October 2017
CSIRO FUTURES
CSIRO Futures is the strategy and innovation advisory business of Australia’s national science agency.
This report may be downloaded at: www.csiro.au/oil-and-gas
CSIRO Futures is the strategic advisory arm of Australia’s national science agency. We work with senior decision makers in Australia’s largest companies and government to help them translate science into strategy and plan for an uncertain future. We build on CSIRO’s deep research expertise to help our clients create sustainable growth and competitive advantage by harnessing science, technology and innovation.
CSIRO Energy is working to ensure economic competitiveness and energy security while enabling the transition to a lower-emissions energy future. We are pioneering energy technologies that create value for industry and households and provide the knowledge to guide us towards a smart and secure energy future. We develop pathways to achieve an enduring legacy from energy resources and the social cohesion to tackle the environmental consequences of the chosen options.
CSIRO Oceans and Atmosphere delivers world-class science that enables governments, industries and communities to make informed decisions about the sustainable management of the marine and atmospheric environments. We are uniquely placed to deliver new and improved scientific knowledge, information, products and services that contribute to significant economic, social, cultural and environmental benefits for Australia and the region.
We are grateful for the time and input of industry representatives consulted throughout this project and the many researchers who provided invaluable review and feedback on this report. Special thanks to Karl Rodrigues, Patrick Hartley, Damian Barrett, Heather Gustin, Jon Kelly, Andrew Garnett, Claus Otto and many others for reviewing drafts of the report and providing invaluable feedback.
© 2017 CSIRO. To the extent permitted by law, all rights are reserved and no part of this publication covered by copyright may be reproduced or copied in any form or by any means except with the written permission of CSIRO.
Australia has had a wealth of resources at its fingertips, and our oil and gas sector has been a strong contributor to Australia’s economy for decades. However, a shifting international market means the industry must invest today in the innovation that will allow it not just to remain competitive, but actually lead tomorrow. While the rapid pace of change has created challenges, there is also an opportunity for the Australian industry to redefine a future that realises gains from reduced costs of exploration and production, improved safety and efficiency of operations, reduced environmental impacts, and by embracing diversified products and services. CSIRO is uniquely placed to drive technological innovation for the oil and gas industry, given our expertise, track record and deep engagement across the sector.
CSIRO’s Strategy 2020 is to be Australia’s Innovation Catalyst, driving a collaborative approach across research, education, government, business and investor communities to build a stronger future for the sector. ‘Customer First’ is the first pillar of our strategy, and we’ve prioritised the way we work side-by-side with our customers and partners to foresee and tackle the big challenges facing their industries. We’re committed to responding with agility and creativity to find the right solutions for unique projects, and spending more time understanding the specific needs of our customers. This customer-centric approach doesn’t just extend to how we work with our partners; it is also reflected in our broader research agenda. For example, we are investing heavily to improve the characterisation of our resource base with a recent investment in the Deep Earth Imaging Future Science Platform. This multi-year strategic investment is focused on developing new technology to analyse subsurface imaging and better characterise oil, gas, and mining resources.
CSIRO studies the markets that matter – using science to conceptualise, predict, and model the major trends shaping Australia’s future, including the Australia 2030 Report, Our Future World: Global Megatrends report, and the Australian National Outlook. We believe the Oil and Gas sector has an opportunity to reshape its future, led by world-class science and solutions. This Industry Roadmap discusses enablers for unlocking these opportunities which rely on a collaborative approach from the research, education, government, industry and investor communities. CSIRO is committed to continuing to channel resources into this effort, including bringing our world-class science and solutions to the table.
Responding to the disruption facing every part of the Australian landscape requires nothing short of deep collaboration to drive breakthrough innovation. We are proud to stand shoulder to shoulder with National Energy Resources Australia (NERA) and the other Industry Growth Centres as they further map out their roads to success. Together, we can apply world-class scientific and technological expertise to our unique Australian challenges. Together we will chart a course for long term sustainable prosperity for our nation. Together, there is no problem we can’t solve.
Dr Larry Marshall
CSIRO Chief Executive
It is my pleasure to jointly endorse the CSIRO Roadmap for Australia’s oil and gas industry. The collaboration between NERA and CSIRO provides a powerful example of the way collaboration can force multiply our efforts and talents and assist to create a competitive, exciting and sustainable future for the oil and gas sector in Australia.
In 2016, NERA (National Energy Resources Australia) was formed as part of the Australian Government’s Industry and Innovation Agenda. NERA’s role is to assist the energy resources sector adapt to a disruptive energy market and in an increasingly automated world. The only way we can achieve this is to transform our thinking and processes and become better equipped to deliver innovative questions and solutions for the sector. NERA is creating vital connections for growth. Through collaboration, we will deliver innovation and improved productivity, direct research to industry needs and deliver the future work skills required for a digital and low emissions economy.
The global and local economies are changing and at an ever-faster pace. We now live in a globally connected and networked marketplace and technological innovation continuously opens new opportunities and ways for delivering and experiencing goods and services, including energy. Global commitments to reducing carbon emissions are driving investment in clean technologies and making alternative energy sources more economic.
Australia’s oil and gas sector is in transition. The industry is transitioning from decades of massive investment and construction to operations and maintenance. Managing costs while improving efficiency and productivity is critical. At the same time, oil and gas companies are finding new partnerships, customers and markets, investigating diverse ways of creating and realising value through the value chain to the generation of electricity and exploring what value renewable and clean energy technologies can create for the sector. To maximise these opportunities, we must challenge our beliefs around what makes us competitive and transform our questions, our thinking and our approach to how we innovate.
The NERA Sector Competitiveness Plan (SCP) and this Roadmap complement one another in assisting the Australian oil and gas sector transition to a fundamentally different digital and energy marketplace. NERA’s SCP provides a detailed international competitiveness benchmarking analysis, strategic knowledge priorities and key focus areas. Together with the CSIRO Roadmap, the SCP provides industry and sector stakeholders with the evidence to guide the initiatives needed to create a future orientated and sustainable industry. Building this strong future will rely heavily on a collaborative approach from all parties – research, education, government, business and investor communities.
CSIRO brings world-class science and solutions to the mix and we are proud to be working with this world-class institution. The CSIRO Oil and Gas Roadmap provides an important contribution to the combined efforts required to address the sector’s challenges and will assist us all in working together to improve our global connections and competitiveness.
Miranda Taylor
Chief Executive
This report was informed by industry consultation and is based on the opinions of executives and managers from oil and gas operators, service firms and Government agencies. Dozens of interviews with technical experts from universities and CSIRO provide the report with a solid perspective on technology developments. In all, approximately 80 interviews were conducted to inform this report during the first half of 2017. Analysis of the content of these interviews, and additional desktop research helped to shape this report. It therefore represents a consensus view of the trajectory of the industry, developed by synthesising executive opinions, technical expertise and scientific research.
Despite prior successes, the Australian oil and gas sector faces many challenges. Overcoming them will require innovation and new collaboration strategies. To help in this endeavour, the Oil and Gas Roadmap identifies four high-impact pathways to growth that are enabled by science and technology.
Australia’s oil and gas sector sits on the world stage, contributing strongly to the country’s position as a leading energy exporter. The nation’s world-class gas resources, geopolitical stability, proximity to lucrative markets and skilled workforce have long made it an attractive target for investment. Decades of investment, including that recently in LNG, have transformed the sector into the major global force it is today.
However, any assumption that this pattern will continue indefinitely fails to acknowledge a number of challenges facing the sector. Oil prices have plunged and are likely to remain low for the foreseeable future. This, coupled with the ongoing commoditisation of LNG, is damaging the economics of existing assets. In terms of attracting new investment, fierce competition from new low-cost producers, and ‘sovereign risk’ may mean that capital for future projects may not flow into Australia. On the demand side, rapid technological change makes the future energy mix difficult to predict. This difficulty is exacerbated by regulatory uncertainty and pressures on the energy sector to decarbonise. All of these forces challenge the future of the industry.
To remain globally competitive in such times, Australia’s oil and gas sector cannot be complacent. A robust strategy is needed to deal with the challenges facing the industry and the uncertainties underlying them.
This oil and gas industry roadmap provides a high-level guide to addressing some of these challenges and uncertainties, to assist with ensuring the long-term viability of the sector.
Four major strategic opportunities are identified herein. Each represents a high-impact pathway to growth that is grounded in science and technology. If these opportunities are pursued collectively by companies and government entities, the Australian sector may become more competitive and innovative, thereby, unlocking its potential and solidifying its place as a major oil and gas player in the decades ahead.
In addition to these technology pathways, the sector will need to focus on a number of ‘business ecosystem’ improvements to unlock its full potential. These include engaging in new approaches to collaboration, focusing on energy security, streamlining the costs of doing business and reducing regulatory uncertainty. Critically important will be improving the sector’s public image. This will be achieved, in part, by enhancing social performance by fostering trust between government, industry and other stakeholders to establish robust social licence to operate – particularly in unconventional oil and gas.
Figure 1: Report structure
CHAPTER 2: GLOBAL OIL AND GAS MEGATRENDS
What global trends are shaping the sector?
CHAPTER 3: Australian oil and gas competitive landscape
What are the Australian trends and issues facing the sector?
CHAPTER 4: STRATEGIC OPPORTUNITIES
What can the sector do to ensure its long-term viability?
What technologies can help unlock these opportunities?
CHAPTER 5: CREATING THE RIGHT BUSINESS ECOSYSTEM
What other changes are needed to help the industry capitalise on these strategic opportunities?
The sector faces a confluence of global trends and domestic challenges that require new ways of thinking about the exploration and production oil and gas, and the future of the energy sector more generally.
To establish the state of play for the Australian oil and gas industry, CSIRO undertook megatrends and competitive landscape analyses. The former focused on global shifts, and the latter on the advantages and challenges facing the Australian oil and gas sector.
Findings point to five megatrends that will shape the global oil and gas industry over the next decade. Combined, they indicate that businesses and government must find economically-viable ways to produce increasingly challenging resource plays in a cost-constrained environment, in order to supply rapid demand growth (from the developing world especially), while at the same time excelling in the environmental and social aspects of doing business. These megatrends are shown in Figure 2.
Figure 2: Global oil and gas megatrends
Energy hungry
Global primary energy demand is predicted to grow rapidly in the coming years, driven by a swelling population, increased urbanisation, and the rise of the middle class particularly in the developing world. However, uncertainties remain about the energy mix that will meet this demand.
Digitally enabled
Rapid improvements in digital technologies hold the promise to dramatically improve the way businesses operate. From embedded sensors to advanced analytics and AI, the industry is creating tools to improve how they create, deliver and capture value. The challenge for this sector is the integration of multiple technologies to capitalise on the next wave of the digital-enabled future.
More complex and costly
Large conventional oil and gas resources are becoming harder to find and the sector is moving toward more complex resource plays. These have different cost profiles and many will require new technology to produce economically – particularly in a cost-constrained business environment.
Socially concerned
Global citizens are increasingly adept at shifting public sentiment around issues important to them. Using such tools as social media, groups of people can create strong opposition to business interests, shape public discourse, and influence government policy. A key challenge for the oil and gas sector in this regard is earning and retaining social licence for its resource projects.
Carbon constrained
Rising concentrations of CO2 and other greenhouse gases are believed to have increased average global temperatures and disrupted weather patterns. Government regulation, subsidies, and rapid cost reductions of renewables are all pointing to the fact that the decarbonisation of the energy sector has begun, which will impact the global oil and gas sector.
A more granular focus on the competitive landscape of Australia’s oil and gas sector reveals a number of advantages that can be leveraged, in addition to a series of challenges that need to be addressed (see Figure 3). Importantly, the tremendous value of Australia’s resource base risks being locked up for the foreseeable future due to a number of issues; including high development costs, lack of domestic innovation, adjusting to the new fiscal realities of remote and higher-risk unconventional resources, regulatory uncertainty and troubles with gaining social licence to operate. The potential solutions for many of these challenges are not technological, but will instead come from a concerted and proactive effort by the business community, government and stakeholders.
Figure 3: Australian oil and gas advantages and challenges
Advantages
Challenges
Advantages can erode without sustained investment
Challenges can become advantages if they are prioritised and addressed
Four strategic opportunities that harness the power of science and technology have the potential to transform existing operations and create entirely new business prospects.
This report asks ‘What can the Australian oil and gas sector do, in the face of considerable obstacles, to remain viable into the coming decades?’ and ‘What investments in science and technology are needed to prevail?’ Questions like these framed the industry consultation approach, with the aim of identifying the major strategic opportunities for the sector, specific enabling technologies, and research priorities over the next ten or more years.
The result of these efforts was the identification of four strategic opportunities as shown in Figure 4.
Figure 4: Oil and gas opportunities along the value chain
1. Enhanced basin productivity
Technology breakthroughs will help lower the cost of locating resources and producing reserves, thereby improving the global cost-competitiveness of the industry.
Potential applications
2. Digital operations and maintenance
Rapidly evolving digital technologies provide opportunities for safer and more efficient O&M of oil and gas assets.
Potential applications
3. Advanced environmental solutions and processes
Developing technologies and processes that reduce the environmental and social impacts of field developments and processing plants, may also provide financial benefits to the Australian oil and gas sector.
Potential applications
4. High-value diversification
Businesses should consider adapting their business models and diversifying into higher-value product and service offerings to gain competitive advantage and hedge against an uncertain future energy mix.
Potential applications
Upstream
Midstream
Downstream
Decommission
Technology breakthroughs will help lower the cost of locating resources and producing reserves, thereby improving the global cost-competitiveness of the industry.
With the recent downturn in oil prices, a gas market undergoing commoditisation, and stiff international competition for capital, reducing costs in the subsurface is a paramount activity for the continued health of the Australian sector. Locating and proving resources can be done more efficiently, drilling and completions can be done more economically, and recovery rates can be improved. These ideas are expanded below.
Firstly, exploration efficiency can be improved in a number of ways. Technologies that enable autonomous collection of seismic data might help to drive down costs, particularly in frontier basins. More detailed pre-competitive datasets, together with tools like cloud computing and Artificial Intelligence (AI), may help to locate and better characterise resources ‘pre-drill’. Inversion of multiple existing imaging modes can provide higher resolution of the subsurface and enable improved outcomes. New technological paradigms, such as those based on quantum gravity sensors, may be used to locate oil and gas more readily in the future.
Secondly, drilling and well completions are important targets for cost reduction. With large numbers of onshore wells to be drilled in Australia over the next decade, focus should be on increasing drilling efficiencies and improving supply chains and infrastructure that support drilling and completions. If done correctly, the potential exists for businesses to apply some of the technological know-how about high-volume onshore drilling to other regions.
The third approach is to use advanced technologies to improve hydrocarbon recovery and extend the life of oil and gas fields. For example, advanced characterisation of reservoirs can improve targeting of hydrocarbons, and enhanced oil recovery technologies can help improve ultimate recovery factors. One interesting potential technology applicable to Coal Seam Gas (CSG) is microbially-enhanced coal-bed methane,1 also known as Reservoir Rejuvenation Technology (R2T).2
Rapidly evolving digital technologies provide opportunities for safer and more efficient O&M of oil and gas assets.
The fourth industrial revolution is well underway, and the convergence of sensors, nanotechnology, robotics and AI will change the way every company conducts business – regardless of sector. The oil and gas industry is in a prime position to use advanced robotics to reduce risks to personnel and decrease costs, and AI – such as machine learning – to drive faster and better decision making. Together, these applications will help to transform operations and maintenance of Australian oil and gas.
Robotics and automation will play an increasingly important role in driving cost efficiencies. Importantly, these technologies will play a critical role in Australia, given the remoteness of its resources. Such technologies will help to remove employees from the field, improve safety and reduce labour costs. For example, robotic drilling and completions will become increasingly common. Unmanned Aerial Vehicles (UAVs) and Autonomous Underwater Vehicles (AUVs) will enable remote inspection and will eventually undertake maintenance interventions. Virtual reality (VR) and augmented reality (AR) will allow experts in central locations to guide workers in remote areas. In the subsea environment, digital production technologies and other low-maintenance processing equipment will enable long tie-backs of remote and stranded assets, reducing the need for traditional infrastructure.
Improved utilisation of data represents another large opportunity for the sector. For example, low-cost sensors and AI can transform the way plants are operated and contribute to a step change in performance. These technologies can enable more precise predictive maintenance, increase uptime, and even help to coordinate supply chains. However, very few operators have fully embraced the decision making power that improved data collection and analysis can provide.
Developing technologies and processes that reduce the environmental and social impacts of field developments and processing plants may also provide financial benefits to the Australian oil and gas sector.
