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1224500 Oil & gas productivity

Octavio Gomez-Haro

Lisa Chandler

on 18 June 2014

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Transcript of 1224500 Oil & gas productivity

Our primary goal is to understand whether productivity and innovation at an industry level is an issue and why? Our research is focused on productivity and innovation at the firm level across the Australian Oil and Gas Industry.

This is a 3 year APPEA endorsed study.
Our preliminary findings indicate that unless there is a significant shift in performance in three key areas this once in a lifetime opportunity is at risk.
Will Australia become a supplier of choice in the “Golden Age of Gas”...
Join us at the UQ-EY Oil & Gas Innovation and Productivity Roundtable Series to continue developing the industry action plan
Unlocking the potential
Preliminary Findings : Australian Oil and Gas Industry Productivity and Innovation Study
...however, growth could be at risk given the low levels of productivity measurement
Closing remarks
The high $AUD and labour productivity are driving incremental innovation, while R&D activity is the key driver for novel innovation...
Our research indicates that Productivity is an important driver of growth
More than 2/3 of respondents are embracing collaboration...
Organisations that embrace productivity are delivering results
However, innovation is not core to the industry
Could this fragmented innovation system jeopardise Australia’s ability to unlock the "Golden age of gas?"
Customer needs and the high cost environment are the top drivers of collaboration...
A radical shift in productivity practices
is critical for long term competitive advantage
Taking an integrated approach
to innovation must become a core focus for the industry
beyond traditional boundaries is critical for inclusive growth
A UQ-EY Study, endorsed by APPEA
Case Study : Senex Energy
Background and Key Challenges
The cost of drilling in an unconventional setting is significantly more expensive (5x) than conventional oil and gas drilling.

Lessons learnt from conventional oil drilling were being applied to unconventional drilling.

Management were faced with a key challenge question : How do we reduce drilling costs and improve drilling performance?
The Solution
Determine the key drivers of drilling cost and operational performance.

Identify the key measures of performance and reporting requirements.

Include field team members in the design/planning of a drilling program not just the implementation.

Instil a “One Team” mindset were everyone is expected to look for opportunities to innovate.

Empower drilling staff by providing real time operational reports.
An improvement in the speed and quality of decision making.

A reduction in operational costs.

Motivated and empowered operations teams.
The facts show that:
80% of respondents are innovating
On average 31% report incremental Innovation
On average 46% report novel innovation
The facts show that:
Only 23% report novel and incremental innovation
Service firms are better novel innovators than operators
Innovation is strongly linked to productivity increases
Innovation in a constrained environment works
Case Study : Chevron
Background and Key Challenges
An LNG and Domestic Gas plant is being built on Barrow Island, a Class A Nature Reserve.

Chevron is complying with strict environmental obligations – including a site footprint limited to 300 hectares of previously uncleared land.

Project was faced with a key challenge: how could it economically develop and operate Barrow Island under these conditions?
The Solution
The 300 hectare restriction drove the need for very high modularisation of the LNG plant, with modules and racks fabricated throughout Asia.

The environmental obligations drove the creation of a dedicated Quarantine Management System. It is being used to manage 13 material risk pathways and to protect indigenous species.
Key Results/Outcomes
An innovative and award winning environmental screening and quarantine process that is scalable and can be replicated globally.

152,000 passengers, and 650,000 tonnes of freight, so far with zero introductions of non-indigenous species to the Island or its surrounding waters.

Potential future application of QMS in industries such as agriculture, new mining developments and other oil and gas ventures.
Beyond traditional boundaries is critical for inclusive growth
The facts show that:
Collaboration is a key enabler of innovation
“Collaborators” have indicated that current mechanisms for collaboration are preventing firms from meeting their business objectives
What's driving collaboration...
Modifying the way in which collaborative arrangements are designed is crucial
The facts show that:
41% of collaborators cite an inability to meet incentive targets
38% cite inequitable risk sharing on contracts
Unlike operators, service firms are most impacted by current risk sharing practices
Improving the way in which we design and execute partnerships will drive higher levels of innovation and hence productivity
Multi-stakeholder collaboration does yield positive results
Case Study : Origin Energy
Background and Key Challenges
Landowners communicated importance of retaining control over their land and privacy, and were keen to be more involved in day-to-day activities in the industry.

Origin faced the key challenge : How could Origin and landowners collaborate to address these issues in a safe, productive and mutually beneficial manner?
Source : http://origintogether.com/in-my-community/community-news/
Origin piloted the “Working Together Program” to give landowners involvement in the industry, enhanced control of their land and less intrusion.

Collaboration included working with AgForce, QLD Farmers Federation and the QLD Government to develop and implement a sustainable program.

Origin also trained and involved the participants to deliver services on a day to day basis
Landowners benefit by receiving recognised training (with recognition of prior learnings), up-skilling and additional income from Origin with long-term partnership arrangement.

Greater levels of empowerment and buy-in for landowners.

Origin hopes to benefit from increased productivity and cost savings in the long term and input from landowners who are passionate about their land
Working Together Program: The first group of participants that completed their training and induction
The Solution
Key Results/Outcomes
Australia is well positioned to become a supplier of choice in the "Golden Age of Gas"
Meeting the Productivity Challenge
Increasing productivity will drive growth & revenue

Investing in technical staff with drive growth

Measuring is necessary to drive growth
Meeting the Innovation Challenge
Novel innovation is borne out of investment in R&D

Immediate constraints such as high cost of the Australian Dollar, labour productivity challenges, and inequitable risk sharing on contracts, drive innovation that is incremental in nature

There is an opportunity in the market for innovative supply & distribution systems
Meeting the Collaboration Challenge
Further collaboration is key to drive increased productivity & growth

Smart Sourcing and Procurement and Shared infrastructure & logistics models could yield major upside

New collaborative models are necessary to promote greater levels of collaboration
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