A new spring for the APPEA

The Australian Petroleum Production and Exploration Association’s new Chief Executive Dr Malcolm Roberts.

The Australian Petroleum Production and Exploration Association’s new Chief Executive Dr Malcolm Roberts.

Despite the economic rollercoaster the gas industry has been on since late 2014, the Australian Petroleum Production and Exploration Association’s new Chief Executive Dr Malcolm Roberts believes it’s an exciting time to take the reins as the industry’s new chief.

Having served as Chairman of the Queensland Competition Authority (QCA) from 2013–16, along with stints at the Energy Networks Association, National Generators’ Forum and Australian National Retailers Association, Dr Roberts has accrued some valuable experience in industry associations.

Dr Roberts began his career in Canberra in the Department of the Prime Minister and Cabinet, and also served as an adviser and then Chief of Staff to current Federal Minister for Industry and Science Ian
Macfarlane in 2001–04 and 2006–07, providing him with a deep understanding of government.

Stepping into the role of APPEA Chief Executive as a number of significant gas projects transition to the operational phase, and amid significant international turmoil with a bottoming oil price, Dr Roberts says Australia has a unique opportunity to compete with the world.

Gas Today Senior Journalist Tim Fitzpatrick spoke with Dr Roberts about his new role.

HOW ARE YOU FINDING THE ROLE OF APPEA CHIEF EXECUTIVE SO FAR?

It’s an exciting time to be in the industry. We’ve got tremendous investment that is getting to the stage now where we see projects getting to first gas.

So far that’s been achieved with one of the Queensland projects [the Queensland Curtis LNG Project], and by the end of the year we’ll see all three projects in Queensland producing LNG exports.

When you look at it, these are some impressive projects that are now getting to the stage of actually making some money.I think the first final investment decision for
those projects was back in 2010 – that is very impressive, because you’ve had huge projects created in a reasonably short period of time.

A tremendous amount of work has been done to develop the upstream resource, and put in place the infrastructure and the production so that we can now export LNG throughout the Asia-Pacific region.

HOW DO QUEENSLAND AND WESTERN AUSTRALIA’S APPROACHES TO GAS COMPARE?

Western Australia has had major project for a long time in the North West Shelf, so they’ve been happily producing gas for a while.

Chevron’s Gorgon Project is almost complete, and we’re expecting to see first gas from that project this year, so that’s pretty impressive – particularly when you consider the isolation the technical and regulatory challenges that project has faced.

Then we have the Wheatstone Project, the Ichthys LNG Project and eventually floating LNG with the Shell Prelude FLNG Project to come.

If it is the case that a lot of the attention has been focused on Queensland in recent times, it’s because the state has three major projects being developed with some quite innovative technology being deployed to
convert CSG into LNG.

The industry is showing itself to be very capable and very innovative to overcome those technical challenges.

HOW WILL FLOATING LNG CHANGE THE GAS INDUSTRY?

I think it’s important to recognise that FLNG allows projects to be developed that probably wouldn’t otherwise be commercially feasible, because it does reduce the upfront capital costs.

FLNG just gives us another option to find a competitive solution, and I mean competitive in the global sense of the environment – to develop reserves that would otherwise probably be out of reach.

It’s a great step forward and we’re finding ways to convert reserves that are difficult to develop into the basis of good projects – whether it’s CSG, or using FLNG to get the project economics right.

HOW DO YOU PLAN TO WORK WITH GOVERNMENT?

We’re trying to start the conversation with both federal and state governments about how we can look at the regulatory framework that we have and simplify and streamline it as much as possible.

APPEA has done a number of studies over the last two or three years to show that there is a competitiveness gap in Australia and that the cost of developing projects in Australia is higher than comparable countries like Canada.

A large part of that is due to some of the regulatory process and its delays, so we’re very keen to see approaches that streamline, through ‘one-stop shops’, the regulatory process so we can save time.

An APPEA study from a couple of years ago showed that on average a Canadian project could get to market about three months earlier through the regulatory process, which I suspect is probably getting even tougher in some ways.

WHY DO YOU THINK THAT IS?

That’s for onshore projects in particular, because the community issues are significant, and the social licence issues are significant.

Although, as we’re seeing, often the political response to that is to add more regulation, or add new steps to the regulatory process.

But the work that APPEA has done over the last couple of years demonstrates pretty clearly that if we get our regulatory framework right, if we look at controlling our costs, we can be very competitive selling gas to Japan, compared to places like Canada.

DO YOU SEE THAT CHANGING ANYTIME SOON?

I hope that we can convince government.As I say, it’s not just a state government or a federal government issue, but there’s a need to do a few things.

One is the case of the Fair Work Act, and we really do believe that it will be important to reform that act to allow for a new category of agreement – a major projects agreement, that would be designed to support big capital projects.

At the moment the Fair Work Act doesn’t provide for investors to have confidence about their costs going forward.

The process can be that the maximum time for an existing agreement is about four years, so your agreement can expire at a critical stage in the construction of the project, and that just leaves you with a lot of uncertainty about your future costs. It also leaves you vulnerable to industrial relations problems.

There’s a host of issues here though. We are going to be a high cost location For many of our projects because of the isolation, and there are always going to be those difficulties, and there are also some features of our geology that make it difficult.

It’s quite an achievement to extract natural gas from coal seams, it’s not an easy or simple process, and we’ve done very well doing that, right to the point now That 95 per cent of the gas being used in
Queensland is out of coal seams. So we’ve got some high cost characteristics for our industry, but we can be competitive.

DID YOUR TIME WITH THE QUEENSLAND COMPETITION AUTHORITY (QCA) PREPARE YOU FOR THE NEW ROLE?

The wonderful thing about the QCA was that you were at the intersection of business and some regulatory decision making.

You had a public interest role, but you worked with the customers, you worked with the infrastructure owners and the service providers, and so it gave you a pretty good sense of the trade-offs that are always going to be there, and the fact that regulation has a cost.

You have to be very clear-headed about what you’re seeking to achieve, what the public interest is that you’re protecting and advancing, and also recognise that you could sometimes spend more time, more money, more effort than was justified to achieve marginal improvements.

If you look at the gas industry, an important point for governments to understand is that investors look for opportunities at particular times, and a project that is attractive and viable at a particular time is not guaranteed to remain so indefinitely.

You can’t be in a situation where there are unnecessary processes to deal with the development of projects, and you can’t assume that the commercial opportunity is going to stay – you need to recognise when the global market is in the right place and when investors are interested in a particular project.

So you really do need to ensure you’ve got a regulatory system that can respond quickly, you don’t diminish the quality of the regulatory decisions, you don’t diminish the oversight, and you don’t diminish the protections that you have in place for the community, for the environment.

But to really also recognise that you can’t assume investors will be able to make the same investment in a few years’ time – the time is now.

There are tremendous benefits for the country – LNG is en route to becoming the number one export from Australia. It’s going to be a tremendous benefit to the country as a whole and to the regional communities where the industry is based. We don’t want to have a regulatory system that becomes a deterrent to investment.

Enter your details to subscribe to the free fortnightly Gas Today e-newsletter

Thank you for signing up for the Gas Today Online Update.