Facing several environmental and social challenges, Australia’s oil and gas sector should continue to focus on coordinated, sector-wide investment in environmental technologies and processes to ensure best-practice management of oil and gas activities. Such investments could go some way towards addressing social concerns. For example, industry-wide activities, such as cost-effective baseline studies, or developing integrated approaches to spill preparation and response, will help build trust with stakeholders. (Such issues are also partly covered in Chapter 5 – Improving the sector’s public image.) Moreover, pursuing the elimination of waste, addressing Greenhouse Gas (GHG) emissions, finding more sustainable uses for produced water, and addressing the sector’s decommissioning liabilities may actually pay long-term dividends. For example, demonstrating leadership in areas like carbon capture and storage may position the industry for a new revenue stream: sequestration as a service for other industries.
Three examples of the application of new environmental technologies and processes are highlighted below.
Firstly, ensuring water quality and dealing with produced water more sustainably are factors vitally important for the Australian sector. Technologies that treat and recycle water and minimise salt by-products, particularly in relation to CSG, are needed to reduce the environmental impact of operations. In future shale gas developments, well stimulation techniques that require water will be a problem in Australia’s dry areas. This will require well-fracturing techniques that use low-quality water, lower volumes of water, or no water at all.
Secondly, improved management of GHG emissions is an important element of demonstrating environmental stewardship. Fugitive GHG emissions such as methane pose a risk, especially in unconventional gas infrastructure, due to the high number of wells and long-distance pipelines. Techniques to measure and mitigate this risk are needed. Likewise, Carbon Capture, Utilisation and Storage (CCUS) technologies offer solutions for preventing CO2 being released into the atmosphere. New techniques for separating carbon from gas streams are needed to drive down the costs of capture. Proving the efficacy of novel geological formations for storage is another opportunity. For example, moving beyond the traditional ‘capped’ reservoir paradigm would open up Australia’s geography to many more potential sequestration sites. Oil and gas businesses could provide geological and engineering sequestration services both here and abroad, allowing coal-fired power plants to cost-effectively meet obligations for future emissions regulations. However the economics of these opportunities will depend upon governments placing cost on carbon emissions.
The third potential application of advanced environmental solutions is in the efficient and environmentally-responsible decommissioning of infrastructure. New technologies and processes are required to enable flexible approaches to decommissioning, while ensuring optimal social, economic and environmental outcomes are achieved. Technologies which allow for more efficient well plugging and abandonment, infrastructure disassembly, transport and waste disposal will be important. More research is also needed to assess the environmental and social impacts of various decommissioning alternatives, from the complete removal of infrastructure to leaving it in place.
Businesses should consider adapting their business models and diversifying into higher-value product and service offerings to gain competitive advantage and hedge against an uncertain future energy mix.
Although this report assumes continued robust demand for oil and gas, the energy mix of the future is not predictable. Technological and regulatory uncertainty looms large in this equation. Rapidly falling costs of grid-scale solar photovoltaics (PV), energy storage technology (including batteries) and electric vehicles are likely to influence the future energy market. Future regulations in the area of GHG management could stimulate this shift. While such matters are not the explicit focus of this report, they have the potential to decrease demand for oil and gas. For example, a rapid decarbonisation of the energy sector could completely undermine the ostensible role of gas as the bridge to a zero-carbon future – a potentially large risk for the Australian gas export industry. In the face of such uncertainty, the sector would be remiss to take a ‘business as usual’ approach. Instead, it must proactively pursue new products and services and devise new business models that diversify revenue streams. Four potential diversification approaches are highlighted.
Firstly, Australia’s remoteness provides an opportunity to investigate off-grid/distributed energy systems, since Australia’s remote resource developments and regional communities need clean and reliable energy. There are also opportunities to export these systems to energy-impoverished developing nations that lack grid infrastructure. A foray into this area is simply the integration of renewables into existing oil and gas operations. This takes advantage of the rapidly falling costs of renewables, especially solar PV, but includes wind and tidal, leveraging them to produce power for operations instead of burning valuable product. This activity would enable companies to build new capability in the area, and provide the opportunity to forge new partnerships. The more strategic second step is to develop fully-integrated hybrid energy systems. Such systems combine, for instance, a petroleum fuel source and renewable energy (typically solar) to provide consistent base and peak load for off-grid or micro-grid applications. Remote mines and regional communities could serve as domestic test beds for such technologies, (many of which, such as micro-grids, are already under development), with the ultimate goal of creating of large export market in developing nations.
The second example is the development of small stranded gas fields using small-scale Liquefied Natural Gas (LNG), and Floating LNG (FLNG). These approaches allow the monetisation of fields where typical infrastructure such as pipelines would be cost prohibitive. Stranded gas is a global challenge, and Australia has a number of small stranded fields. Offshore, cost-effective mini-FLNG (e.g. using repurposed ships) is particularly appealing since these systems can be used domestically, or be easily redeployed to new markets when needed.
Thirdly, there is significant potential for the use of LNG as a transport fuel (in domestic and international markets) for heavy road transport, locomotion and maritime shipping. Annual demand for such applications is estimated to exceed 100MTPA by 2030.3 Increased regulatory scrutiny on ship emissions, in particular, opens up a potentially large market for LNG-powered vessels, and represents about one-third of the anticipated demand. To enter this market, advanced storage and bunkering technologies are needed.
Fourthly, businesses must consider developing energy and chemical products that can command larger profit margins. The renewed interest in hydrogen in many parts of the world represents an appealing way to diversify and to help contribute to lowering the carbon intensity of the energy sector. Its appeal for end-users is that with few changes to equipment, clean burning hydrogen can be directly used in combustion applications including stationary power generation, as well as used directly in fuel cells for power and transport. While making hydrogen by reforming methane is one approach, economical methods of deriving it from less carbon-intensive routes are needed. For example, using solar PV to power water electrolysis can lessen the carbon footprint of hydrogen production. Furthermore, the logistics of hydrogen production need to be improved since hydrogen liquefaction is costly. Hydrogen carriers such as ammonia, that require less energy to transport, are needed. However, these alternatives will only be economically viable once affordable conversion technologies are commercialised to support the point-of-use hydrogen applications.
Value-added petroleum products, such as chemical intermediates and liquid fuels, represent another opportunity to diversify. Instead of traditional petrochemical refining routes, the sector chould leverage the next generation of gas-to-liquid (GTL) and gas-to-product (GTX) plants based on micro-channel technology. This technology is smaller and more nimble, and could be coupled with small gas field developments or appended to existing LNG plants. Due to their high efficiency, these technologies may provide more affordable routes than traditional refining to various liquid fuels and chemical intermediates, such as methanol and diesel. Their small scale and nimbleness means that the product mix could be quickly changed in response to market signals, thereby maximising profit margins at any given time.
In order to unlock these strategic opportunities, several changes in the business ecosystem may be required. Figure 5 summarises two types of changes: opportunity-specific and cross-cutting.
Opportunity-specific changes focus on (a) processes, standards and regulations, as well as (b) people, skills and collaboration.
The cross-cutting changes deal with broad themes that affect the sector and that may be hindering innovation and collaboration. Importantly, the sector needs to act on these points soon, or risk being overtaken by international competition.
Figure 5: Summary of business ecosystem changes
|
Strategic opportunities |
||||
|---|---|---|---|---|---|
Enhanced basin productivity |
Digital operations and maintenance |
Advanced environmental solutions and processes |
High-value diversification |
||
Opportunity-specific business ecosystem changes |
Processes, standards and regulations |
Support collection, publication and smart analytics on geoscience data from underexplored Australian regions. |
Address interoperability and integration issues though development of common standards for IoT sensors and associated technology. Work to improve shared digital infrastructure to enable full use of the cloud, including cybersecurity. |
Investigate and prepare for future decommissioning efforts and potential changes in carbon regulations. Support development of standards for fugitive emissions measurement. Development of CCS standards and protocols for novel formation types. |
Assess need for incentives to develop appropriate market conditions to encourage technology development for value-adding technologies such as GTL or GTX. Support development of standards for technologies that create new markets for LNG. |
People, skills and collaboration |
Improve exploration efficiency through multidisciplinary collaboration and skills development. |
Foster skills development and collaboration to drive digital transformation and integration. Collaborate across value chain in terms of scheduling and work-loading to drive efficiencies in O&M |
Strive to improve collaboration and planning of developments at the basin scale, including lifecycle planning for decommissioning activities, and sharing of common infrastructure. |
Explore new business models, partnerships and technology investments. Upskill staff on diversification technologies. |
|
Cross-cutting business ecosystem changes |
Pursuing diverse collaborations for innovation – Companies must collaborate in new ways. Bold collaborations will be needed to build competencies new to the business and to crack new markets. Reducing the cost of doing business – Australia has a growing reputation for high costs, which may deter industry investment. Investments in digital infrastructure and reducing the costs of physical infrastructure through shared models may help. Improving Australia’s energy security – Additional analysis of the supply side of the energy market from an energy security perspective is needed. This may develop support for opening up exploration and production of Australia’s resource base, and decrease its reliance on imported liquid fuels. Reducing regulatory uncertainty – Common standards, streamlined approval processes, and stable greenhouse gas emissions policy will help to provide investment stability in the upstream oil and gas sector. Improving the sector’s public image – Improving the sector’s public image and social licence to operate – through strong and productive trust-based relationships with local communities, stakeholders and the Australian public – is critical to the future viability of the sector. Continued research around issues pertaining to social licence, improved integrated basin-wide planning, and strengthened science communication with the public may help. |
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A vision for Australian oil and gas
A globally competitive, sustainable, collaborative and innovative sector that fully supports domestic energy needs and maintains a leadership position in energy export markets.
The Australian oil and gas industry is at a cross-roads. Recent successes, such as the billions of dollars of capital used to develop natural gas resources and infrastructure for LNG export, have made it an energy leader. Future expansions to existing LNG plant infrastructure can maximise the returns from these initial investments. However, the industry faces significant challenges, including increasing competition, rising costs, low commodity prices, changing social expectations, regulatory uncertainty and environmental concerns. This report is an effort to identify routes to navigating these turbulent waters and ensure the viability of the industry over the coming decades.
This report outlines four major strategic opportunities, each representing a broad area that may hold the keys to unlocking Australian resources and reducing costs. The collective pursuit of these opportunities will be essential to achieving the stated vision for the sector.
The report is meant for public consumption. Anyone with a vested interest in the future of the Australian oil and gas sector should find it insightful, including:
This report was informed by industry consultation. The perspective on the future of the sector, including major opportunities and challenges, was based on the opinions of executives and managers from oil and gas operators, service firms and Government agencies. Dozens of interviews with technical experts from Universities and CSIRO provide the report with a solid perspective on technology developments. In all, approximately 80 interviews were conducted to inform this report during the first half of 2017. Analysis of the content of these interviews, and additional desktop research helped to shape this report. It therefore represents a consensus view of the trajectory of the industry, developed by synthesising executive opinions, technical expertise and scientific research.
This document directly supports the Department of Industry, Innovation and Science (DIIS) Growth Centre Initiatives, specifically National Energy Resources Australia (NERA). It is an industry roadmap, meant to sit beneath high-level market roadmaps and Sector Competitiveness Plans (SCPs) that focus on market trends and national competitiveness, and above technology roadmaps that dictate specific innovation pathways. This report bridges the two (see Figure 6). It uses top-down trends and bottom-up technology insights to identify strategic business opportunities important to the long-term success of the sector.
The report directly supports each of the nine knowledge priority areas outlined in NERA’s SCP, each of which cover major issues or knowledge gaps that need to be addressed to best position the sector for the future.4 Appendix 1 provides a map of these relationships.
Figure 6: Position of the oil and gas roadmap in the context of other reports and structure of report
Industry Roadmaps
CHAPTER 2: GLOBAL OIL AND GAS MEGATRENDS
What global trends are shaping the sector?
CHAPTER 3: Australian oil and gas competitive landscape
What are the Australian trends and issues facing the sector?
CHAPTER 4: STRATEGIC OPPORTUNITIES
What can the sector do to ensure its long-term viability?
What technologies can help unlock these opportunities?
CHAPTER 5: CREATING THE RIGHT BUSINESS ECOSYSTEM
What other changes are needed to help the industry capitalise on these strategic opportunities?
The majority of the report focuses on the upstream oil and gas industry of Australia, covering the exploration for oil or gas resources and their extraction and transport, LNG production and transport, as well as decommissioning. The report expands beyond this to cover chemicals, fuels and (to a limited extent) distributed electricity generation since these represent high-value diversification options for the sector (see Figure 7).
Figure 7: Positioning of report in the broader oil and gas, petrochemical and energy context
Enhanced basin productivity
Digital operations and maintenance
Advanced environmental solutions and processes
High-value diversification
Broadly, the ideas and opportunities discussed in this report are applicable to both conventional and unconventional resources. Basic definitions for conventional and unconventional are:
These resource types were the traditional targets of the oil and gas industry. Such resources have structure, seal and reservoir components. Resources can be extracted using traditional methods of drilling down through a structured ‘cap’ rock and allowing petroleum to flow up the well. Conventional resources typically have moderate to high hydrocarbon mobility (permeability divided by fluid viscosity) and thus require relatively few wells for effective field development.
Unconventional resources like CSG and shale gas, despite their large volumes, were not traditionally considered viable targets for commercial oil and gas development. These resources may have no structure or seal elements, and are characterised by low to very low hydrocarbon mobility. As such they require high well counts and/or the application of non-traditional technologies (e.g. horizontal wells and hydraulic fracture stimulation) for effective field development.
This report does not cover uranium or coal, and thus departs from NERA’s remit. This is a conscious decision to enable in-depth focus on the oil and gas sector. Furthermore, there are existing reports that directly address uranium and coal. For example, both rely on the mining equipment, technology and services (METS) sector which has its own industry growth centre and corresponding industry roadmap.5
The report does not go into great detail about renewable energy, although some forms are mentioned as potential diversification strategies for the sector. While there is little question as to the strong potential for renewable energy in Australia, these opportunities are well documented elsewhere, such as in the activities and reports of the Australian Renewable Energy Agency6 (ARENA) and the recently released roadmap for low emissions technologies.7
This roadmap uses primary energy demand assumptions based largely on the International Energy Agency’s (IEA) projections. As this report is not a scenario analysis, it uses these assumptions as a starting point, with the caveat that there is significant associated technological, regulatory, and social uncertainty in the future energy mix. Nonetheless, the IEA’s projections show that both oil and gas have a role to play at least for the next 20 years, even taking into account projected increases in renewable generating capacity and energy efficiency gains (see Section 3.1 – Global demand picture for more information).
Australia’s oil and gas sector is just one part of a global industry. As such, the Australian sector is heavily impacted by global trends and must ensure that future planning takes into account the broader implications of these trends.
CSIRO has identified five megatrends evident in the global oil and gas sector that will have significant impact on the development and success of the Australian sector over the next 20 years. These megatrends represent substantial shifts in social, economic, environmental, technological or geopolitical conditions that in combination may reshape the way the industry operates in the long term.8
They occur at the confluence of many sub-trends; they are not mutually exclusive and the trends that influence one can also influence or contribute to another.
These megatrends were developed by applying CSIRO’s Global Megatrends9 to the oil and gas sector and refining the output with both research and business communities (see Figure 8).
Figure 8: Global oil and gas megatrends
Energy hungry
Global primary energy demand is predicted to grow rapidly in the coming years, driven by a swelling population, increased urbanisation, and the rise of the middle class particularly in the developing world. However, uncertainties remain about the energy mix that will meet this demand.
Digitally enabled
Rapid improvements in digital technologies hold the promise to dramatically improve the way businesses operate. From embedded sensors to advanced analytics and AI, the industry is creating tools to improve how they create, deliver and capture value. The challenge for this sector is the integration of multiple technologies to capitalise on the next wave of the digital-enabled future.
More complex and costly
Large conventional oil and gas resources are becoming harder to find and the sector is moving toward more complex resource plays. These have different cost profiles and many will require new technology to produce economically – particularly in a cost-constrained business environment.
Socially concerned
Global citizens are increasingly adept at shifting public sentiment around issues important to them. Using such tools as social media, groups of people can create strong opposition to business interests, shape public discourse, and influence government policy. A key challenge for the oil and gas sector in this regard is earning and retaining social licence for its resource projects.
Carbon constrained
Rising concentrations of CO2 and other greenhouse gases are believed to have increased average global temperatures and disrupted weather patterns. Government regulation, subsidies, and rapid cost reductions of renewables are all pointing to the fact that the decarbonisation of the energy sector has begun, which will impact the global oil and gas sector.
