A former Woodside Petroleum and PTTEP Australia executive, Fitzpatrick said while launching NERA's 10-year Sector Competitiveness Plan at the Australia Oil & Gas Expo yesterday that Australia needed to keep pace with other western countries reforming their economies, and innovation is the key.
Yet Woodside vice president and chief digital officer Tom Ridsdill-Smith also told AOG's Collaboration Forum that the pressure to innovate came from completion both inside and outside the industry.
He said energy industry was more pressure to innovate than "at any point in recent memory".
"One of the consequences is that that the pace of change that we have to innovate is probably faster than at any point in the past, so as a result we need to think about new ways of collaborate by looking at the ecosystem we work in," Ridsdill-Smith said.
"This means we need to look at the traditional ecosystem of big and small companies - operators and service companies - along with research and government; but also outside our industry for new sources of collaboration."
Fitzpatrick said industry needed to reduce cost of doing business, strengthen networks and linkages, and improve the innovation system as a whole, particularly as Australia has become a high-cost environment, global exploration has declined to historic lows and the energy resource sector is facing "unprecedented levels of challenge".
"Australia needs to find a cohesive plan to transition to a low-emissions future while also securing energy reliability and affordability for all," he said.
"Yet as the world's energy balance continues to evolve the energy sector needs to remain competitive and sustainable."
The Sector Competitiveness Plan aims to help Australia's energy resources sector transition from a decade of massive expansion to the operations phase and address the "perfect storm" of increasing global competition, changing energy markets and the accelerating pace of technological change.
The report, the result of extensive industry consultation and analysis of forecast trends over the next 10 years, proposes a series of "knowledge priorities".
NERA's report revealed that local operating costs are still among the highest in the world, despite global demand for Australia's commodities remaining strong, so Fitzpatrick said the industry must be prepared to go through both incremental and transformational change.
Ratings disappointment
NERA and Accenture have benchmarked Australia's oil, gas and coal industries, with a data-driven baseline which industry and government can measure improvement in competitiveness over time.
In oil and gas, Australia has an overall competitiveness score of 6.4 out of 10, ranking it seventh on the leader board, above the world median of 5.5 but lagging the world's best, the US, at 7.3.
The analysis show improvements across four priority areas have the ability to improve the score by 14% to be in line with the world's best and adding about $5 billion to the industry.
Short-term changes will increase Australia's overall competitiveness, Fitzpatrick said.
The four priority areas are:
- Supply chain - increased collaboration between operators, service providers and to sharee resources and infrastructure;
- Research and innovation - promoting research collaboration and industry-led research;
- Workforce - investing in building it; and
- Regulatory reform - increased collaboration between industry and government to reduce red tape that adds costs and extends costs for industry.
Fitzpatrick said industry needed to "overcome a legacy of poor productivity performance" during the capital-intensive phases to take its place at the top of the leader board.
It also needs to deal with shrinking operating margins - which are admittedly already increasing as oil prices rise; increased community opposition to future development; finding the right balance for a sustainable sector between the economy, society and environment; and removing costly regulatory blocks.
Top issues
NERA's stakeholder consultation has distilled eight opportunities to prioritise initiatives - the top issue being reducing the country's high cost structures and improving productivity.
The second was improving industry sustainability and protecting the industry's social license. The third was adopting predictive analytics and digital technology.
"We need to shift from a short-term focus to a long-term focus, and transformational change rather than incremental change is needed to make the country competitive again," Fitzpatrick said.
This contrasted with Ridsdill-Smith's boss, Woodside senior VP and chief technology officer Shaun Gregory, who told the forum yesterday that the ability of many employees each working on incremental changes should "not be underestimated".
Yet most of what Fitzpatrick said gelled with Gregory's overall sentiment, that intellectual property barriers needed to be broken down.
"If the energy resources sector is to harness the huge efficiency benefits and competitive advantage to be gained from technology like advanced manufacturing, automation, 3D printing, drones, the Internet of Things, then we must unlock our intellectual property and move away from the reliance on single-source and bespoke solutions," Fitzpatrick said.
"We need to commercialise our huge investment in research and knowledge, adopt multi-vendor approaches that deliver improved products and capabilities into a global market.
"These changes will enable operators to build new relationships with technology across the value chain through new collaboration platforms. Industry innovations ecosystems need to be established so technology vendors can collaborate with each other and bundle products and services.
"For example, formal and informal clusters lower the risk of failure and maximise the benefits that new technology can provide to all."
