The oil and gas industry in Australia has emerged from a period of major structural, political and technological changes that have accompanied unprecedented expansion in the country. Entering the new decade, the industry is set to embrace these changes as energy demand, emerging markets, urbanisation and improving living standards gather momentum.
Characterised by Deloitte partner and national oil and gas leader Bernadette Cullinane as a fascinating time for the oil and gas industry, she anticipates that a number of factors will influence company strategies as they face the future.
Cullinane, who has worked across the oil and gas value chain in multiple countries, believes workforce management, technological change and sustainable energy will be pivotal elements of future operating models.
As an advisor helping companies reduce cost, improve business performance, grow and be globally competitive, Cullinane highlights how companies can navigate these challenges.
The role of the workforce
In an industry where talent is in demand and the rise of millennials is reshaping the workforce, it is important that companies have a clear message and identity what will enable them to be successful in competing for the best talent.
Cullinane believes millennials, who are rapidly increasing in numbers in the workforce, are questioning the role of the oil and gas sector more critically than previous generations.
“This generation is certainly having an influence on the future direction of the industry,” Cullinane told Oil & Gas Today.
“There are already skill shortages in certain areas in the industry, and the future depends on getting the right mix of skills. Companies will increasingly compete to attract the next generation of top talent.”
With the future of work being different to that in the past, Cullinane said companies need to create an “employee value proposition that is really clear and crisp and one that ties to compelling business models”.
“Companies that are not aware of these big changes and are not rethinking their business models now run the risk of becoming left behind,” she said.
As the industry shifts to more collaborative models with partnership-focussed initiatives, companies are critically evaluating the skills and assets they need for the future and having the right talent in the organisation is key.
Cullinane’s observations reflect the thoughts of Woodside chief executive officer and managing director Peter Coleman, who believes all jobs are going to change.
Woodside will need employees who are ready to learn and willing to continue learning, according to Coleman.
“This transformation has big implications for how companies hire. We need education and training systems that support this lifelong learning,” Coleman said during a November 2019 speech.
“It’s a decision that is paying off as we head into a growth phase and see opportunities to harness these technologies to improve project execution, deliver savings on maintenance costs and design what we call intelligent plant.”
The benefits of embracing technology
The oil and gas industry is no stranger to the innovation that technology can provide.
Increasingly driven by digital technology, a number of evolutions within the oil and gas sector have been off the back of breakthrough initiatives.
Cullinane said the oil and gas industry had the right DNA and mindset to take bold risks, positioning it well for a digital future.
“What other industry explores, develops and operates big, complex projects in remote and risky places around the world?” Cullinane asked.
“The oil and gas industry hasn’t just been doing it for the past decades, but for more than 150 years.
“This bold risk-taking approach is a characteristic of the industry, solving problems through engineering and technology excellence to create positive outcomes for stakeholders. I believe the oil and gas industry of the future will build on the success of the past.”
Australia finished the last decade reflecting on an extraordinary construction phase in the liquefied natural gas (LNG) sector that culminated in it becoming the leading exporter of the commodity in the world.
A major trend moving forward will be how the industry transitions towards sustainable energy synonymous with the digital and technology transformation, according to Cullinane.
“These new technologies will help companies make a step change in operational excellence, productivity and will improve bottom-line results,” Cullinane said.
Woodside represents a leading example of how technology is being prioritised at an oil and gas organisation to ensure a sustainable future.
Coleman noted that technology had changed the way that Woodside’s employees worked and lived through a number of emerging initiatives.
“The resources sector, particularly in Western Australia, has led the adoption of technologies like data analytics, artificial intelligence and automation, recognising the benefits for increased efficiency and improved safety,” Coleman said.
“It’s time for Australia to get serious about artificial intelligence.”
Coleman urged the industry to collaborate with technology firms to establish operations and employ and develop local talent.
Woodside has backed a number of local tech start-ups with the potential to transform the industry, from the way ocean conditions are surveyed to enhancing cybersecurity for operation systems.
“We have a fantastic robotics laboratory and data science team, but it is really since we have taken the technology out of the lab that we are seeing tangible value creation,” Coleman explained.
“That has been driven by integration of our technology and digital teams…we are working for a future where technology helps us solve real-world challenges.”
Greener energy attracts investment
Social expectations are pushing oil and gas companies and the industry towards a greener future.
The Department of the Environment and Energy’s 2019 Australia’s emissions projections estimated that Australia would exceed its 2020 target by 238 million tonnes of carbon dioxide equivalent (Mt CO2-e), an improvement of 43 Mt on 2018.
Australia has a target of reducing emissions to 5 per cent below 2000 levels by 2020, with this year expected to be 534 Mt CO2-e.
The report also noted that electricity emissions from LNG facilities are set to decline slightly over the next five years as the Darwin LNG facility goes offline for maintenance.
From 2025, emissions will increase again as production increases because of the return of the Darwin LNG facility, and the addition of another train at Pluto in Western Australia.
Cullinane is confident that oil and gas companies will see the benefits of investing in greener energy.
To achieve this, Cullinane believes companies will have to shift towards a lower carbon energy mix while extracting value from new technologies.
She said now is the time to “really leverage these ideas and not just talk about them”.
“There are some companies that are ahead in terms of what they are doing and what investments they have in greener and cleaner energy,” Cullinane said.
Woodside is aspiring to become carbon neutral by 2025 by offsetting emissions from its Pluto development and has signed an agreement with Greening Australia.
The company plans to offset equity reservoir CO2 across its entire portfolio from next year.
However, Cullinane stated that on average across the industry only “1.3 per cent of capital expenditure in 2018 went into low carbon projects”.
“Companies need to invest in greener energy to safeguard their assets and revenue base. Their social license is being increasingly scrutinised by investors and by customers,” Cullinane said.
“With a big focus on ESG (environmental, social and governance), companies must ensure they are attractive to investors, customers and the talent they require for their organisations.”
Coleman reinforced Woodside’s intention to work towards a lower carbon future and why it would be important for the sustainability of the company.
“We are working for a future where Australia draws value from its rich and diverse resource endowment and charts an energy path that is sustainable in both an environmental and an economic sense,” Coleman said.