Global primary energy demand is predicted to grow rapidly in the coming years, driven by a swelling population, increased urbanisation, and the rise of the middle class particularly in the developing world. However, uncertainties remain about the energy mix that will meet this demand.
The global population is expected to increase by 2.4 billion people by 2050.10 During this same time even more people – an estimated 2.5 billion – are expected to move into urban areas, with 90% of them moving from rural areas in sub-Saharan Africa and Asia into burgeoning city centres.11,12 Based on these trends, the International Energy Agency (IEA) predicts a 30% rise in global energy demand to 2040 as its main scenario, driven mostly by developing nations.13 In OECD countries, energy demand is expected to remain flat due to a combination of energy efficiency and the increased integration of renewables.14
The global population will increase from 7.3 billion in 2015 to 9.7 billion in 2050.15
Global electricity demand is expected to increase by 65% between 2014 and 2040, at which point it will comprise 40% of total energy usage.16 Most of this growth – approximately 85% – will come from non-OECD nations, resulting from an increased urbanisation of the new middle class.17 Electricity demand in the developed world could come from, among other things, the expected rise in the number of electric vehicles.18
Although energy demand growth for electricity may be met in part by renewables and non-carbon energy forms, demand for oil and gas is expected to remain strong for some time to come. Oil will continue to have strong global demand into the future, driven mainly by the transport sector. Similarly, demand for gas is expected to remain strong, with power generation and industry being key to demand growth. It is predicted that 50% of the world’s primary energy demand will be met by oil and gas by 2040.19
Predicting future energy supply and demand is extremely difficult given continued geopolitical uncertainty and unforeseen technology improvements. Geopolitics will continue to have an impact on energy production and use, arising from situations including economic sanctions in energy-rich countries like Russia and Iran, and lack of long term political stability in many developing nations.20 For example, oil supply onto the global market from the Middle East, particularly Libya and Iran, remains unpredictable in the face of continued unrest.21
Technology development is one of the biggest variables, and has wide-ranging impacts. For example, the US recently unlocked shale oil resources that have long been considered uneconomical to produce, using several key technologies including horizontal well drilling, directional steering, hydraulic fracturing and advances in completion technologies.22 The continued downward cost trajectory of renewables, including wind and solar, is driving rapid adoption and causing governments around the world to reassess incentive structures and grid infrastructure.23 Energy efficiency gains and the electric vehicle revolution have many thinking that peak oil demand will occur in the not-too-distant future.24 Exemplifying such trends are recent pronouncements by France, Britain and India about eliminating the sale of internal combustion engine-powered cars in the coming decades.25
Global electricity demand will increase by 65% between 2014 and 2040.26
The world (and developing nations, in particular) needs more energy. Conveniently, an estimated 20% of the world’s oil and gas reserves are located in Asia and Sub-Saharan Africa, where most urban growth will occur and from where increased energy demand will stem.27 If developed properly, these reserves can help raise an estimated 1.2 billion people out of energy poverty by providing them with an affordable and reliable energy supply.28 Doing so will be a priority of developing nations, in line with United Nations (UN) Sustainable Development Goals.29
Fossil fuels will likely remain an important part of the global energy mix for some time into the future, and will be critical in reducing energy poverty. However, concerns about climate change, the rapid pace of cost reductions for renewables and potential advances in energy storage, paint an uncertain future for companies that rely on fossil fuel business models.
The global energy sector accounts for around two-thirds of global greenhouse gas emissions.30
Rising concentrations of CO2 and other greenhouse gases are believed to have increased average global temperatures and disrupted weather patterns. Government regulation, subsidies, and rapid cost reductions of renewables are all pointing to the fact that the decarbonisation of the energy sector has begun, which will impact the global oil and gas sector.
The impacts of rising global temperatures range from altered rainfall patterns, rising sea levels, and increased frequency and severity of severe weather like cyclones, flooding and droughts. These impacts will threaten energy and food security, and therefore the social and economic wellbeing of citizens.31 In recognition of this growing threat, the international community acted. The Paris Agreement, which aims to reduce the threat of climate change by keeping a global temperature rise this century to below 2°C, was adopted by over 190 countries at the 21st Conference of the Parties United Nations Framework Convention on Climate Change (COP21) in 2015.32
Accomplishing this goal will require limiting CO2 and other GHG emissions, while simultaneously meeting rapid energy demand growth. This will require fundamental changes to the way the world produces and consumes energy, and investments in less carbon-intensive energy production and energy efficiency technologies. Such innovations will be critical in enabling populations to continue to have high living standards while at the same time meeting climate goals.33
One way to reduce the amount of CO2 going into the atmosphere is by reducing the carbon intensity of the energy supply mix.34 This trend is already well underway through the use of fuel switching, particularly in fuel used for electricity generation. Some aggressive estimates suggest peak demand for coal will occur sometime after 2020, giving way to less carbon-intense fuels like natural gas.35,36 Gas is one of the least carbon-intensive fossil fuels37 and as such, the IEA estimates a nearly 50% increase in demand for natural gas through to 2040.38
Although the energy mix in 2040 is expected to remain dominated by fossil fuels, technologies can assist in reducing the impact of CO2 emissions. Importantly, CCS will be needed to meet global climate goals.39 There is also an opportunity to co-fire biofuels or biogas to lower emissions from coal and gas-fired power plants, and further decrease the carbon intensity of the energy supply.40
The biggest contribution to CO2 reduction will come from integration of renewables and adoption of energy efficiency technology developments, both of which will reduce fossil fuel demand. Furthermore, development of these technologies represents a significant reallocation of capital from recent years where fossil fuel investment dominated.
Australia’s target is to reduce emissions to 26%–28% on 2005 levels by 2030.41
Although a lower-carbon future is coming into focus, there is still uncertainty around the political instruments that will deliver on it. Lack of clarity around global climate policy increases the risks of investing in new resource development projects and in building new electricity generating capacity.
Significant uncertainty surrounds the largest CO2 emitters, China and USA, and how these countries will meet the Paris Agreement. It is not known to what extent market-based mechanisms, like a price on carbon, will be employed, or whether prescriptive regulations will be used instead. These unforeseen outcomes will likely change the economics of new resource development projects.
Despite an unclear and non-uniform policy environment, the near-unanimous agreement to limit CO2 emissions should prompt oil and gas companies, working with the power generation and transportation sectors, to continue to find ways to reduce their emissions through the mitigation of fossil fuel emissions and by developing new energy technologies. In terms of proving new reserves and investing in new developments, this may mean shifting focus toward natural gas or pursuing low and non-carbon energy supply options, including renewables.
Global citizens are increasingly adept at shifting public sentiment around issues important to them. Using such tools as social media, groups of people can create strong opposition to business interests, shape public discourse, and influence government policy. A key challenge for the oil and gas sector in this regard is earning and retaining social licence for its resource projects.
The ability (or failure) to ensure that health, environment, ecological, and economic interests of the populace are well served has been shown to have an impact on the business interests of companies across a range of industries, from pulp and paper to genetically modified food.42 Social licence to operate has been a critical issue for the oil and gas sector for many decades. Presently, stakeholder discontent can be amplified more quickly than ever before, creating new issues and risks that must be dealt with in extremely short time frames.43
On average, 6,000 ‘tweets’ are sent every second globally, each having the potential to reach millions of people and dramatically shape perceptions of industry activity.44
Social media platforms are tailored to the interests of consumers, and often reinforce and support an individual’s existing view on issues. These platforms, with their ability to disseminate information quickly, have allowed stakeholder groups to become better organised and more efficient at changing public opinion and creating conditions for policy changes.45 Activist investors are also on the rise, and can have the power to influence how business is conducted. Australia is expected to see an increase in this type of activity in the coming years.46
The global oil and gas sector faces numerous community concerns associated with resource extraction, ranging from climate change and air pollution to water quality and health impacts. If these concerns are not addressed, deteriorating community relationships may prevent projects from proceeding.47 The ability to gain and maintain social licence to operate is based, in part, on proving that the resource projects will positively impact on the community, and on addressing concerns about potential environmental damage.48
Not building strong social licence can have detrimental impacts on energy supply. An example is the increased scrutiny on onshore development projects in Australia. In 2016, the Victorian Government announced a permanent ban on hydraulic fracturing, exploration and development of coal seam gas.49 In the same year, the Northern Territory Government implemented a moratorium on hydraulic fracturing of unconventional gas reservoirs subject to an independent scientific inquiry.50 Such bans may restrict local supply in areas of heavy demand.
These challenges provide unique opportunities to develop better approaches to managing the social components of resource developments, and provide impetus to invest in outreach and education. However, they should also catalyse a new wave of technology aimed at reducing or eliminating environmental and health impacts altogether.
Large conventional oil and gas resources are becoming harder to find and the sector is moving toward more complex resource plays. These have different cost profiles and many will require new technology to produce economically – particularly in a cost-constrained business environment.
Oil and gas projects are becoming more complex due to the need to explore for new resources in more hostile environments. Companies are increasingly pursuing opportunities in unconventional resources such as shale oil, shale gas and coal seam gas, and conventional ‘frontier’ plays like the Arctic and ultra-deep water. Often these resources are characterised by more challenging operating conditions and complexity of exploration and production that must be overcome to successfully locate these reserves and produce them economically.51
In 2015, global spending on exploration fell by approximately 30%.52
It is possible that the era of ‘100 dollar oil’ will never return. The convergence of increased global supply of oil and gas, together with slowing growth in some markets, has created an oversupply, resulting in suppressed prices.53 Even though the price of oil has improved from its near record lows in 2016, oil prices have the potential to remain suppressed for many years because of the structural market changes stemming from the US shale revolution. Many now consider the US to be the marginal-cost producer, able to quickly ramp up production to capitalise on higher oil prices, and just as quickly retreating to dormancy when the oil price drops.54
These market dynamics have resulted in decreased exploration activity globally. In response to supressed prices, many have prioritised cuts in exploration spending in order to sustain cash flow, which consequently has resulted in a 60-year low in discoveries.55 Similarly, a slowdown in exploration activity has occurred in Australia.56 This slowdown in exploration activity may jeopardise the future pipeline of greenfield developments. Low prices may also accelerate the pace of asset decommissioning as some existing resource plays become increasingly uneconomic.
New and improved technologies are required to locate and produce new, more complex fields and to drive down the cost of these activities.57 New reservoir discovery is increasingly difficult, with most basins already explored and often only small discoveries made, usually involving more complex geologies. This calls for new and novel means to efficiently explore and locate new resources, including low-cost autonomous solutions.
New cost-efficient production technologies are required in order to enable margins to be made on the back of weak market prices, especially for unconventional plays. As these enabling technologies are developed, production of gas and oil resources will become more economic.
Existing fields will increasingly become targets for operational cost reductions driven by the need to eliminate inefficiencies that were previously hidden by high oil prices.58 Additional investments in innovation will be focused on addressing declining production profiles and expanding the life of existing assets.59
Discoveries of new oil and gas deposits dropped to a 60-year low in 2015.60
Rapid improvements in digital technologies hold the promise to dramatically improve the way businesses operate. From embedded sensors to advanced analytics and AI, the industry is creating tools to improve how they create, deliver and capture value. The challenge for this sector is the integration of multiple technologies to capitalise on the next wave of the digital-enabled future.
The oil and gas sector has a long history of digital technology uptake, starting as early as the 1980s, primarily to deal with vast quantities of subsurface characterisation data.61 This trend continued through the 1990s in a wave of digital oilfield efforts focused, in part, on increasing connectivity to improve communication and collaboration between sites. For example, advancements in sensors, communication, computation and analytics has progressed to the point that drill-line data can be utilised to inform drilling operations in near-real time.62
Globally, digitalisation has the potential to create around $1 trillion of value for oil and gas firms.63
Many digital initiatives within the sector have been conservative and incremental. The sector has not yet fully leveraged the benefits of AI, machine learning and distributed sensor networks, and thus these technologies are having a limited impact on existing operating and business models.64
Analytics can help oil and gas companies improve production by 6% to 8%.65
Increasingly large amounts of data will be generated through installed sensors across operations, producing several orders of magnitude more information than that available just a few years ago. However, only a small fraction of generated data is being used for decision making. Added-value can be gained by using this data to derive, via advanced analytics, insights that will directly improve decision making across the value chain, from exploration to production and operations, thus helping to reduce costs. Fully capitalising on digital technologies has the potential to create an estimated $1 trillion of value for oil and gas companies globally (2016–2025).66
Modern offshore drilling platforms have about 80,000 sensors.67
The digital transformation of the sector will be further enabled through the convergence of numerous digital technologies, including operational technology, information technology, and the Industrial Internet of Things – the integrated digital connection of people, equipment and processes. Data generated from these technologies will be analysed by various AI applications, which will transform how vast data stores are analysed and actionable insights derived. In gas field developments and operations, for example, the collection and analysis of geologic, microseismic, operational and performance data can improve the process of drilling and connecting wells by reducing lag time, and optimising drilling parameters, well spacing and completion techniques.68
Taken together, digitally-enabled operations will provide meaningful outcomes for the sector. Remotely controlled operations and automation are key areas of interest, as is the increasing ability to integrate data to improve operational and strategic decision making.
Global primary energy demand is rapidly increasing and will require an estimated US$44 trillion of investment in new infrastructure by 2040.69 During this time, oil and gas will continue to play a role in the world’s future energy mix according to projections, though the size of its role will vary depending on the pace of technological change and the regulatory actions taken to combat climate change.
Healthy demand for oil and gas is demonstrated by the IEA’s ‘New Policies Scenario’, which reflects current measures and declared policy intentions aimed at limiting global warming.70 This scenario projects a primary energy demand increase of 30% by 2040. Combined oil and gas would comprise approximately 50% of the energy mix – nearly equal to today’s proportion. However, the relative contribution of each would shift, with oil demand increasing by 12% and gas demand by 50% over 2014 levels.
More tepid demand for oil and gas is demonstrated by the IEA’s ‘450 scenario’. This scenario assumes more steps are taken to limit CO2 concentrations to 450ppm, coinciding with a 50% probability of limiting global warming to 2°C. In this scenario, renewables (e.g. hydropower, bioenergy, wind, geothermal and solar PV) will increase dramatically, contributing over 30% of the primary energy mix by 2040. Even though oil and gas would together comprise 45% of this mix, higher efficiencies and more electrification in the energy sector mean that total energy demand will only increase 10% over 2014 levels. Thus, oil demand would actually decline 22% from 2014 levels and gas would increase a meagre 14% (see Figure 9).71
Figure 9: World total primary energy demand (Mtoe) by fuel, 2014 through to 2040
Source: IEA, World Energy Outlook 2016
Australia is the OECD’s third largest energy producer behind Canada and the United States, and is a leading energy exporter.72 Australia’s total energy exports73 in 2015–16 amounted to approximately $59.8 billion, with oil and gas accounting for 40%, and coal accounting for 57%.74 Domestically, oil and gas extraction contributes around 2% of GDP (more than $31 billion 2015–16).75 Although it currently employs an estimated 29,000 people,76 the sector’s GDP impact is on par with Australia’s agricultural sector, which employs 10 times that number.77
Natural gas is playing an increasingly important role in Australia’s export mix, with LNG accounting for approximately two-thirds of Australia’s oil and gas exports in dollar terms in 2015–16. LNG exports have more than doubled in value since 2009–10.78 Asian trading partners account for much of this increased demand. By 2020, a large portion of Japan’s and China’s LNG demand will be met by Australian exports.79 Over half of all Australian-produced gas destined for export markets,80 the country will compete with the world’s leading exporters of LNG in the years past 2020, fuelled by Queensland’s LNG projects, and those in Western Australia and the Northern Territory.81
Domestic gas consumption by gas-powered electricity generation is forecasted to rise over the next decade, in order to support the nation’s climate commitments by replacing coal generation and complementing the growth in renewables. The ability to meet this domestic demand through Australian resources is important, but some are forecasting supply challenges through to the mid-2020s.82
At the same time, Australia remains a net importer of oil with a heavy reliance on imported liquid fuels, especially refined petroleum products. The reliance on imported refined fuels introduces energy security risks for Australia.
Geographically, Australia’s upstream oil and gas industry has distinct offshore and onshore segments. Australia’s onshore operations are widely distributed in remote areas, with conventional operations in Western Australia, the Northern Territory, South Australia and Queensland and unconventional operations mostly concentrated in Queensland’s Coal Seam Gas (CSG) fields and the smaller shale resources in South Australia. Offshore operations are predominantly located off of Western Australia, the Northern Territory and in the Bass Strait off of Victoria.
