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A focus on execution excellence: Pursuing high performance in downstream energy

Amid declining demand, carbon regulations, pricing pressures and overcapacity, how can energy downstream companies increase margins and cash flow?

Overview

Greater efficiency driven by execution excellence is emerging as the new strategy to respond to these multiple pressures. In this report, Accenture discusses how downstream energy companies can achieve major gains by pursuing excellence throughout the value chain.

Greater efficiency driven by execution excellence is emerging as the new strategy to respond to these multiple pressures. In this report, Accenture discusses how downstream energy companies can achieve major gains by pursuing excellence throughout the value chain.

Key Findings
Execution excellence is critical for capturing value by improving overall effectiveness and asset management in the context of downstream energy transformation. Improved execution excellence generally results in:

  • Reduction of losses related to planned/unplanned downtime and suboptimization of assets

  • Increased efficiency and effectiveness in maintenance, production and workforce utilization

  • Reduced costs of materials for maintenance and operations

  • Increased capital efficiency

Recommendations
Downstream energy companies can achieve major gains by pursuing excellence throughout the value chain through four levers:

  • In sales, supply and trading, by providing real-time data from an improved technology backbone to support commercial optimization.

  • In plant operations, by addressing execution effectiveness from both the organizational and functional perspectives to deliver benefits from increased asset and labor utilization, particularly for complex turnarounds.

  • In sourcing and procurement, by streamlining and standardizing processes and increasing supplier collaboration to increase procurement return on investment to par with global benchmarks.

  • Through low-cost back-office operations, by developing networks of global business service centers, with support functions in pursuit of operational excellence and performance optimization.

Authors
Fay Shong
Managing Director – Energy

Lee J. Laviolette
Managing Director – Accenture Plant and Commercial Services

Sourav Niyogi
Executive - Procurement and Supply Chain



Authors

Fay Shong
Managing Director – Energy

Lee J. Laviolette
Managing Director – Accenture Plant and Commercial Services

Sourav Niyogi
Executive - Procurement and Supply Chain

A Sustainable Growth Strategy for Australian Gas
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.

Background
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.

Analysis
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).

Recommendations
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.

Authors
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.

Accenture contributors

Gertjan Leideman
Managing Director – Accenture Strategy, Australia & New Zealand

Jan-Willem Jannink
Managing Director – Accenture Resources, Australia & New Zealand

Simon Vardy
Senior Manager – Accenture Resources, Australia & New Zealand