For me, as the 2015 APPEA conference draws to a close in Melbourne, the major challenge facing the upstream petroleum industry and its lobbyists is encapsulated in a final day talk delivered by Roy Krzywosinkski, managing director of Chevron Australia.
His presentation is a strong focus on the achievements of the LNG industry over the past decade and not least, of course, the contributions being being made by his company and its partners through the Gorgon and Wheatstone developments on the west coast plus yet another pointer to the still-larger opportunities of further future development.
Our newspapers are certainly not ignoring the talk. Fed copies in advance, Wednesday morning’s papers have all reported some of the key notes of Krzywosinkski’s themes — on the business pages. This does not matter so much in the West, where the community is quite well tuned to the LNG doings, given its importance to their State, but it flies way over the large, and politically important, residents of the eastern capital cities.
Here is the industry’s dilemma: while more nonsense than enough is talked about “social licence” in the public debate (and not least by politicians dodging and weaving around decisions in States like Victoria and New South Wales), the connection between LNG (and other large resource developments) and the (pretty good) way most of us live is lost to view for millions of Australians — and not least those who live within four kilometres of capital city GPOs on the east coast.
Many of these are people for whom the “You can’t eat gas” car bumper sticker is meaningful when it is, in fact, a fine example of energy illiteracy. (One of my acquaintances suggested at the APPEA conference this morning that we should produce another one that reads “Are you enjoying your raw hamburger?”)
The communications challenge for the industry is very large and it vies with lobbying needs to deal with tax issues and elimination of red tape and so forth, important to the bottom line of Chevron and other APPEA members, for attention (time) and expenditure.
I’m biased, of course, because I have devoted a large part of my working life for the past 35 years to the thesis that, if you can’t convince the broad community of the value of your business activities, you’re in political trouble.
In economic terms, the LNG story is compelling.
As Krzywosinski told the APPEA conference audience, there has never before been growth of the magnitude of the Australian LNG effort in any energy industry anywhere. “The scale,” he said, “is simply enormous.”
The LNG developments, and other upstream petroleum industry activities here over a half century, he added, have unlocked economic benefits, jobs and energy security for two generations of Australians.
Part of his story is that, using recent independent analysis commissioned by Chevron, the economic benefits flowing from its current project activities may have been under-estimated. Across the life of Gorgon and Wheatstone, he said, the contribution to national GDP is now seen as being about a half trillion dollars, equivalent to the size of the New South Wales economy.
More than 80 per cent of the projects’ spending will go to Australian suppliers, delivering tens of millions of dollars to local businesses each month for many years, with a still larger multiplier effect cross the economy — the suppliers have suppliers, too.
A key part of Krzywosinski’s talk is that a second wave of LNG developments, carrying another wave of economic benefits, is “at serious risk of not happening — at least in the foreseeable future.”
The reasons, as he explained, are many and complex but a key factor is this country’s declining competitiveness in an international environment where there is rising competition from other possible LNG developments.”
Until quite recently the LNG story carried little domestic traction with Joe (and Jo) Public, but the impact of the Gladstone developments on the domestic scene has changed this — and not in a way that works to the advantage of the export gas producers. A considerable amount of APPEA effort in recent years, still continuing, has been devoted to seeing off the proponents of gas reservation.
The situation is made worse by the gas sector also being under attack from the anti-fossil fuel brigade, who to date have been quite successful in NSW and Victoria in worrying politicians in to positions that are economically nuts but salable to at least some voters (and not least those in marginal seats).
Krzywosinski’s argument is that it is in the national interest to pursue a series of steps to maximize the benefits from gas production.
He points to the need for an attractive investment climate, a regulatory system that encourages industry growth, a much-improved industrial relations system, a globally-competitive taxation system and government support for research and development that will help facilitate projects.
A critical trick for the petroleum industry is creating a community (ie voter) environment that says sees the advantage to them in legislators going down these paths.
Krzywosinski commented in his talk that the federal government understands the issues and is “doing what it can in a tough political environment.”
Some of the steps, such as a more collective mindset between industry players to deliver shared benefits that can drive down costs, are down the companies to pursue.
The broader policy/regulatory environment requires bipartisan government action and, in turn, the community getting the message that this works to its benefit in a big way.
Krzywosinski said “If we look decades down the track, I see the legacy of the gas boom as a sustainable, world-class industry with benefits shared across the nation.”
Selling this message to the community-at-large is, shall we say, a work in progress.