As part of a highly globalised industry, Australia’s oil and gas sector relies heavily on many large international companies. These companies have a global reach, financial backing and extensive expertise which is leveraged by Australia’s domestic oil and gas projects. Similarly, the technology used in Australian projects comes from a global network of service firms that generate a large proportion of the industry’s innovations.83 In well-known hubs like Houston (US) and Aberdeen (UK), service companies develop technology and deploy it to oil and gas fields around the globe.
Oil and gas exports: $24.3 billion | 5 year CAGR -0.81%
Oil and gas imports: $24.7 billion
Employment: 29,000
Businesses: 1,38085
GDP contribution: 2%
Australia has strong oil and gas sector, and a long history of oil and gas exploration and production. From the Bass Strait and the North West Shelf, to the CSG fields of Queensland, Australia has developed its unique conventional and unconventional resources and in doing so, has developed several comparative advantages. However, it also faces many challenges and future threats that will test the growth of the sector. A number of Australia’s current challenges, including project costs and regulatory stability, were once recognised as advantages. This section highlights the fact that advantages can be easily lost. Figure 10 illustrates a number of Australia’s advantages and challenges which are further detailed below.
Figure 10: Australian oil and gas advantages and challenges
Advantages
Challenges
Advantages can erode without sustained investment
Challenges can become advantages if they are prioritised and addressed
More than $200 billion has been invested in Australian LNG projects in the past decade,87 pushing Australia into the top tier of LNG-exporters that includes Qatar, and increasingly the US.88 This investment has catalysed the development of new expertise in areas such as logistics planning, international trade, and LNG production. This expertise affords operators in Australia a unique opportunity to become world-leaders in LNG operations and maintenance, helping to solve industry-wide challenges in the short to mid-term. In the longer term, these capabilities can help Australia to play a lead role in the development of new LNG capacity.
Australia also has considerable conventional reserves. Natural gas proven reserves plus contingent resources were measured at 169tcf at the end of 2014 – nearly twice that of CSG and shale gas. This represents a large portion of Australia’s total prospective conventional gas resources of 214tcf.
Nearly 9.4 billion barrels (bbl) of crude oil and Natural Gas Liquids (NGL) have been produced from nine major basins across Australia, with about 5.4 billion bbl remaining. Prospective petroleum estimates are anticipated to be even higher. For example, prospective NGL alone amounts to nearly 7 billion bbl, and there is thought to be 14.5 billion bbl of crude yet to discovered. Australia’s total proven oil reserves rank 25th globally, an estimated 0.2% of the global reserves.89
Unconventional oil and gas has transformed the global oil and gas market. By 2040, unconventional resources are expected to meet significant portions of the world’s energy demand.90
Australia can capitalise on these trends by developing its potentially large unconventional prospective resources. However, the extent of these resources will remain uncertain until they are more extensively appraised with exploration and test wells – a costly endeavour. Currently, proven unconventional proven reserves plus contingent resources are relatively small, with CSG at 75tcf and shale gas at 11tcf.91 Prospective estimates are much higher. Australia may possess 6% of the world’s CSG resources (235tcf), alongside the world’s seventh largest shale gas resource (437tcf) and sixth largest shale oil resource (18 billion barrels).92
Australia’s location gives it a key advantage over many other oil and gas jurisdictions. Australia is perfectly situated to export oil and gas to Asian markets. As the majority of energy demand growth to 2040 is projected to come from developing nations,93 Australia is well positioned to deliver to the market, with lower transportation costs than other global competitors.
Australia has well-regarded research institutions and consortia that focus on oil and gas in a range of areas, from subsea engineering systems94 and geosequestration95 to the engineering and socio-economic issues related to unconventional oil and gas.96 These entities comprise a research capability that can be leveraged to solve Australian-specific exploration and development challenges.
Exploration and production costs in Australia are high. The cost of drilling an onshore exploration well is more than two and a half times that in the US.97 Offshore, costs have increased by a factor of nine in the North West Shelf over the past decade.98 Construction costs are also high, exemplified by significant cost overruns on several multi-billion-dollar projects in recent years.99
As Australia’s costs increase, low-cost competition abounds. Costs of a greenfield LNG project in East Africa is estimated to cost 20% to 30% less than in Australia.100 The threat of cheaper LNG sourced from the US shale revolution (transported easily across the country in existing pipeline infrastructure) is becoming real, as exports increase at a record pace.101
Taken together, high costs and cheaper competition mean that Australia may miss out on the next wave of oil and gas investment. This would diminish Australia’s role in supplying the new LNG capacity needed to meet future gas demand projections past 2020.102 At risk is at least $243 billion worth of LNG, gas and petroleum projects.103 High costs also mean that Australia could struggle to economically develop its unconventional resources (those which require a high number of wells to be drilled). This would have an impact on the economics of existing east coast LNG infrastructure, as well as the prospects for unlocking shale gas resources in the future.
Historically, the Australian oil and gas sector has had great success with attracting investment due to Australia’s stable economy and robust democratic systems. However, in recent years, this picture of stability has eroded and companies now consider political risk to be high in Australia.104 Four types of regulatory uncertainty challenge future investment in Australian resource developments.
Firstly, constraints on onshore exploration will deter discovery and development of Australia’s unconventional resources. Bans, moratoria or restrictions are already in place (covering practices such as onshore exploration and hydraulic fracturing) in the Northern Territory, Victoria, New South Wales and Tasmania, with calls for similar measures in South Australia and Western Australia.105
Secondly, there is uncertainty about future emissions policy,106 which primarily concerns the future viability of high-concentration CO2 gas fields. Numerous policies and regulations aimed at managing climate change have been introduced and repealed in Australia over the past decade.107 As a result, investment delays are occurring across many sectors,108 including oil and gas.109
The third challenge is gas export restrictions. The Australian Domestic Gas Security Mechanism (ADGSM), announced in June 2017,110 may challenge individual companies’ ability to fulfil existing international supply agreements. If it succeeds in momentarily reducing domestic gas prices, State royalties will be reduced and private investment will be discouraged. This may undermine current and future oil and gas contractual agreements in Australia.
The fourth challenge is high levels of regulatory complexity, including multiple overlapping regulatory bodies, particularly for the onshore sector. More than 50 agencies are involved in regulating the Australian oil and gas industry,111 adding to the complexity of the system and creating uncertainty that may undermine industry investments. Regulatory compliance requires an understanding of Commonwealth and State regulations, covering everything from health and safety and industrial practice to environmental management and land tenure issues.
Gaining social licence to operate is an important activity across both onshore and offshore operations.112 The loss of social licence may manifest in investment delays and even project cancellations, which will in turn hinder domestic energy security, damage the country’s image as an attractive investment destination, and ultimately slow Australia’s economic growth.
With low oil prices and the ongoing commoditisation of LNG, global investments in upstream oil and gas exploration have declined in recent years.113 In Australia, offshore petroleum exploration has dropped by nearly 90% since 2008.114 In Queensland, exploration expenditure dropped by nearly 27% between 2015 and 2016.115 Reduced exploration activity will ultimately reduce the industry’s reserve replacement performance. More acutely, a lack of exploration investment will delay the appraisal and development of Australia’s significant unconventional resources. Outside of Queensland’s CSG industry, unconventional gas exploration remains in its infancy. Unconventional resources remain undeveloped in South Australia and Northern Territory in particular and, with the right development pathways and policies in place, these could be matured to supply domestic users or export markets.116
Despite Australia’s robust research sector, there are a relatively low proportion of research activities that deliver commercial outcomes. The most recent Global Innovation Index report placed Australia 76th out of over 127 countries for innovation efficiency – a ratio of innovation outputs to inputs.117 In 2014–15, only 8.4% of all Australian companies introduced a product that was ‘new to the world’. Instead, an estimated 75% of all product innovations reported by firms operating in Australia are simply adopted from other firms.118
Innovation in the oil and gas sector is even more difficult, with uptake of new technology across the sector recognised as being relatively slow. It often takes many years to achieve high levels of technology adoption. Consequently, supply chain businesses tend to focus on developing incremental improvements to existing products rather than pursuing truly novel solutions.119 Furthermore, operators in the sector are extremely risk adverse when it comes to trialling new technologies in ongoing operations. Operators prefer well-tested technologies and reliability over the promise of a novel piece of equipment that could potentially disrupt a viable production well or compromise on safety, regardless of the potential savings.120
A 2013 global survey of oil and gas companies reported that, in the three years prior, 60% of new technologies deployed came from companies headquartered in the US, compared to less than 1% from Australian businesses.121 A lack of local investment is one probable cause – only about half of the oil and gas companies
operating in Australia actually conduct any research and development,122 a slightly lower average than Australian industry as a whole. Although these figures are only indicative, they suggest that Australian oil and gas companies rely upon international companies or their foreign parent companies for technology. With a lack of R&D investment, it may be challenging for Australian companies to develop breakthrough technology that can help to unlock Australia’s oil and gas resources. There is risk in Australia relying solely on international oil and gas companies to make the significant R&D investments needed to unlock the specific resource plays located here.
Closely related to innovation and commercialisation is collaboration. Collaboration between business entities and research institutes is critical to a healthy innovation ecosystem. Australia regularly ranks very low among the 27 OECD nations when measuring the percentage of businesses that collaborate with research institutions.123
Although oil and gas firms regularly form joint ventures to share costs and risks of new oil and gas developments, they rarely do so for the explicit purposes of innovation. In one study, more than one quarter of Australian oil and gas firms were found to have no formal strategic collaborations with external parties, which significantly decreased their chances of producing a new product or service innovation.124 Another study showed that oil and gas firms with fewer formal collaborations were also likely to have low organisational productivity levels.125 Even within the oil and gas sector, there are relatively few formal collaborations between companies in the same line of business.126
This Roadmap presents four strategic opportunities that could support the long-term growth of the Australian sector, by addressing some of its most pressing challenges. These opportunities (identified through consultation with oil and gas operators and service firms) are driven by the megatrends and leverage Australia’s comparative advantages. The alignment of each opportunity with NERA’s sector knowledge priorities are outlined in Appendix 1.
Each of the four opportunities are detailed in this chapter, supported by potential applications for oil and gas companies, and in some cases, the broader supply chain (see Figure 11). Importantly, the potential applications listed in this section are not intended to be an exhaustive list, but rather a starting point for discussion and consideration. Each potential application listed is supported by a number of short-, medium- and long-term prospective technology outputs and solutions.
Figure 11: Oil and gas opportunities along the value chain
1. Enhanced basin productivity
Technology breakthroughs will help lower the cost of locating resources and producing reserves, thereby improving the global cost-competitiveness of the industry.
Potential applications
2. Digital operations and maintenance
Rapidly evolving digital technologies provide opportunities for safer and more efficient O&M of oil and gas assets.
Potential applications
3. Advanced environmental solutions and processes
Developing technologies and processes that reduce the environmental and social impacts of field developments and processing plants, may also provide financial benefits to the Australian oil and gas sector.
Potential applications
4. High-value diversification
Businesses should consider adapting their business models and diversifying into higher-value product and service offerings to gain competitive advantage and hedge against an uncertain future energy mix.
Potential applications
Upstream
Midstream
Downstream
Decommission
Technology breakthroughs will help lower the cost of locating resources and producing reserves, thereby improving the global cost-competitiveness of the industry.
The cost of exploration and production of Australian oil and gas resources has been steadily increasing for a number of years. Globally, it is estimated that the costs of finding and developing new reserves have increased on average six-fold between 2000 and 2013.132 Technologies that enable relevant cost efficiencies, especially offshore and in unconventional plays, represent a large target for investment for the sector.
This section focuses on three potential targets for cost-efficiency and productivity improvement in this area.
Figure 12: A sample future vision for enhanced basin productivity
An accurate understanding of the subsurface is critical to locating resources and making Australian basins more productive. Locating oil and gas using existing methods, such as 2D or 3D seismic reflection technology, can be time-consuming, high-cost and high-risk. New methods and technologies need to be found to drive down exploration costs, improve the accuracy of exploration data and increase the quality of imaging at the basin level.
Seismic surveys are costly,133 time consuming and may have adverse effects on the environment. New methods of acquisition should focus on acquiring data in a fashion that is quicker, cheaper, and more accurate, while minimising the impacts on sea life. For example, recent modelling shows that vibrating sources could potentially provide an environmentally safer alternative to conventional airguns without compromising effectiveness.134 Furthermore, autonomous exploration vehicles135, and robotically-enabled autonomous seismic acquisition,136 are increasingly likely to be used to discover offshore hydrocarbons in remote areas.
Onshore seismic acquisition can also be problematic in remote areas where vehicles carrying the seismic wave generator face logistical challenges. Most of Australia’s onshore resources are located in very remote areas. For example, the Beetaloo sub-basin – a shale resource currently in the exploration phase – is located 500km south-east of Darwin in the Northern Territory and covers an area of 18,500km2.137
Ways of addressing these challenges range from better management of pre-competitive data to using AI and new modes of acquisition.
Firstly, improvements in the management of pre-competitive data could significantly increase exploration efficiency. These datasets may at present be incomplete, non-standardised or be held in different databases depending on jurisdiction. Onshore pre-competitive data is separately administered by each state or territory government, while Geoscience Australia (GA) curates data for Australia’s offshore regions. GA receives newly collected exploration data within the statutory submission period and makes data publicly available after the statutory timeframes. This framework may lead to exploration inefficiencies, with opportunities to apply big data analytics being missed due to very limited standardised national datasets. Subsurface geophysical, petrophysical and available production data should be centrally available to facilitate geological understanding of entire basins and corresponding reservoir dynamics. This would improve exploration efficiency by providing pre-competitive data necessary for basin-wide models that help to identify potential locations for drilling and production.
Secondly, new technologies for interrogating and interpreting seismic data represent another opportunity to improve exploration success. One approach is to use AI to improve seismic inversion and interpretation. Neural networks, fuzzy logic, and genetic algorithms have already been shown to improve seismic inversion.138 Even greater potential may lie in the sophisticated inversion of other data types, such as those from wireline and electromagnetic surveys, to provide greater resolution and accuracy in subsurface imaging.
Thirdly, it is unclear whether computational improvements for conventional exploration data alone will be sufficient to overcome the problem of imaging thin reservoir horizons that require sub 10-metre resolution – those which characterise many unconventional resources. Although continued refinements in seismic acquisition, including multi-frequency seismic source technology and multi-azimuth acquisition, can provide the raw materials to create a truer image from the data, the seismic paradigm may be reaching its theoretical limits. Emerging alternative technologies, such as quantum gravity sensors, may improve the ability to precisely locate and image resources.139 However, it remains unclear exactly what the next subsurface acquisition paradigm that could outperform seismic will be.
Figure 13: Key prospective technology outputs and solutions
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Increasing exploration success |
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A significant opportunity exists to drive down the costs of drilling and completing wells through advanced technologies, new designs and processes. These costs are high and are increasing due to many factors. Onshore, these include the remoteness of Australia’s basins, poor infrastructure and supply chains, and lack of benefits that would accrue from economies of scale from a more active exploration and production landscape. These factors will become even more pronounced in future unconventional gas developments. This is because they will require thousands of wells to be drilled, and the scale of these endeavours will magnify cost inefficiencies in drilling, completions and in supply chain operations. Offshore, costs have been increasing due to a range of issues that are not likely to subside. They include long travel distances from major transport hubs, relatively high Australian labour costs, a trend towards drilling further offshore in deeper waters and in areas with less favourable metocean conditions, such as geomechanical instability in areas of high stresses and pressures.
To address these cost pressures – onshore and offshore – digital solutions, including automation, IoT, AI, and robotics, as well as new well designs and stimulation technologies, have the potential to drive down the costs of wells and completions, improve insights derived from exploration wells, and improve long-term performance of production wells. Several examples follow.
Offshore, seismic inversion and machine learning could be combined to automate and standardise the process of identifying and mitigating the risks of high stress/pressure conditions in Australian basins, for instance by integrating seismic data with previous well instability events. Collaboration between operators is necessary to support this approach.
Real-time data from ‘logging while drilling’ systems is being used to ‘geosteer’ wells to their intended positions and avoid hazards such as faults. Greater use of drilling data and logging information, including gas logs, rapid determination of stratigraphic age with microfossils (so-called ‘biosteering’140), pressure while drilling and rock property information from returned cuttings could, with better integration, enable more rapid updates of geological models in real time. This would ensure the well and completions are implemented to maximum effect, achieved more rapidly and safely, and at lower cost.
