Dick Perry Avenue Kensington WA 6151

ABN 24 609 540 285

T: (08) 6555 8040 E: [email protected]: www.nera.org.au

@NERAnetwork NERA – National Energy Resources Australia

NERA wishes to thank all of the businesses, organisations and individuals who have contributed their time, knowledge, experience and foresight to the preparation of this plan through the consultation workshops, individual meetings, discussions and provision of input material.

Sector Competitiveness Plan

Documents

Transcript of Sector Competitiveness Plan