Gas Today has collated the experts’ top 7 trends for the Australian gas industry in 2015.
1) The financial challenge of low oil prices
In a reflection of current trading conditions, Wood Mackenzie’s corporate upstream research team say the lower oil prices pose the biggest threat to oil and gas industry earnings and financial solidarity since the “financial crash of 2008”.“More evidence of how this is affecting performance and strategy will appear in the fourth quarter results and further pared-back investment plans. The financial performance in the first quarter will deteriorate, as the impact of a full-quarter of low price realisations flows through to earnings.”
2) Operational excellence is key
In its report Tracking the Trends 2015, Deloitte has the following tips for natural gas operators looking to achieve operational excellence in the tough economic times:
Harness big data in real time to reduce costs;
Cut the largest expenses by tackling energy costs;
Create transparent information flows;
Come up with a common culture to drive excellence across the organisation;
Streamline inventory, optimise working capital, divest non-core assets and strengthen focus on portfolio management;
Reduce internal red tape; and,
Monitor external elements to plan for a wide range of potential outcomes.
3) Debt management and intense cost cutting
Wood Mackenzie says capital discipline in 2015 will be less about choice and more about survival for certain gas operators.“We estimate companies need to cut costs by $US170 billion or 37 per cent to maintain net debt at 2014 levels at a Brent oil price of $US60/bbl. Cuts will be spread across investments in new projects; exploration budgets; operating costs; and shareholder distributions.”
4) New generation of talent
To draw new people in, energy companies must consider ways to make the sector more attractive. Deloitte’s tips on how gas companies can attract new skills to the sector are:
Formulate a diversity agenda;
Invest in cloud-based talent management systems and sophisticated workplace planning tools;
Treat recruiting like marketing; and,
Make targeted training investments.
Financially strong players will put rationalisation programmes on hold but some companies will find themselves with little choice, unable to achieve the cuts in discretionary spend required to balance the books. Large-scale corporate consolidation is more likely than at any point since the late 1990s
5) Large-scale corporate consolidation
Wood Mackenzie says there is potential for a buyers’ market in mergers and acquisitions (M&A) in 2015.“Financially strong players will put rationalisation programmes on hold but some companies will find themselves with little choice, unable to achieve the cuts in discretionary spend required to balance the books. Large-scale corporate consolidation is more likely than at any point since the late 1990s.”
6) Effective stakeholder engagement
Winning a licence to operate today often means negotiating with different local shareholders.
Below are Deloitte’s tips on how to balance competing interests:
Create a shared vision of what the future will look like and build deep relationships;
Devise sustainability reports and come up with new mobile methods to engage with global workers in real time;
Better understand community concerns and how you are perceived on social networks;
Spearhead community outreach initiatives and foster dialogues;
Engage in means of official charitable giving and manage social portfolios; and,
Consult with stakeholders and plan facility closures well.
7) Golden opportunity for long-term resource capture
Wood Mackenzie says there will be a window of opportunity to capture high-impact acreage and discover resource opportunities.“A big unknown is how much and for how long costs will fall – many companies will hold on expensive frontier drilling in anticipation that lower drilling and appraisal costs could materially improve full-cycle economics.”