Using the noise from drilling itself as a seismic source is now possible, offering the possibility of creating a vertical seismic profile of the region close to the wellbore. These data could be used to update the full 3D seismic image and ‘ground truth’ depth and rock information. The time required to do this could be shortened by improved algorithms and higher computational speeds. Ultimately, this could result in a constantly recalibrated seismic image, available in near-real time, essentially closing the loop in the geosteering process.
Unconventional resources such as shale and some tighter coal seams require stimulation techniques like hydraulic fracturing to induce the flow of hydrocarbons. Continued advances in fracture characterisation techniques, such as advanced modelling and simulation, microseismic and tiltmeter monitoring, and tracers, will help to more accurately depict the location and growth patterns of induced fractures and support optimum productivity.141 Furthermore, greater understanding of the propagation of fractures and their interaction with natural faults will facilitate environmental stewardship.142
Future Australian shale developments will require substantial water inputs to support the required hydraulic fracture stimulation. This will necessitate sustainable water sources, methods of recovery, and treatment regimes to be viable in Australia’s water-scarce areas and to assuage social concerns. The development of less water-intensive stimulation techniques together with technologies able to utilise lower quality water could deliver significant economic and environmental benefits for unconventional resource developments.
Ikon Science’s RokDoc Ji-Fi software system, developed in collaboration with CSIRO, integrates seismic and well data to derive quantitative predictions of rock, fluid and reservoir properties. These inversions are generated through sophisticated rock physics modelling and risk analysis.
Rokdoc can provide decision support for exploration, production and drilling activities and has been used to generate high-fidelity production predictions for numerous late-stage oil and gas fields around the world.143
Figure 14 shows the results of facies prediction from seismic inversion of a North West Shelf data cube using the Ji-Fi toolbox. The position of the 2D vertical section is shown on the inset time slice amplitude map at Upper Triassic level. The inversion correctly identifies gas sands in red, penetrated by the Pyxis-1 exploration well. Several undrilled targets are also identified in the seismic data cube.
Figure 14: Bayesian inversion of 3D seismic data
Source: CSIRO, 2017
Figure 15: Key prospective technology outputs and solutions
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Advances to drilling and well completion |
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Although the global average recovery factor144 for oil is 35%,145 many Australian oil reservoirs consistently achieve recovery rates of above 50%, without the use of enhanced recovery techniques.146 Enhanced Oil Recovery (EOR) technologies have been limited in their use in Australia. However, improved oil and gas recovery strategies – through optimal well positioning and whole of life field management enabled by well surveillance and time lapse sensing – have the potential to yield further improvements in ultimate recovery factors for Australia’s reservoirs.
Improving gas recovery rates and extending the life of existing reservoirs to feed the growing LNG industry represents a significant opportunity. One potential technology is microbially enhanced coal bed methane,147 also known as Reservoir Rejuvenation Technology (R2T).148 This involves enhancing the activity of microorganisms in coal seams to stimulate new methane production. Another approach is enhanced gas recovery (EGR), using CO2 to displace hydrocarbon gas into wells.149 Preliminary studies find this approach feasible in coal seams, but more research is needed to understand its potential across a range of coal types. Subsurface CO2 injection for aquifer pressure support could also assist in maintaining production and extending the life of offshore, high CO2 gas fields while at the same time disposing of a significant waste gas stream.
Other improvements to recovery factors over the medium to long term will come from a range of technologies. For example, data provided by shapeshifting autonomous down-hole robots may help optimise recovery factors and prolong field life, and could potentially be directly integrated into automated production management systems. Advanced reservoir characterisation technologies will allow for more efficient and informed ‘sweet spotting’ or targeting of hydrocarbons. Improved identification of sweet spots minimises the required number of hydraulic fractures, improving the overall economics.150
Figure 16: Key prospective technology outputs and solutions
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Improving recovery rates |
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CSIRO is conducting research to enhance gas production by using cultured indigenous microbes which are active in coal seam gas reservoirs and produce secondary biogenic methane.
A long-term field trial will be undertaken where microbes and nutrients will be injected into the reservoir to optimise gas generation. If successful, this research will lead to the development of a technology to increase methane content of CSG reservoirs and enhance production.151
A variety of technologies and research programs will be required to make Australian basins more productive. Research priorities to enable these developments are detailed below.
Digital technologies
Hydraulic fracturing
Subsurface imaging
Enhanced recovery
In order to unlock this opportunity, several suggestions for improving the business ecosystem are presented for consideration.
Processes, standards and regulations
People, skills and collaboration
Rapidly evolving digital technologies provide opportunities for safer and more efficient O&M of oil and gas assets.
(Note: digital technologies for exploration and field development are discussed in Section 4.1)
The potential to capitalise on digital technologies in the Australian oil and gas sector is significant, given looming operational expenditures, which are important targets for cost reductions. For example, the annual expenditure on Australian LNG operations and maintenance is expected to increase from $1.3 billion in 2014 to $4.9 billion by 2020.157 Australian operators should continue to investigate the potential of digital technologies to decrease costs by streamlining operations and maintenance activities. These technologies include the Industrial Internet of Things (IoT), advanced sensors and analytics, machine learning, artificial intelligence (AI), automation, and integration of other digitally enabled technologies.
With Australia’s comparatively high labour costs and the remoteness of both offshore and onshore resources posing logistical and health and safety challenges, automation is a key opportunity. Digital solutions that enable the remote operation of facilities, such as Remote Operation Centres (ROCs), robotics and unmanned vehicles are all well-suited to address these problems. Moreover, autonomous and digital technologies may actually be required, in order to comply with harsher future inspection regimes that may call for continuous monitoring capability.158 For example, to ensure plant integrity, digital imaging may emerge as a requirement for independent structural validation of as-built drawings.
With Australia’s mining sector also looking to pursue greater automation and integration of digital solutions,159 Australia’s oil and gas sector may be in a position to parlay its digital expertise to create new technologies with the mining sector.
Digital advances are expected to assist the sector in gaining cost efficiencies through improved productivity of operations, alongside protecting its workforce. Through consultation with the industry, two key applications have been identified:
Figure 17: A sample future vision for digital operations and maintenance
Digital technologies have broad appeal and are poised to transform exploration, production, inspection and maintenance activities across onshore and offshore developments. In exploration, future developments may see autonomous vehicles powered by solar, wind and wave energy, outfitted with seismic acquisition technology with the potential to transform how resources are found.160 In drilling, recent advancements in robotics could soon allow nearly complete automation of drilling and construction offshore well bores.161 In operations, unstaffed offshore platforms (similar to those currently used in the Gulf of Mexico) will be used to exploit smaller reserves162 using tele-operated robotics supported by human operators in consolidated remote operations centres.163
Artificial Intelligence (AI) – A branch of computer science involving the replication of intelligent human behaviour using computer algorithms.
Machine learning – A class of AI algorithms that use large amounts of input-output data to learn patterns which are then used make decisions without requiring direct human intervention.
Artificial neural networks – Machine learning models based on emulating neurophysiology of the human brain to establish multidimensional, nonlinear, and complex models.
Cognitive computing – A high-level computing system that composes multiple hypotheses to make decisions based on modelling in context and learning from data. The system provides a series of alternative answers along with an explanation of the rationale or evidence supporting each answer.164
Augmented and virtual reality – Augmented Reality (AR) is representation technology that superimposes computer-generated content over a live view of the physical world to a user using either a conventional display screen or head mounted display.
Unmanned vehicles – A broad range of mobility platforms having different levels of vehicle control from manual, supervised or autonomous. Examples include:165
The future of maintenance activities for the sector will increasingly see routine monitoring and inspection conducted remotely or autonomously to capitalise on considerable cost efficiencies and health and safety benefits that can be gained by de-staffing these activities. Active maintenance will also be increasingly conducted remotely, as robotic technologies become more agile and reliable. For example, UAVs (already being deployed in CSG gas fields) will soon be regularly used to check valve positions, read gauges, detect leaks and perform surface condition monitoring. Low-cost sensor networks will be capable of monitoring production data, corrosion and fatigue. Queensland’s geographically dispersed and remote CSG industry, with its numerous wells, may be an ideal test-bed for this remote monitoring technology. Remotely operated undersea welding equipment may remove the need for diving welders to enter dangerous environments. ROVs will be used to operate subsea infrastructure, and AUVs will be used for subsea inspection and survey. Similarly, robots may be used to perform confined space inspections of pipelines and tanks, as well as gas and fire detector testing, sampling, pigging, cleaning, and refilling.166
Moreover, there is considerable potential to drive down the costs of non-routine inspection and maintenance with digital technologies such as Virtual Reality (VR), Augmented Virtuality (AV) and Augmented Reality (AR). Non-experts can be trained by VR, can visualise complex information more efficiently with AV, and perform interventions with the aid of remote expertise via AR. In the longer term, it is anticipated that remote-controlled or even autonomous robots will be used to conduct the majority of non-routine inspection and maintenance tasks.
Remote operations in the offshore environment are already occurring with some smaller platforms already unmanned. These ‘Not Normally Manned’ or ‘Nominally Unmanned Installation’ production facilities are controlled and monitored remotely through ROCs. Remote operations will be further enabled by developments in reliable electrically-driven subsea production and processing, reducing the need for expensive offshore platforms and associated onshore infrastructure. For example, subsea compression equipment can extend the feasible length of long tie-backs to bring new fields into existing processing facilities. Automation is a critical aspect of subsea processing as the equipment is required to run autonomously for many years in order to fully realise potential capital savings. Robotics, either remotely operated or autonomous, are needed to perform inspection and maintenance interventions. The Australian industry could take the lead in the development and testing of subsea technologies, including lightweight and efficient processing equipment such as boosters, compressors and separators. Advances in these technologies are critical to the further economic development of Australia’s remote offshore resources.
Figure 18: Key prospective technology outputs and solutions
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Robotics, automation and remote operations |
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Although digital technologies are not new to the oil and gas sector the full potential of these technologies has not yet being realised. Some estimates show that operators are using less than 1% of the data being captured at the well.170 Improving operational and maintenance efficiencies represents a huge opportunity that digital technology can unlock. By using data from sensor networks and cloud-based analytics, companies can reliably predict the probability of equipment and process failures in order to reduce or eliminate unplanned maintenance and costly down-time.171 The economic benefits of this are significant. For example, GE estimates that unplanned outages cost the LNG industry approximately US$11 million per day.172 Furthermore, unplanned downtime is estimated to cost offshore oil and gas organisations US$49 million annually.173
Cognitive computing platforms (for example, IBM’s Watson and Google’s Deepmind) can digest reams of historical data and documents, and be trained to interact with human operators to provide insights used to inform decisions. These technologies apply reasoning and learning to very large data sets and can help to rapidly retrieve information and find answers to complex operational problems. Cognitive computing can use both structured and unstructured data, including documents, diagrams, and even weather reports, to build a knowledge base.
Supply chain optimisation is another application for digital technologies; helping to seamlessly communicate production, operational and logistical data throughout the supply chain in order to optimise operations for the many different businesses involved. Big data analytics and AI can be applied to more efficiently match supply with demand,174 while Blockchain technology may be employed to streamline contracts and payments to gain further efficiencies.175
Figure 19: Key prospective technology outputs and solutions
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Optimising operations and supply chains |
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Woodside has invested in advanced digital technologies to help improve operations – outfitting its Pluto LNG plant with over 200,000 sensors. Data from these sensors are stored in the Cloud and managed by third party services. Data are fed into over 6,000 statistical modules, where machine learning algorithms predict operational problems and maintenance issues, providing Woodside with days, and sometime weeks, of advanced warning of potential process upsets.177
Woodside is also investing heavily in cognitive computing; for instance, using IBM’s Watson cognitive capability to become an expert in the company’s operational history. Woodside has provided Watson with 30 years of operational detail, including nearly 30,000 historical documents, with the view to recognising patterns and generating new insights from them. Engineers can converse with Watson in natural language and obtain answers to their queries in seconds – a process which drives operational efficiencies and cost savings.
Many digital technologies are still in their infancy, requiring further development prior to meaningful integration and adoption. For example, robots are largely constrained to single tasks, and currently lack the robustness and dependability to enable completely autonomous operations. Integration of components into a systems-level framework or platform will be critical in enabling the future development of digital oil and gas solutions.
Research priorities to enable these technical developments are detailed below.
Sensors, networks and analytics
Robotics and unmanned vehicles
Virtual and Augmented Reality
Integrating advanced materials
In order to unlock this opportunity several suggestions for improving the business ecosystem are presented for consideration.
Processes, standards and regulations
People, skills and collaboration
Companies will need to prioritise and actively support digital transformation and integration efforts.
Developing technologies and processes that reduce the environmental and social impacts of field developments and processing plants may also provide financial benefits to the Australian oil and gas sector.
The oil and gas sector faces several environmental and social challenges.
Firstly, the sector is energy intensive, consuming about 20% of its output for its own needs.183 Becoming more efficient would reduce the sector’s energy intensity and would help the sector reduce its emissions intensity, thereby supporting Australia’s global commitments made to meet the COP21 goals.
Secondly, there are growing stakeholder concerns and opposition to the oil and gas industry. This has been particularly evident in onshore unconventional developments, and in development of new basins and infrastructure offshore. There is also growing opposition to the continued focus on non-renewable energy sources. Onshore, key concerns relate to land access, threats to water and air quality, and effects on native flora and fauna. Offshore, stakeholder concerns are largely focused on the potential impacts of oil spills. However, other issues, such as impacts of sound on marine life, are also generating wider stakeholder interest.184
Lastly, due to the number of ageing facilities in Australia, the decommissioning of wells and infrastructure will become a growing focus of both industry and government, and is also likely to generate interest from stakeholders and other users of the marine and terrestrial environments.
Given these and other pressures, there is considerable opportunity for Australian research organisations and oil and gas companies to develop a range of new solutions, ranging from technologies to improve environmental outcomes to new methods for decommissioning infrastructure. New technologies can improve water and air quality and help to mitigate environmental concerns.
This section focuses on just three potential applications for advanced environmental solutions, noting that there are many more pathways that could be pursued:
Figure 20: A sample future vision for advanced environmental solutions and processes
Better technologies are needed to allay water concerns on multiple fronts.
Firstly, some CSG and (future) shale developments may require drilling through water aquifers. This will require robust water treatment processes and technologies to prevent contamination of groundwater, and affordable sensor network technologies to monitor and verify it. This is a primary concern of stakeholders, especially landholders, farmers and remote communities, who rely on groundwater for their livelihood. Technologies that monitor and prevent groundwater contamination and treatment technologies are vitally important to the sector, and are expected to undergo rapid development and improvement. Developments such as advanced bio and nano-sensors, affordable sensor networks, and in situ remediation technologies, are needed.
Secondly, improved technologies are needed to manage water, both onshore and offshore. For example, an onshore CSG well in Queensland averages 30,000 litres of produced water per day.185 This produced water is usually high in salt and contains contaminants that must be separated before disposal or reuse. Currently, this water is either placed in large holding ponds or piped great distances to centralised processing facilities. Centralised processing does not afford any opportunity for the water to be reused where it was produced, opening up an opportunity to develop low-cost, distributed water treatment technology to be located near the well head.
A related problem is the large amount of salt by-product contained in CSG produced water.186 The high likelihood of increasingly stringent environmental regulations related to production effluent187 will translate into higher production costs, unless cost-effective treatment, re-use, monitoring and verification technologies can be developed. In the marine environment, baseline measurement and operational monitoring is needed to enable, among other things, cost-effective and robust spill preparedness and response.
Offshore, there is ongoing debate regarding best practice management of produced water, largely in relation to the fate and effects of various chemicals within the produced water. The global produced water to oil ratio is approximately 3:1, and the produced water ratio for gas is even higher.188 This remains an area of focus for regulators, and continues to be an ongoing area of uncertainty and expense for offshore operators. New technologies and solutions that help to improve water treatment processes, while, at the same time, accommodating the space and weight limitations and motion on offshore platforms, will be increasingly important.
Thirdly, where possible, beneficial reuse of produced water is an attractive solution for the sector, especially in water-scarce regions of Australia where competition for water may be an issue. Reuse applications include aquaculture, agriculture, coal washing, construction, landscaping and revegetation, industrial and manufacturing operations, research and development, incidental land management, and recharging of aquifers. The Chinchilla Beneficial Use Scheme highlights the potential for reusing CSG produced water. High-quality treated CSG water is piped to the Chinchilla Weir, where it supplements the water available for use by irrigators in the area.189
Fourthly, many future unconventional plays will require water to support hydraulic fracturing of the source rocks. Shale and other tight gas resources will require high-pressure water to introduce fissures into the rock to stimulate gas flow from the highly compact source rock material.190 Finding source water may be problematic in water-scarce areas of Australia, prompting the need to find low or no-water fracturing technologies (also refer to Section 4.2.2). Locally sourced low-quality (e.g. brackish) water, or produced water from other operations (if transport distance is feasible), should be researched as viable alternatives.
