Industry uncertainty keenly discussed at APPEA: Orchison reports

Keith Orchison

Keith Orchison

Today’s gas supply saga is now on equal controversial footing in eastern Australia with the electricity security and pricing shemozzle; they also share much uncertainty about how (and over what time) they can be resolved.

While the technical aspects of these problems occupy masses of opinion commentary and debate time, there is a growing unease in the supply sector about the impact of the twin issues on the energy industry’s reputation in the community at large.

Delivering a keynote address to the Australian Petroleum Production & Exploration Association (APPEA) Conference in Perth in May, Woodside Petroleum Chief Executive Peter Coleman labeled this a “trust deficit,” declaring that “we have lost the trust of the public” and warning that this is “infecting” relationships vital to the energy industry with investors and policymakers among others.

As a North American energy consulting company analyst puts it, trust is a vital mechanism, essential in reducing complexity and enhancing the functioning of processes. Beware an environment, he warns, where stakeholders can only see the negative side of things.

It says something about the state of play in Australia that APPEA has felt the need this year to devote a conference plenary session to addressing the upstream petroleum industry’s trust challenges, acknowledging that they are “serious” while complaining that the situation has been exacerbated by “sophisticated activism”.

APPEA’s program notes comment that “the industry tends to see the solution as better communication of technical issues” while stakeholders seek improvement in performance by industry actors and more transparency on the part of companies and regulators.

Long-experienced energy journalist Angela Macdonald-Smith, summarising the 2017 conference for the Australian Financial Review, opines that “the message to the country’s oil and gas industry can’t be made any clearer: it has to live up to community expectations or suffer the consequences.”

With an estimated $50 billion of investment needed between now and 2030 to match east coast gas supply with demand, she adds, the time for the industry to deal with being on the losing side in a public relations war (as federal Labor’s resources spokesman, Tim Hammond, called it in his keynote address) “is now”.

The complicating factor in this, as APPEA chairman Bruce Lake told the conference in his opening address, is that “the expectations of the community, the media and the political class about our industry are impossibly contradictory — not in my backyard, zero-risk, lower prices and more tax.”

His other observation – that the oil and gas business is at its most vulnerable where it does not operate, in other words in metropolitan areas, home to the vast majority of voters who hold the fate of governments in their ballot papers – goes to the heart of part of the upstream sector’s trust problem: the metro community, many of them millennials, have no lived experience of the industry’s activities as rural and regional people do.

But the other segment of this issue is the reaction of the community at large to the current higher cost of energy (both gas and electricity) – which is no longer just seen in terms of household budget pain by many but also as a threat to jobs.

It is obvious from conversation with APPEA conference attendees in Perth that the industry, and its lobby group, are well aware of all this; but appreciating the problem and dealing with the many angles of its “PR” are different parts of the coin.

Woodside’s Coleman says “it is time for the conversation to change.” The devil for the industry and its representatives lies in how to accomplish this and the chronic lack of time available for effective action.

A further complicating factor right now is how the body politic – at federal and state level – handles the report of the Finkel energy security task force and the review of Australia’s climate change policies.

What will the environment and mood be by the time APPEA brings the industry together again via its 2018 conference in Adelaide next May?

Keith Orchison has been involved in the resources and energy industry policy issues for more than 37 years, of which he spent 24 as Chief Executive of national industry associations dealing with upstream petroleum and electricity. He publishes the This is Power blog and a monthly newsletter on his Coolibah website, read by members of the energy industry, analysts, politicians and public servants.

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

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