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Mining & Resources

Clough director calls for oil and gas stability

2 Oct 2013, by Informa Insights

Oil and gas fundamentalsAustralia needs more stability in its oil and gas sector under the new government, according to an industry expert.

Kevin Gallagher, managing director of oil and gas contractor Clough, was quoted by The Australian as saying that he hoped prime minister Tony Abbott would bring much-needed confidence to an industry that has been plagued with uncertainty.

“I think one of the things that epitomised the last three or four years in Australia was the uncertainty and the continuous threat or perception of changing legislation and fiscal instability,” he explained.

“In order for Australia to improve its competitiveness on a global basis, and improve the prospects of our organisations to compete internationally, I think we need a period of stability now, fiscal stability, that can encourage investment back to Australia.”

Mr Gallagher was speaking at The Australian’s Path to Prosperity series in Perth last week, as he took part in a panel discussion on the oil and gas sector.

The news may encourage more organisations to pursue oil and gas training, with stability in the industry suggesting investment in human resources could pay dividends.

Oil and gas crossroads

Executives attending the panel agreed that oil and gas is at a crossroads, as many large-scale projects hang in the balance on whether they will get approved or not.

Not only this, delegates claimed the sector is experiencing a period of over-regulation and high costs, which could jeopardise tens of billions of dollars of investment.

Angus Jaffray of Boston Consulting Group said political uncertainty is what has been hampering oil and gas businesses over recent years.

“The big thing about energy is energy projects massively outlive election cycles and so an energy project from discovery through to board approval and ‘press the button’ to go might be, even if it’s fast, three to five years,” he stated.

“And then to build it might be another three to five years.

According to Mr Jaffray, these long project lifecycles are why the word stability often crops up in the oil and gas sector.

The Australian Petroleum Production and Exploration Association recently claimed that $150 billion worth of gas projects stalled in 2012.

Confidence for the future

Despite these problems, executives at the Path to Prosperity event in Perth also showed confidence that investment may be on an upward trajectory.

John Anderson, a senior executive at Santos, claimed the federal election result provided a certainty that was a “good start” in boosting optimism across the oil and gas industry.

“Having a clear majority in place and now having that certainty through the next three years and potentially beyond, I think, is just a wonderful platform,” he added.

Mr Anderson, who is head of Santos’ West Australian and Northern Territory operations, said the specific benefits of having more reliable regulations – and potentially less regulations – are a positive.

David Leslie, general manager of GE Oil and Gas Australia, echoed these sentiments and argued that it is the government’s role to help the industry complete projects.

“The proponents for these projects kind of decide the economics around them moving forward,” he stated.

“What the government has got to be doing is helping them with the process to get them moving forward.”

Why Australia?

Several of the delegates highlighted that Australia was an excellent location for foreign oil and gas investment, despite the high costs of setting up.

Mr Jaffray said the country has an abundance of resources, a skilled labour force and proximity to important export markets.

This latter point was picked up by Mr Anderson, who argued that Asian demand for LNG would skyrocket in the coming decades, with Australia well positioned to take advantage.

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