Overall, in terms of managing all of these water inputs, best practices will need to be employed to reduce the perceived risks of spills, avoid subsurface contamination, and to appropriately manage the use of surface waters.
Figure 21: Key prospective technology outputs and solutions
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Water quality and reuse |
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With the energy sector under pressure to reduce its carbon footprint, increasing focus will be placed on the energy intensity of operations, as well as venting and flaring practices. Although energy efficiency measures, integration of renewable energy and processes to convert waste gases instead of flaring (see Section 4.4, for instance) have the potential to reduce the sector’s emissions intensity, the high CO2 content of many gas reserves make this task difficult. Globally, it is estimated that 30% of gas reserves have a CO2 content of between 15% and 80%.191 If and when these reserves are produced, the sector will be pressured to either treat or avoid producing the CO2 altogether (for example, by leaving it in the reservoir). Development of technologies that directly help the sector to reduce such emissions should be a priority.
CCUS refers to the set of technologies used to capture, transport, and store or utilise CO2 emissions, preventing them from otherwise being released into the atmosphere. Despite its potential value in decarbonising the energy sector, global deployment of CCUS has been limited. For example, there are only 17 large-scale Carbon Capture and Storage (CCS) projects operational globally.192 Of these, only four are dedicated geological storage. The Global CCS Institute ranks Australia highly in its CCS Readiness Index.193 However, there are only a few active projects and only one commercial scale plant application – Chevron’s Gorgon Carbon Dioxide Injection Project, which is expected to become operational in 2017, sequestering between 3.4 and 4 MTPA of CO2.194
As the costs of capture and sequestration decrease, the oil and gas sector may be able to deploy the technology to assist in lowering the carbon intensity of its own operations. For example, LNG plants already employ CO2 separations technologies, so a portion of the costs are already covered and sequestering it remains. New offshore gas fields with higher CO2 content are also logical targets for capture and sequestration, particularly if this gas could be captured and reinjected offshore before being brought to shore. Using waste CO2 for enhanced oil recovery (EOR) is a possibility; however, due to the distance between the high-CO2 gas fields (usually located offshore) and applicable oilfields, dramatic cost reductions in transport methods would be needed.
There may be an opportunity for the sector to store CO2 in novel geologic formations. Currently only capped reservoirs – both relatively unconfined aquifers and depleted oil or gas fields – are used for CO2 storage projects. However, these fields are limited in number in Australia which, in turn, constrains the potential locations for sequestration. If more ubiquitous saline aquifers and uncapped formations could be utilised to store CO2, this would improve the chances that suitable sequestration locations could be found for new gas projects. These novel geologies, of course, need validation, but this can be accomplished using advanced computer modelling and through pilot studies leveraging the latest advances in monitoring, measurement and verification (MMV) technologies. Of course, the economics of such endeavours will be driven by a price on carbon emissions.
Proving that storage can work in many types of geologic formations would directly support efforts to decarbonise coal-fired power generation. It will open up opportunities for injection much closer to existing coal fired power plants, thereby improving the economics of capture and storage, and helping the electricity generation sector to meet its regulatory requirements. If coal is to remain a large part of the electric power generation capacity of Australia and other parts of the world, capture and storage will almost certainly be required in the coming decades. Taken together, this could present an opportunity for oil and gas firms to expand into new markets (if a cost on carbon is levied) by leveraging the sectors geologic expertise and applying it to the downstream power sector.
CO2 utilisation (i.e. the beneficial use or conversion of CO2) is a potential long term opportunity for the oil and gas sector to move into chemicals and higher-value fuels, and to establish new revenue streams. Already CO2 and other feedstocks can be converted into chemical intermediates like methanol and formic acid, and in some cases CO2 is being used for more novel applications like microalgae production for fish feed. However, the cost of conversion is currently high, and smaller-scale efficient conversion systems are needed. Furthermore, it is important to note that CO2 conversion technologies are not emission reduction pathways because no market for any chemical product is large enough to deal with the amount of CO2 needing abatement globally.
Fugitive emissions associated with this sector are those emissions released during the extraction, processing and delivery of oil and gas. In 2015, fugitive emissions from oil and gas were estimated to be 14 Mt CO2e – accounting for 2.7% of Australia’s total emissions. By 2030, these emissions are projected to increase by 25% on 2015 levels, with emissions from LNG production expected to more than double.195 Fugitive emissions have a direct impact on profit margins, so there is an explicit commercial incentive to reduce them but only if those methods are cost-effective.
There is an opportunity for the sector to build upon Australian experience and expertise, and lead the way in developing novel methods to cost-efficiently monitor and minimise fugitive emissions from the sector; in particular, in unconventional gas, due to the high global warming potential of methane. For example, efforts are underway to remotely identify, track and measure the volume of methane emissions from thousands of wellheads, and hundreds of kilometres of pipeline infrastructure, using lasers and space-based hyperspectral imaging.
Flaring is the controlled burning of waste gas streams, while venting is the practice of releasing gas streams to the atmosphere. Both practices lead to the release of emissions and need to be minimised through improved operational practices and by technological solutions such as advanced process control.196 Flared gas represents 4% of the total gas produced globally, prompting the World Bank Group to lead an effort to reduce it through the ‘Zero Routine Flaring by 2030’ initiative.197 Improved methods to cost-effectively capture and use or convert gases that are typically flared will directly improve process economics in oil and gas fields. For example, the LNG production plants in Australia provide an excellent opportunity to embed best practice and reduce venting and flaring, and to test and incorporate novel technologies for capture and abatement.
A solution for flaring offshore, where space and weight on the platform are at a premium, is particularly attractive. However, this would require significant improvements in process miniaturisation (to separate and convert gases), together with novel storage and/or transport solutions. One potential solution here may be the refuelling of seafaring vessels with traditionally flared gases that are captured and repurposed.
Figure 22: Key prospective technology outputs and solutions
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Reducing greenhouse gas emissions |
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Planning for the entire lifecycle of resource development projects provides significant opportunity to minimise the future cost liabilities to the sector. This is particularly true with decommissioning activities, which occur when oil and gas facilities reach the end of their productive life.
It is estimated that Australia’s future decommissioning liability is US$21 billion over the next 50 years.198 By 2040, it is estimated that over 100 offshore installations in Australian waters will require decommissioning.199 This liability stems largely from offshore petroleum infrastructure installed in the Bass Strait from the 1960s, and the North West Shelf in the 1980s. Onshore liability could also be very significant over the longer term, considering the large number of wells in the CSG industry, and the similar geographic span of future unconventional developments like shale.
There is a significant opportunity to minimise the economic impact by developing new best-practices and advanced technologies for decommissioning, alongside new uses for infrastructure prior to decommissioning. Better understanding of the decommissioning process could enable the tailoring of new infrastructure in ways that reduce end-of project liabilities, optimise environmental and safety outcomes, and minimise legacy costs.
For example, new technologies that more cost-effectively plug and abandon wells could result in significant savings. Another opportunity – which may present the optimal environmental, social and economic outcome in some circumstances – may be to leave offshore infrastructure in place or transition it for other uses, such as offshore wind farms or the development of tidal energy. Leaving subsea offshore infrastructure in place is predicated on the notion that its removal might cause more damage than leaving it in place. For example, transforming the infrastructure into artificial reefs may be a better option.200 This option may also eliminate the need to put divers in high-risk situations to remove infrastructure embedded in or on the sea floor, or eliminate the need for costly robotics to do the same. However, more research is required by industry, government and stakeholders to provide the scientific evidence necessary to enable comprehensive assessment of all decommissioning alternatives.201
Figure 23: Key prospective technology outputs and solutions
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Efficient and environmentally-sound decommissioning |
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Founded in 2005, LanzaTech has commercialised a carbon capture and reuse technology that captures CO2-rich waste gases and converts them to high value fuels and chemical intermediates. This company has received over US$150 million in investment from companies including Kohsla Ventures, Siemens and PETRONAS, and the technology has been successfully deployed in a number of sectors, including steelmaking and oil and gas.
The technology is based on a gas fermentation process. LanzaTech’s proprietary microbes have the capability to produce 20 different compounds, including ethanol, 1,2-Butadiene and 2,3-Butanediol; the latter being important chemical intermediates used in the production of nylon and rubber products. In collaboration with PETRONAS, the company is working on acetic acid-to-lipids pathways to produce jet fuel, diesel and gasoline.202
A variety of technologies and research programs are needed to facilitate these advanced environmental technology and process outcomes. They range from advanced separations technology and new materials to more nuanced understanding of marine ecosystems. Research priorities to enable these technical developments are detailed below.
Research Priorities
Separations
Sensors
Studies and modelling
Materials
Processes and equipment
In order to unlock this opportunity, several suggestions for improving the business ecosystem are presented for consideration.
Businesses should consider adapting their business models and diversifying into higher-value product and service offerings to gain competitive advantage and hedge against an uncertain future energy mix.
The industry faces a series of market, regulatory, and technological uncertainties that make projecting oil and gas demand and energy mix difficult, particularly in the long term. As pressure increases on the energy sector to lower its carbon intensity, oil and gas companies will need to adapt.
Many companies are already diversifying their offerings and repositioning themselves as ‘energy providers’ as a result of these changes. For example, some companies are moving into or expanding their gas resources, while other companies are moving into renewables. The biggest firms are exploring higher-value energy products, as demonstrated by Shell’s and Total SA’s investment in the Hydrogen Council. It is expected that together with large automakers they will invest US$10.7 billion in the hydrogen industry over the next five years.209
Within this realm, there are tremendous opportunities for operators and service firms. Industry interviews and desktop analysis highlight four examples of diversification, each of which are identified and explored in further detail within this chapter. These include:
Figure 24: A sample future vision for high-value diversification
In remote locations, electricity from the grid is often not an option, and diesel is used to power local communities and mine sites which, in turn, poses economic and logistical challenges. Oil and gas companies operating in remote locations usually burn valuable product to operate their equipment. None of these solutions are ideal. There are three examples described below, each one increasing in terms of their level of sophistication.
Firstly, an immediate win would be to develop small local gas fields to provide gas directly to nearby mine sites and communities to reduce the use of diesel. Diesel generators can be retrofitted to accept natural gas as fuel, or high efficiency gas turbine technology can be employed to supply the local microgrid.
Secondly, oil and gas companies can integrate renewable energy into their operations. This may include solar and wind for onshore and offshore, or tidal and wave power for offshore. Rapid cost reductions and continuing efficiency improvements in solar and wind power are making these options attractive alternatives to the burning of oil or gas or trucked-in diesel. These renewable technologies can be integrated into production and operations to power on-site equipment, such as artificial lift and compression. Gas powered hybrid systems can provide rapid respond base-load to even out intermittency of renewable energy.
Thirdly, to provide power for larger operations, some businesses in the sector are pursuing hybrid energy solutions to power microgrids and provide energy for oil, gas and mining operations. These solutions reduce reliance on costly diesel and other fuels by making better use of abundant renewable energy. Skills and capabilities developed in the creation of such systems for regional Australia can be parlayed into export markets for developing nations.
Figure 25: Key prospective technology outputs and solutions
Short term |
Medium term |
Long term |
|---|---|---|
Integrated energy services |
||
|
|
|
SunShift technology is a re-deployable modular solar PV-diesel hybrid power plant for off-grid use. A recent pilot demonstration project funded by the Australian Renewable Energy Agency (ARENA) saw a reduction of 36% in diesel use per kWh. Over the 81 day trial, an estimated 166 tCO2e was avoided.
The system consists of five different modules that can be integrated in multiple configurations depending on the end user’s needs. They include diesel generators, tanks, an integrator, solar sub-arrays and an optional lithium ion battery and inverters. The system is scalable, using component 50kW arrays.
Following the LNG construction boom of the last decade, companies are now delaying investment decisions regarding new plants. Changing market conditions have left operators searching for new ways to deliver gas with the least amount of capital and operating expenses.
The industry is likely to focus on minimising costs in two ways. Firstly, it will leverage existing LNG plants by optimising production of existing plants, and perhaps building additional trains to them, rather than investing in new greenfield projects. Any new trains that are built will utilise the latest technological advances to drive down costs.
The second approach will be to shift focus towards smaller developments that do not require such significant capital investments. The problem is finding ways to bring these (often stranded) assets to market. This challenge can be overcome using low-cost mini-LNG and small floating LNG (FLNG) technologies.
The appeal of mini, small and floating assets are their shorter development and deployment timelines, relatively low capital and operating costs, and ability to unlock small stranded resources (~0.5 to 1.5tcf fields212). In remote areas of Australia, small-scale LNG can enable economic development that would otherwise be limited by a lack of electric supply infrastructure.
Similarly, small FLNG may have many advantages over traditional offshore gas developments. For example, depending on the economics, these vessels (with some reconfigurations depending on field conditions) can be readily redeployed, giving operators market flexibility to maximise profits. They may also be built from older vessels that have been repurposed, potentially offering reductions in capital cost.213
The market for small and mini-LNG and small FLNG is potentially significant. Estimates of stranded gas fields (those larger than 48bcf) outside the US amount to 2,612tcf of gas. Australia has an estimated 173tcf of stranded gas assets214 with total potential market value of $1.8 trillion.215 Many of these stranded assets are located offshore, in remote or deep locations where large scale LNG plants are not suitable due to the need to install pipelines over long distances, or where there are significant environmental issues related to locally situating plants. These stranded assets make Australia an attractive location for mini-LNG and small FLNG.
Figure 26: Key prospective technology outputs and solutions
Short term |
Medium term |
Long term |
|---|---|---|
Small and mini-LNG and small FLNG |
||
|
|
|
There is a potentially large global market for LNG to power heavy transport vehicles, such as trucks, trains and ships, with demand for these applications expected to exceed 100MTPA by 2030.216 This is driven by the many advantages associated with the use of LNG as a diesel substitute. These include cost efficiency over diesel per unit of energy, lower emissions profiles, and fewer particulates. LNG also has advantages over liquefied petroleum gas (LPG) as it is considered more environmentally friendly due to lower emissions and lower running costs.
However, there are challenges in implementing this vision. For example, there is the issue of safe and cost-efficient storage of LNG at smaller scales in bunkering applications for ships, and similar infrastructure for regional ground transport hubs. Advanced materials and insulators would be needed to sufficiently lower storage costs. In addition, LNG-powered engines for long-haul applications are currently expensive and the costs of switching from diesel powered drive trains to LNG would take time. In the interim, mini-regasification terminal infrastructure would be required to more easily use LNG in the form of lower-pressure Compressed Natural Gas (CNG). Formerly diesel-powered transport vehicles can be more easily converted to CNG, and it is more applicable for equipment with more intermittent use patterns.
There is room for growth in the Australian market for LNG-powered ground transport. LNG currently accounts for less than 1% of all transport fuel.217 Conservative estimates conclude that for Australian trucks, public transit, mining vehicles, ships and rail applications to switch to either CNG or LNG could require 3.7bcm per annum of natural gas (approximately 2.7MTPA LNG equivalent) by 2030.218
Rail also provides a market opportunity, albeit smaller. Converting the estimated 1,500 locomotive engines that carry iron ore and coal around the country to LNG would require about 0.3bcf (0.2MTPA LNG) per annum.219
Since the 1970s, LNG has been used for marine vessels; however, there has never been a compelling economic or regulatory case for making this standard practice. This scenario is quickly changing, driven by new regulations, such as: sulphur content reductions for marine fuels by 2020;220 potential broader implementation of Economic Control Areas (ECAs) which result in stricter emissions levels around ports; and industry-led greenhouse gas reduction efforts.
