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How will Australia ensure that its rapidly expanding LNG sector grows sustainably and benefits the whole economy in the years to come? With no time to waste, the question becomes, what is needed to galvanise stakeholders to the dangers of conducting yet more reviews and relying on a naturally-rich resource base to take care of itself while real action is avoided?
The stakes are high: without intervention, Australia will lose out to international competitors and compromise not just new major LNG developments but the development of an efficient, secure and sustainable domestic energy sector, which impacts the entire economy.
At Accenture, we believe long-term, sustainable resource development of LNG is a key priority for Australia. In our report Energy critical: A sustainable growth strategy for Australian gas, created in partnership with The Australian Financial Review, Accenture recommends five interventions needed for Australia to make decisive and comprehensive progress in streamlining and improving LNG development.
Visit the Future of Australia Industry Trends microsite to learn more about trends shaping the Australian gas industry landscape.
An impending increase in LNG production means that by 2020, Australia will become one of the two largest gas producers in the world. The facts are clear – rapid growth is already underway and a series of major projects will reach full production in the next few years.
Recent analysis reveals Australia’s status as a producer is not reflected in other key areas of high performing energy sectors globally. Australia was ranked 26th in the 2014 Global Energy Architecture Performance Index, published by the World Economic Forum (WEF) and Accenture, in delivering an effective and balanced energy system.
The entire Australian energy sector – including mining, oil and gas, and utilities - now faces a looming set of macro and micro opportunities and challenges. There has already been a marked decline of investment in listed energy entities in recent years. Lengthy and uncertain processes for capital project approvals have caused significant delays of capital-related investments.
The importance of getting LNG right – particularly given its impact right across Australia’s economy - is well understood in the wider business community. In February 2014, the Financial Review Business Leaders Panel (FRBLP) was surveyed and asked to focus on energy issues for Australia and particularly the forecast future gas boom.
Survey respondents identified the following as the most pressing issues for the Australian gas sector to resolve:
Reducing the number of approval requirements for capital investments
Long-term planning by agreeing on locations or corridors for future infrastructure
Increases in the price of gas
A shortage of gas in some states
The need to develop a central energy policy body to centrally manage issues and opportunities
Costs in Australia, including wages, which were cited as hampering productivity and competitiveness
Green tape from environmental regulation (along with red tape).
At Accenture we think there is a clear imperative to take immediate and active steps in a new direction. This point of view is supported by the analysis and research in the business community we have conducted with the Australian Financial Review. Stakeholders in the sector no longer face a question of whether change is needed, but how and when this fundamental transformation must happen.
In our report, we recommend the following interventions:
Opening the door to investment: Tackling some core barriers identified by industry stakeholders will help bolster Australia’s attractiveness as an investment arena as well as improve productivity
Collaborating across the board: Increasing co-operation between government, industry and individual project owners is a key priority to reduce risk and increase efficiency – and boost productivity
Developing a national Australian energy body: The creation of a central policy body would be in keeping with the idea that there is a need to help ensure that resources wealth is used wisely and sustainably now and in the future, regardless of the political cycle
Encouraging greenfield development: There is increasing demand to develop smart, interconnected infrastructure in the sector with extensive upside to come from a more coordinated approach, particularly for greenfield development, according to Accenture’s analysis. These corridors are crucial in a geographically dispersed market such as Australia
Powering up research and development: The boosting of government support for research development and demonstration will stimulate the building of a portfolio of new energy technologies, particularly for LNG production.
This research is released in partnership with Accenture Strategy and The Financial Review Group, and is the first in a series of reports examining future trends for key industries in Australia.
The 2014 survey panel comprised 103 business executives from organisations across Australia. Respondents were asked for their feedback on challenges and opportunities in the Australian gas sector and recommendations for how to resolve issues faced by the energy industry.
Gertjan LeidemanManaging Director – Accenture Strategy, Australia & New Zealand
Jan-Willem JanninkManaging Director – Accenture Resources, Australia & New Zealand
Simon VardySenior Manager – Accenture Resources, Australia & New Zealand
April 3, 2014
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