Generator of wealth

I can’t get anyone to tell me how many billions of dollars change hands in Australia each year because of the upstream petroleum industry.

I had the answer off pat for electricity supply when I ran the Electricity Supply Association (ESAA) through the 1990s; it averaged six billion dollars a year in purchases of goods and services, not taking in to account employment remuneration. And the utilities in the ‘Nineties by and large still didn’t pay much in corporate taxes.

The answer for the oil and gas sector, I think, must be rather more than a score of billion dollars annually in goods and services purchases plus the rivers of gold that flow to government coffers through corporate taxes and royalties — and which will rise by at least a third over the rest of this decade because of LNG development.

It’s a massive contribution towards Australia Inc — and it is going to be reflected in mid-month at the 55th annual conference of the Australian Petroleum Production & Exploration Association in Melbourne’s cavernous Conference & Exhibition Centre where, for three days, some 2,500 stakeholders in the business will be milling around 12,000 square metres of exhibition space when they are not crowded in to large and small meeting rooms listening to more than 100 presentations about the state and the fate of the oil and gas sector here and worldwide.

I have a very special interest in this conference because I ran it from 1981 to 1991 when I was executive director of what is now APPEA (and then had only one “P” in its name, “production” being the modern addition reflecting the explosion in activity of the business over the past 20 years) and I am an honorary life member of the organisation.

For me. the annual exhibition that goes with the conference also has special meaning because I launched it in 1991 (in the teeth of negativity of my own board) with 41 stands and this month it will have 200 exhibitors covering the panoply of services needed by explorers and producers.

In recent years, the exhibition has been a magnet for federal ministers like Ian Macfarlane, Martin Ferguson and Gary Gray when they come to speak at the conference because they understand what it represents in terms of the national benefit; I just wish I could march the other 860 MPs from around the country through the exhibition hall because so relatively few of them share this insight.

One of my hobby-horses is that industry generally and the resources sector specifically could do still more to bring home to the Australian community its role as a generator of national wealth.

Back in the 1970s, when I was for a time public relations manager of Associated Pulp & Paper Mills, I hit on this topic as important in talking to the Tasmanian community where the company was a major employer and was also engaged in hand-to-hand combat with Bob Brown, Christine Milne and the other forebears of what is now the Australian Greens.

In my view, the debate then and now requires a proper balance in considering the benefits of industry to the community, including Australian investors (among them millions of people with superannuation interests), and the need to minimise the inevitable environmental footprint of resource-related activity.

For the 10 per cent or so of Australians, mostly living within four kilometres of a capital city GPO, who call the Greens political home, this still seems to be too big an ask, as witness their endless campaign against fossil fuels even when it is perfectly obvious, as in the case of the plastics and chemicals industry, which in turn is a key supplier to another 109 national business sectors, that they are an essential part of our economic well-being.

Apart from its value to the oil and gas industry stakeholders, who have self-interested reasons for coming together at the annual APPEA event, the conference is the touchstone of the extra-ordinarily complex melange of science, engineering, commercial, legal issues and sociology combined with the animal spirits of investment that go to make up this remarkable business.

And it is always these days a giant seminar on geo-politics and modern global trade, as witness one of the key plenary sessions where an Oxford University professor (Jonathan Stern) will lecture on the state of play in the world’s LNG markets before moderating a panel discussion featuring a leading American industry analyst (Deloitte’s John England) and two senior figures in the domestic petroleum sector, heading businesses that are prominent players in Asia-Pacific gas trade (Woodside’s Peter Coleman and Shell’s Andrew Smith).

In the same vein, the conference will also feature a plenary session on the ongoing role of science and innovation in the energy business featuring an American astronaut and petroleum engineer (Jim Reilly), BP’s Asia Pacific head of exploration (Bryan Ritchie), the local head of China’s National Offshore Oil Corporation (Yongfeng Lu) and, providing a paper I think of special importance, one of the senior executives (Dylan Mair) of US-based consultants IHS (advisers to companies and governments around the world and whose leadership includes Daniel Yergin) speaking about how Australia rates as a destination for oil and gas exploration investment.

An indication of the business news value of the event is that some four to five dozen journalists from Australia and overseas cram the conference media room, but the sad truth is that little of what they communicate to readers and listeners will impact on the critical target — the millions of ordinary Australians whose voting volatility is now the battleground of combat politics and who really don’t spend their time reading the “Australian Financial Review” or the business pages of mass market newspapers but who increasingly (as voting patterns show) are susceptible to the propaganda of climate doom-and-gloom merchants, anti-capitalist activists and purveyors of myths about the impacts of some activities (e.g. hydraulic fracturing).

As a mirror of the Australian petroleum industry, the conference obviously hits the spot, its attendance particularly reflecting the quality of the event as a learning and networking opportunity for industry insiders — but the challenge for the sector to make its role as a major generator of wealth really appreciated across the community still remains in front of it and it is growing.

We live in a very self-centred society — “What’s in it for me” manifestly dominates the thinking of the large middle of our community — and the resources and energy sectors’ battle to be heard in a cacophonous public debate where the mass media, itself increasingly dominated by left-of-centre thinking, find scare-mongering more attractive than serious analysis and where mainstream political parties are in permanent populist duck-and-weave mode to cope with the media coverage.

The annual APPEA conference produces a tonne of information — ferrying back home what I collect at the exhibition is a demanding chore — but the industry’s critical challenge remains the need to deliver a tonne of influence in a society where what was once a joke (“I am the people’s leader, I must follow them,” said PM Jim Hacker in “Yes Prime Minister”) is now a truism of modern politics.

A parting thought: contrast the rolling maul that is the debate over onshore gas activity in New South Wales and Victoria with Texas — which has an agricultural activity worth $US80 billion a year to the state and a quarter of a million farms but also accommodates 218,000 onshore petroleum wells and employs 370,000 people (out of a workforce of 8.4 million) directly and indirectly in the oil and gas sector. Texas accounts for 30 per cent of US gas production. ¬†Rural communities and a vibrant agricultural sector can co-exist with petroleum activity, it seems.

 

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