Globally, the potential maritime LNG opportunity is large, with upside estimates of between 30 and 60MTPA by 2030.221 Domestically, demand could also be robust; conservative estimates of supplying just half of the coastal ship fleet would require only 0.44bcf (0.32MTPA LNG).222 However, an optimistic scenario could see much higher demand. In 2030, the projected number of calls to Australian ports from container and bulk carrier ships is expected to increase by nearly 60% to a total of 34,300 per year – or potentially around 94 ships per day needing fuel.223
Woodside Energy is already moving to capitalise on this market, having recently commissioned Australia’s first LNG-fuelled support ship.224 This is part of a larger plan of working with collaborators to build an LNG supply chain in the Pilbara and the North West Shelf to enable Woodside to change the company’s fleet of 16 marine support vessels to LNG over the following five years.225
Figure 27: Key prospective technology outputs and solutions
Short term |
Medium term |
Long term |
|---|---|---|
LNG for heavy transport |
||
|
|
|
In operation since 2001, EVOL LNG is leading Australian efforts to provide LNG as a fuel for remote power stations, industrial facilities, marine bunkering and transportation. EVOL LNG completed Australia’s first commercial LNG bunkering in Western Australia early in 2017. With Australia’s largest fleet of LNG road tankers (including LNG-fuelled delivery tankers), EVOL LNG is licenced to provide truck-to-ship LNG bunkering by two major Australian port authorities, Fremantle Ports and the Pilbara Port Authority.226
The current level of competition in the global natural gas market may provide an opportunity for oil and gas companies to explore alternative energy products and chemicals, such as converting Gas to Products (GTX), Gas to Liquids (GTL), or reforming methane to create hydrogen.
GTX/GTL can convert natural gas (or even gasified biomass or coal) into syngas, and through subsequent catalytic reactions can lead to fuels like diesel, gasoline, or jet fuel (so called Fischer-Tropsch fuels) and other chemical intermediates like methanol. While there are technical and economic challenges for GTX/GTL – for example, tougher capital markets and low oil and gas prices – the market is expected to experience growth. The global market is projected reach US$15.5 billion by 2022.227
The inherently high costs of GTX and GTL make them hard to compete with traditional refining routes using cheap oil. To make these approaches affordable in Australia, cheaper gas and lower-cost facilities are needed. Perhaps, more gas supply could help drive down costs, which can be accomplished by opening up currently restricted onshore resources. To convert it, small-scale GTX and GTL production facilities can be used, and they should leverage micro-channel processing technologies to enable a reduction in capital expenditure and operating costs.
A key opportunity lies in the miniaturisation of GTX/GTL that could bring about an order of magnitude reduction in required investment, making the technology cost-effective at smaller scales. This could be done via micro-channel technologies that intensify chemical reactions by reducing the dimensions of reactor systems. This means that small-scale systems could be used to more profitably unlock value in stranded gas fields. Estimates indicate that nearly 75% of the world’s stranded assets are suitable for GTL (based on a 10 million cubic feet per day (mmcfd) gas need to support a 1kpd GTL facility for 30 years228). In Australia – which has limited local refining capacity – GTL to monetise smaller fields would have the additional benefit of helping with liquid fuel energy security.229 Furthermore, mini GTL and GTX could help developments become more profitable by converting waste gas and associated gas into valuable commodities (particularly in regions where flaring is limited). Their small footprint means they will be deployable even in the constrained offshore environment.
In terms of chemical intermediates, GTX could be used to create a number of products, including Methanol and Di-Methyl Ether (DME). These can easily be derived by transforming methane and other gases into syngas and performing subsequent catalytic conversion.
Methanol is an increasingly important fuel and chemical intermediate that has strong demand growth. The market for methanol was US$29.6 billion in 2015 and is expected to grow to US$54 billion by 2021; largely driven by demand for polyethylene and polypropylene plastics.230
Methanol also has potential use as a fuel. Methanol has lower energy density than other liquid fuels; however, it does have a distinct advantage over hydrogen and natural gas in terms of its transportability. It can be used to supplement gasoline, much like ethanol is today. Furthermore, methanol can be directly converted to diesel and gasoline using many commercially available synthesis routes.231
The GTX method can also yield Dimethyl Ether (DME) – a viable alternative to diesel in the trucking industry. With minor adjustments to the engine and fuelling systems, DME can be blended (nearly seamlessly) with LPG as a fuel. The advantages of DME as a fuel are significantly lower NOx emissions and particulate matter.232
GTL and GTX are flexible systems offering the potential to shift production toward products that maximise profits based on shifting market demand. Savvy operators could capitalise on global commodity price shifts to produce gas, methanol, diesel, and higher value speciality chemicals and waxes for instance, depending on relevant market signals. As GTL and GTX processing equipment becomes smaller and more efficient, there is an increased likelihood that these solutions could be integrated into LNG facilities both on and off shore.
A final opportunity is the production of hydrogen gas – a fuel with diverse applications and a very high energy density by mass and clean-burning, emitting only water vapour. Hydrogen is expected to support transport and electricity production in the future, with hydrogen-powered vehicles a key target market. Growth in fuel cell electric vehicles is expected to be rapid, with millions on the road globally by 2030.233
Key to fully capitalising on hydrogen fuel is finding low or zero-carbon methods of producing it. Australia’s vast solar and wind resources could be used to economically produce hydrogen via electrolysis for export, either in pure liquefied form or in a more transport-friendly form, for example ammonia, methanol or LNG. However, cost-efficient conversion technologies will be needed to convert ammonia to hydrogen at the point of use. An alternative approach is to produce hydrogen from natural gas using the current approach (Steam Methane Reforming) and combining this with CCS to mitigate the CO2 emissions. Once such routes are developed, hydrogen could be an appealing way to store excess renewable energy and to buffer associated intermittency in the domestic energy market. It will also open the doors to industrial scale production.
Figure 28: Potential technology outputs and solutions
Short term |
Medium term |
Long term |
|---|---|---|
Higher value products |
||
|
|
|
A variety of technologies and research programs will be required to facilitate both the incremental and substantial technical advancements required for the Australian sector to pursue the various aspects of this opportunity.
In a number of cases, the technology is either already viable or close to being viable; however, market or policy settings do not encourage its adoption or commercialisation. For example, LNG-powered trucks are yet to be widely adopted due mainly to a lack of infrastructure and pilot programs together with high capital costs. Research priorities to enable these technical developments are detailed below.
Materials and catalysts
Process engineering
Collaboration is important to unlocking these diversification opportunities. For example, developing new markets for LNG, such as using LNG in heavy transport, will require action across converging industries (e.g. manufacturing and transport) and will also need encouragement via policy.
In order to unlock this opportunity, several suggestions for improving the business ecosystem are presented for consideration.
Processes, standards and regulations
People, skills and collaboration
There are a number of changes that need to occur in the Australian oil and gas sector to enable it to unlock the strategic growth opportunities identified in the last chapter, address its national challenges, and remain globally competitive. The enablers identified in this chapter echo the consistent themes that arose from industry consultation. They focus on the cross-cutting issues in the business ecosystem that will require coordinated effort between oil and gas companies, suppliers, governments, researchers and community stakeholders.
The sector can improve on its approach to collaboration in order to drive better innovation outcomes. Many operators report their prime motivation for collaborating is to reduce costs, whereas accessing new markets is ranked lowest.236 This preference for cost reduction may result in only incremental changes to technology and focus on existing collaborators. As buyers of technology, operators’ collaborative preferences help to explain the sector’s persistent reputation for incremental innovation.
To unlock the new opportunities outlined in this report, companies must collaborate in new ways to build competencies that are new to the business, to break into new markets, or to do both. Research sector collaborations will help to create completely new technological paradigms. Partnerships with other sectors may be needed to move into adjacent markets. Both are needed to create completely new businesses.
To exemplify these different types of collaborations, Figure 29 uses the measures of capability (core versus build) and markets (existing versus new) to create four notional categories of innovation.
This matrix highlights the fact that different collaborators may be needed to bring about each type of innovation.
Figure 29: Collaboration/Innovation matrix for Australian oil and gas opportunities
Australia has a growing reputation for having a high-cost business environment, which may deter future industry investment. With many recent projects suffering budget blowouts,237 together with the emergence of low-cost LNG providers in East Africa, pressure is increasing on the Australian sector to improve. Furthermore, with the depletion of low-cost conventional supplies, exploration and production costs are set to be substantially higher in the future than they have been in the past.238 The sector (government and industry) needs to focus its attention on ways to reduce costs in order to ensure that Australia remains a competitive and attractive destination for investment.
Despite Australia’s significant oil and gas resources, there are potential challenges to ensuring continued adequate, reliable and competitive delivery of energy in Australia’s liquid fuel and natural gas sectors.
One prevalent example is the potential shortage of gas in Australia’s east coast market, limiting Australia’s ability to meet domestic demand while at the same time fulfilling export contracts. At present, growth in exports and constrained supply has led to increasing prices that may have damaging effects on Australian manufacturers. The response to this – the Australian Domestic Gas Security Mechanism (ADGSM)240 – means that gas earmarked for export could be blocked if a domestic gas shortfall is likely.241 If successful in reducing wholesale gas prices, the mechanism also reduces State Government royalties, leading to further consequences in those producing States. At the same time, there are concerns that LNG contractual commitments will struggle to be met in coming years, as unproven CSG resources without production history will soon be required to fill the plants, introducing a significant longer-term supply risk.242
Another challenge to Australia’s energy security is its heavy dependence on imports of crude oil and refined fuels. Australia is a net importer of refined fuels. Australia relies heavily on international trade hubs for imports, particularly Singapore, which itself is reliant on the Middle East. If this port were to close for 30 days due to extenuating circumstances, it has been estimated that the subsequent four months would result in Australian GDP losses of nearly $1.4 billion and real income losses of $2.1 billion.243
Domestic energy security concerns could be addressed in part by opening up exploration and production of Australia’s onshore gas, which has more than enough capacity to deliver Australia’s domestic needs and also support the export markets. Other opportunities lie in developing new technologies (i.e. micro-channel GTL to convert gas to refined fuels), as highlighted in Chapter 4. The following points detail a number of ways the ecosystem may be improved.
A stable investment environment helps to ensure that Government and industry are consistently working towards common goals in the development of Australia’s vast energy wealth. In the interviews that were conducted with this report we found several areas for improvement.
One of the major issues raised during consultation relates to GHG policy. Over the past decade, several policies and regulations aimed at managing climate change have been introduced and repealed in Australia.247 It remains unclear how Australia will meet its Paris Accord commitment to reduce emissions to 26%–28% on 2005 levels by 2030. The uncertainty about carbon policy and regulation has delayed investment decisions across many sectors.248 The lack of an explicit decarbonisation goal is creating significant uncertainty in the oil and gas sector, and represents a significant investment risk.249
Enact an enduring carbon policy framework – Investors require clarity regarding the future of Australia’s emissions reduction policy in order to bring forward the investments that will deliver a secure and reliable energy supply. Long-term emissions reduction policy is needed to provide stability to the energy sector and guide the necessary investments to meet Australia’s Paris Agreement pledges.250 An enduring carbon policy that has bipartisan political support and is agreed at state and federal levels is needed. Such a stable policy would create the market conditions for achieving certain technology pathways. However, depending on the approach used, these pathways could look very different, ranging from those that focus on natural gas as a bridging fuel, to those that more fully embrace solar and wind.251 The impact on the oil and gas sector will depend on the mix of policy and incentives that Government chooses, including if and when a price on carbon is enacted.
Other areas of action include:
Improving the sector’s social licence to operate through strong and productive, trust-based relationships with local communities, stakeholders and the Australian public is critical to the future success of projects in the sector. While increased stakeholder consultation will go some way toward improving social licence, several changes in terms of the approach for consultation may be required. Social science research (like that being conducted at GISERA) is needed to understand the underlying dynamics of social licence and how it may be maintained in this sector. In addition, more scientific research may help by providing clearer information regarding the potential environmental impacts of oil and gas activities and their mitigation. Likewise, increased outreach by companies might help, as well as social licence related training within the State and Federal Government agencies, where applicable. Several suggested changes to the business ecosystem are detailed below.
Furthermore, integrated planning will help the industry develop more integrated and effective approaches to oil spills. For example, there is a need to develop industry-wide approaches to oil spill preparation and response. This involves both the development of oil spill monitoring plans, as well as development of technologies to detect oil in a response situation.
Australia’s oil and gas sector will play an important role in Australia’s future for decades to come, provided that companies embrace innovation and governments play their part in shaping and providing stability for the regulatory and investment environment. That means proactively identifying and investigating new opportunities for growth and exploring ways that science and technology can help to unlock them. This report offers some high-level guidance, but more work needs to be done.
With substantial market, technological and regulatory uncertainty at present, the most successful oil and gas businesses will be those that constantly reassess the way their businesses are run – ensuring that business decisions are underpinned with strong underlying market and technology assumptions, and that innovation is a central part of their strategy development.
This Roadmap can be used as one tool to inform the strategic decision-making that will be required for business success. Global megatrends, strategic opportunities, enabling technology, and business ecosystem changes are all starting points, but businesses need to create specific innovation strategies that are tailored to their goals and objectives as an organisation.
To develop long-term, technology-enabled strategies for businesses, CSIRO Futures uses a four-step strategic planning framework (see Figure 30). This framework – tailored to individual company requirements – moves from identifying major strategic opportunities using methods such as scenario planning, right through to the detailed planning of research programs and collaboration strategies that are aimed at achieving real commercial milestones.
Figure 30: CSIRO Futures strategic planning framework
Explore
Choose
Plan
Create
Continual monitoring and assessment of strategies and projects
Table 1: Examples of how strategic opportunities and business ecosystem changes support NERA’s knowledge priority areas
NERA Knowledge Priority Area |
Digital operations and maintenance (4.1) |
Enhanced basin productivity (4.2) |
Advanced environmental solutions and processes (4.3) |
High-value diversification (4.4) |
Business Ecosystem Changes (5) |
|---|---|---|---|---|---|
Work skills for the future |
New skills required for remote operations, robotics and automation, and data and analytics for process optimisation. |
Cross-disciplinary skilling of subsurface and data science |
|
Developing new skills to accommodate renewable integration and micro-grid applications, and small-scale gas conversion technology. |
|
Enabling effective collaboration |
Digital platforms to streamline and coordinate supply chains. |
|
Collective planning for environmental and social impacts of resource development projects at basin level. |
Collaboration with novel partners will be required to break into new markets and build new capabilities. |
See 5.1 Pursue diverse collaborations for innovation |
Understanding Australia’s resource base |
|
Make large volumes of data stored in local, state and federal databases more searchable and consistent. |
|
|
|
Social licence to operate |
|
|
Increasing energy efficiency of GHG capture, fugitive emissions tracking, etc. to demonstrate the sector’s commitment to sustainability. |
|
See 5.5 Improve the sector’s public image |
Unlocking future resources |
|
More accurate subsurface modelling, AI to maximise productivity, advances in hydraulic fracturing and enhanced recovery methods. |
Locating affordable locations for CO2 storage to support resource development projects. |
Stranded resources can be unlocked through FLNG and mini-LNG. |
|
New markets, New technologies, New business models |
|
|
Beneficial uses of CO2, new drilling and completion technology. |
A key driver of this opportunity is finding new markets, business models and technologies to diversify into. |
|
Commercialisation of R&D |
|
|
|
Development and commercialisation of small scale methane conversion technologies, and lower-cost solar-PV and hybrid energy systems for mini-micro-grid application. |
|
Efficient operations and maintenance |
Using AI to streamline operations and maintenance. |
|
|
|
|
Regulatory framework optimisation |
|
|
Understand impacts of different decommissioning options. |
|
See 5.2 Reduce the costs of doing business and See 5.3 Improve Australia’s energy security See 5.4 Reduce regulatory uncertainty |
AAV Autonomous Air Vehicle
AI Artificial Intelligence
APPEA Australian Petroleum Production and Exploration Association
AR Augmented Reality
ARENA Australian Renewable Energy Agency
ASV Autonomous Surface Vehicles
AUV Autonomous Underwater Vehicles
AV Augmented Virtuality
bcf billion cubic feet
bbl barrels of oil
CBM Coal Bed Methane
CCS Carbon Capture and Storage
CCUS Carbon Capture, Utilisation and Storage
CO2 Carbon dioxide
COP21 21st Conference of the Parties, United Nations Framework Convention on Climate Change
CSG Coal Seam Gas
CSIRO Commonwealth Scientific and Industrial Research Organisation
DAS Distributed Acoustic Sensing
DIIS Department of Industry, Innovation and Science
DTS Distributed Temperature Sensing
EGR Enhanced Gas Recovery
EOR Enhanced Oil Recovery
FLNG Floating Liquefied Natural Gas
GAB Great Australian Bight
GDP Gross Domestic Product
GHG Greenhouse Gas
GISERA Gas Industry Social and Environmental Research Alliance
GLT Gas-to-Liquids
GTX Gas-to-Products
IEA International Energy Agency
IoT Internet of Things
IT Information Technology
kW kilowatt
kWh kilowatt hour
LIDAR Light Detection and Ranging
LNG Liquefied Natural Gas
mmcfd million cubic feet per day
MMV Monitoring, Measurement and Verification
Mtoe Million tonnes of oil equivalent
MTPA million tonnes per annum
MW megawatt
NERA National Energy Resources Australia
NGL Natural Gas Liquids
NOx Nitrous oxides
O&M Operations and Maintenance
OECD Organisation for Economic Co-operation and Development
OPEC Organization of the Petroleum Exporting Countries
OT Operational Technology
RAV Robotic Amphibious Vehicle
ROC Remote Operations Centre
ROV Remotely Operated Vehicles
tcf Trillion cubic feet
TCO2e Tonnes of carbon dioxide equivalent
UAV Unmanned Aerial Vehicles
UN United Nations
USV Unmanned Surface Vehicles
VR Virtual Reality
Many of the activities recommended in this report require investment in R&D. The table below lists national and state-based funding schemes available to Australian SMEs and start-ups that support innovation and commercialisation.258
Program |
Project |
Eligibility / Notes |
||
|---|---|---|---|---|
Name |
State |
Funding |
SME Contribution |
|
Innovation Connections |
All |
< $50k |
1:1 cash |
$1.5m - $100m turnover, 3+ years in business. Grants available for researcher, business researcher and graduate placements. |
CSIRO SIEF STEM+ Business |
All |
< $105k p.a. |
1:1 cash |
$1m - $100m turnover. Projects delivered by early-career researchers. |
CSIRO Kick-Start |
All |
$10k-50k |
1:1 |
< $1.5m turnover. Research/development/testing with CSIRO. |
Accelerating Commercialisation |
All |
< $1 mil |
1:1 |
< $20m turnover. Funds commercialisation, not research and development. |
ICon Proof of Technology grant |
ACT |
$5k-30k |
1:1 cash and/or in-kind |
< $2m turnover. |
ICon Accelerating Innovation grant |
ACT |
$5k-10k |
1:1 cash and/or in-kind |
< $2m turnover. |
TechVouchers |
NSW |
< $15k |
1:1 cash |
< $30m turnover, < 20 employees, 1+ years in business. Preference for companies not previously engaged in research. |
BISI Innovation Voucher |
NT |
< $25k |
40% |
< 100 employees. |
Knowledge Transfer Partnerships |
QLD |
< $50k |
1/3 cash |
< 200 employees, 2+ years in business. Research performed by KTP eligible graduates. |
Innovation Voucher program |
SA |
$10k -$50k |
1:2 or 1:1 |
< $200m turnover, 1+ years in business. Contribution 1:2 for SMEs below $5m. |
Business Transformation Voucher |
SA |
< $50k |
1:1 cash |
1+ years in business. Can include developing new business models or R&D. |
BioSA Industry Development program |
SA |
$50k-250k repayable |
|
Early-stage/start-ups. Bioscience and related industry sectors. |
SBDF Start-up business grant |
SA |
< $20k |
1:1 cash |
To contribute to starting a new business or buying a business. |
SBDF Business Expansion grant |
SA |
$10k-100k |
1:1 cash |
< 20 employees, 1+ years in business. |
Innovation Vouchers |
WA |
< $20k |
At least 20% |
< $500k turnover, < 200 employees. |
The following reports provide deeper insights into some of the specific trends and concepts covered in this Roadmap:
OTHER ROADMAPS IN THE CSIRO SERIES
This Roadmap is the fifth in a series of roadmaps developed by CSIRO.
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2 CSIRO (2017). Reservoir rejuvenation technology (R2T), [Online] Available from: https://www.csiro.au/en/Research/EF/Areas/Oil-gas-and-fuels/Onshore-gas/Microbes Accessed 17/07/2017
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4 National Energy Resources Australia (2017). Sector Competitiveness Plan, Kensington.
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8 Hajkowicz, S. (2015). Global Megatrends – Seven Patterns of Change Shaping Our Future, CSIRO Publishing, Canberra.
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10 United Nations (2015). World population Prospects – Data Booklet, [Online] Available from: https://esa.un.org/unpd/wpp/Publications/Files/WPP2015_DataBooklet.pdf Accessed 31/05/2017
11 International Energy Agency (n.d.). Energy poverty, [Online] Available from: http://www.iea.org/topics/energypoverty/ Accessed 31/05/2017
12 United Nations, Department of Economic and Social Affairs, Population Division (2014). World Urbanization Prospects: The 2014 Revision.
13 The IEA’s main scenario is the New Policies Scenario, incorporates existing energy policies as well as an assessment of the results likely to stem from the implementation of announced intentions, notably those in the climate pledges submitted for COP21.
14 Exxon Mobil (2016). The Outlook for energy: a view to 2040, Exxon Mobile Corporation, Texas.
15 United Nations (2015). World population Prospects – Data Booklet, [Online] Available from: https://esa.un.org/unpd/wpp/Publications/Files/WPP2015_DataBooklet.pdf Accessed 31/05/2017
16 International Energy Agency (2016). World Energy Outlook 2016, OECD/IEA, Paris.
17 Exxon Mobil (2016). The Outlook for energy: a view to 2040, Exxon Mobile Corporation, Texas.
18 Sussams, L., Leaton, J., (2017). Expect the Unexpected: the disruptive Power of low carbon technology, Grantham Institute, London.
19 International Energy Agency (2016). World Energy Outlook 2016, OECD/IEA, Paris.
20 PwC (2016). 19th Annual Global CEO Survey: Oil and gas industry key findings, [Online] Available from: https://www.pwc.com/gx/en/ceo-survey/2016/industry-focus/oil-and-gas-key-findings-global-ceo-survey-2016.pdf Accessed 31/05/2017
21 PwC (2016). New Energy Futures Perspectives on the transformation of the oil and gas sector, [Online] Available from: https://www.pwc.com/gx/en/oil-gas-energy/pdf/new-energy-futures.pdf Accessed 4/08/2017.
22 Hardy, P., (2015). Introduction and Overview: the Role of Shale Gas in Securing Our Energy Future, Royal Society of Chemistry.
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201 Western Australian Marine Science Institution (n.d.). Decommissioning offshore infrastructure: a review of stakeholder views and science priorities - Draft Report, [Online] Available from: http://www.marinescienceblueprint.org.au/sites/default/files/Decommissioning%20offshore%20infrastructure%20a%20review%20of%20stakeholder%20views%20and%20science%20priorities.pdf Accessed 6/07/2017
202 LanzaTech (2017). [Online] Available from: http://www.lanzatech.com/ Accessed: 25/07/2017
203 DNV GL (2017). Short-term agility, long-term resilience – The outlook for the oil and gas industry in 2017.
204 Shankleman, J., (2017). Solar Could Beat Coal to Become the Cheapest Power on Earth, Bloomberg, [Online] Available from: https://www.bloomberg.com/news/articles/2017-01-03/for-cheapest-power-on-earth-look-skyward-as-coal-falls-to-solar Accessed 12/07/2017
205 Campey, T., et al (2017). Low Emissions Technology Roadmap. CSIRO, Australia.
206 Core Energy Group (2016). Commercial Assessment of CNG and LNG as Transport Fuels.
207 Madconald-Smith, A., (2016). Shipping to become 'major new sector' for LNG: Shell, Australian Financial Review, [Online] Available from: http://www.afr.com/business/energy/gas/shipping-to-become-major-new-sector-for-lng-shell-20161101-gsfw74 Accessed 2/06/2017
208 TechSci Research (2016). Global Small Scale LNG (SSLNG) Market By Application, By Mode of Supply, Competition Forecast & Opportunities, 2011 – 2021, Abstract [Online] Available from: https://www.bharatbook.com/oil-gas-market-research-reports-801973/small-scale-lng-global.html
209 Abbott, J., (2017). How to get from here to there: building the future of transport together, Speech, [Online] Available from: http://www.shell.com/media/speeches-and-articles/2017/building-the-future-of-transport-together.html Accessed 2/06/2017
210 ARENA (2017). Innovating Energy ARENAs 2017 investment plan, Canberra.
211 ARENA (n.d.). SunShift Demonstration Report, [Online] Available from: https://arena.gov.au/assets/2016/04/Laing-ORourke-MS-2-ii-Case-Study.pdf Accessed 2/06/2017
212 Piasenti, F., (2015). Can the SEA FLNG Approach Monetise Small Australian Stranded Gas Resources? [Online] Available from: http://www.sut.org/wp-content/uploads/2014/09/Francesco-Piasentin-SUT-Is-SEA-FLNG-Approach-suitable-for-Australia-website-approved.pdf Accessed 2/060/2017
213 International Gas Union (2017). IGU 2017 World LNG Report.
214 Attanasi, E.D., Freeman, P.A., (2013). Meeting Asia’s future gas import demand with stranded natural gas from central Asia, Russia, Southeast Asia, and Australia, SPE Economics & Management Vol5, Iss2.
215 $10GJ basis for calculation
216 Madconald-Smith, A., (2016). Shipping to become 'major new sector' for LNG: Shell, Australian Financial Review, [Online] Available from: http://www.afr.com/business/energy/gas/shipping-to-become-major-new-sector-for-lng-shell-20161101-gsfw74 Accessed 2/06/2017
217 Core Energy Group (2016). Commercial Assessment of CNG and LNG as Transport Fuels.
218 Heyning, C., Segorbe, J., (2016). The role of natural gas in Australia’s future energy mix, McKinsey and Company.
219 Heyning, C., Segorbe, J., (2016). The role of natural gas in Australia’s future energy mix, McKinsey and Company.
220 Australian Government (2013). Marine Order 97 (Marine Pollution prevention – air pollution ) 2013, Federal Register of Legislation, [Online] Available from: https://www.legislation.gov.au/Details/F2016C01016 Accessed 10/04/2017
221 Aronietis, R., et al (2016). Forecasting port-level demand for LNG as a ship fuel: the case of the port of Antwerp. J. Shipp. Trade.
222 Heyning, C., Segorbe, J., (2016). The role of natural gas in Australia’s future energy mix, McKinsey and Company.
223 Bureau of Infrastructure Transport and Regional Economics (BITRE) (2010). Australian Maritime Activity to 2029–2030, Canberra.
224 Woodside (2017). Trunkline, The magazine for Woodside people Q1, 2017, [Online] Available from: http://www.woodside.com.au/About-Us/trunkline/Documents/Trunkline%20Q1%202017.pdf#search=Siem%20Offshore%20Australia Accessed 2/06/2017
225 Wilkinson, R., (2017). Woodside promotes LNG as a fuel within Western Australia, Oil&Gas Journal, [Online] Available from: http://www.ogj.com/articles/2017/02/woodside-promotes-lng-as-a-fuel-within-western-australia.html Accessed 2/06/2017
226 EVOL LNG (n.d.). Marine, [Online] Available from: https://www.evollng.com.au/marine Accessed 2/06/2017
227 Stratistics (2017). Gas-to-Liquids Processes for Chemicals and Energy - Global Market Outlook (2016-2022).
228 Clint, O., West, R., (2013). BERNSTEIN Commodities & Power: What if "Small-Scale Gas to Liquids" Was the Next "Shale Gas"? Are We On the Verge Of Another Energy Revolution?, [Online] Available from: http://www.velocys.com/resources/Velocys_131211_Bernstein_note.pdf
229 Blackburn, J., (2013). Australia’s Liquid Fuel Security: A Report for NRMA Motoring and Services.
230 M2 Presswire (2017). Methanol Market worth 54.16 Billion USD by 2021, [Online] Available from: https://search.proquest.com/docview/1861650852?accountid=26957 Accessed 2/06/2017
231 Abazajian, A., (2016). ‘Methanol economy’ gains ground with technology, market developments, Gas Processing. [Online] Available from: http://www.gasprocessingnews.com/features/201604/methanol-economy-gains-ground-with-technology,-market-developments.aspx
232 Wilson, S., (2013), Into the (dimethyl) ether, CSIRO, [Online] Available from: https://blog.csiro.au/into-the-dimethyl-ether/
233 Nocera, S., Cavallaro, F., (2016). The competitiveness of alternative transport fuels for CO2emissions, J.Transp. Policy Vol 50, pp 1–14.
234 Clint, O., West, R., (2013). BERNSTEIN Commodities & Power: What if “Small-Scale Gas to Liquids” Was the Next “Shale Gas”? Are We On the Verge Of Another Energy Revolution?, [Online] Available from: http://www.velocys.com/resources/Velocys_131211_Bernstein_note.pdf
235 Lott, M., (2017). Scientists Develop a “Better Way” to Produce Renewable Hydrogen, Scientific American, [Online] Available from: https://blogs.scientificamerican.com/plugged-in/scientists-develop-a-better-way-to-produce-renewable-hydrogen/ Accessed 2/06/2017
236 Cullinane, B., Harrison, P., (2017). A hive mentality: collaboration lessons for Australian oil and gas, Deloitte.
237 Ellis, M., Heyning, C., Legrand, O., (2013). Extending the LNG boom: Improving Australian LNG productivity and competitiveness, McKinsey&Company.
238 Segorbe, J., Lambert, P., (2017). Meeting east Australia’s gas supply challenge, McKinsey&Company.
239 Ellis, M., Heyning, C., Legrand, O., (2013). Extending the LNG boom: Improving Australian LNG productivity and competitiveness, McKinsey&Company.
240 Department of Industry, Innovation and Science (2017). The Australian Domestic Gas Security Mechanism, [Online] Available from: https://industry.gov.au/resource/UpstreamPetroleum/AustralianLiquefiedNaturalGas/Pages/Australian-Domestic-Gas-Security-Mechanism.aspx Accessed 4/07/2017
241 Australian Energy Market Operator Limited (2017). Gas statement of opportunities for eastern and south-eastern Australia.
242 Energy Quest (2017). Energy Quarterly – March 2017 Report.
243 ACIL Tasman (2011). Liquid fuels vulnerability assessment, Department of Resources Energy and Tourism, [Online] Available from: http://www.environment.gov.au/system/files/energy/files/liquid-fuels-vulnerability-assessment.pdf Accessed 1/06/2017
244 Finkel A. et al (2017). Independent Review into the Future Security of the National Electricity Market: Blueprint for the Future, pg 88 Commonwealth of Australia.
245 Finkel A. et al (2017). Independent Review into the Future Security of the National Electricity Market: Blueprint for the Future, pg 116, Commonwealth of Australia.
246 Clark, R., Thomson, M., (2014). Transport Fuels from Australia’s Gas Resources, UNSW Press, Sydney.
247 Talberg, A., Hui, S., Loynes K., (2016). Australian climate change policy to 2015: a chronology, Parliament of Australia, [Online] Available from: http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp1516/Climate2015 Accessed 14/07/2017
248 Herd, E. (2017). Submission to: Independent review into the future security of the national electricity market, Investor Group on Climate Change, [Online] Available from: http://www.igcc.org.au/resources/Pictures/IGCC%20Submission%20Finkel%20FINAL%203March2017.pdf Accessed 6/6/2017
249 CSIRO (2013). Change and choice, [Online] Available from: https://publications.csiro.au/rpr/download?pid=csiro:EP1312486&dsid=DS13 Accessed 2/06/2017
250 Finkel A. et al (2017). Independent Review into the Future Security of the National Electricity Market: Blueprint for the Future, pg 88 Commonwealth of Australia.
251 Campey, T., et al (2017). Low Emissions Technology Roadmap. CSIRO, Australia.
252 APPEA (n.d.). Approvals and Regulation, [Online] Available from: https://www.appea.com.au/industry-in-depth/policy/approvals-and-regulation/ Accessed 2/06/2017
253 National Energy Resources Australia (2017). Sector Competitiveness Plan, Kensington.
254 Williams, R., Walton, A., (2013). The Social Licence to Operate and Coal Seam Gas Development, GISERA.
255 Moffat, K., Zhang, A., (2016). The paths to social licence to operate: An integrative model explaining community acceptance of mining, Resources Policy, Vol 39.
256 GISERA (2017), About us – Factsheet, [Online] Available from: https://gisera.org.au/wp-content/uploads/2017/04/16-00767_GISERA_AboutUs2ppFactsheet_WEB_170410.pdf Accessed 1/06/2017
257 Gallois, C., et al (2016). The Language of Science and Social Licence to Operate, Journal of Language and Social Psychology, Vol 36, Iss 1.
258 For more information on the funding schemes available to Australian SMEs and start-ups see CSIRO’s SME Connect Program http://www.csiro.au/SMEConnect
Karl Rodrigues
Director, CSIRO Energy
+61 2 9490 5590
www.csiro.au/Energy
James Deverell
Director, CSIRO Futures
+61 2 9490 8456
futures@csiro.au
www.csiro.au/futures
Simon Hanson
Director, SME Connect
+61 3 9545 2752
www.csiro.au/SMEConnect