Addressing media at the Australasian Oil & Gas Exhibition and Conference in Perth last week, Cullinane said that in a world where the LNG glut and buyers’ market is expected to endure for at least another five years, operators needed to adapt fast to the new world, particularly with the looming competition from the US.

She told Energy News that the US, which has just relaxed a 40-year ban on exporting oil, has supply chain advantages over Australia, whose LNG projects are more remote, and Accenture research has found operators prefer them to be adjacent to the operations they are servicing.

Cullinane said the US has an advantage over Australia to usher in the next LNG supply wave with its very well advanced industry, which has a supply chain co-located next to major projects, even in formerly remote locations like North Dakota.

“The maturity of the industry [in the US] means the supply chain has really built up, and is certainly the case in most of the producing regions of the United States,” Cullinane told Energy News.

“We see that it’s essential for service companies and operators to work together to pragmatically put their supply chain offices and maintenance facilities close to the operations – and that is critical in driving down the cost of delivered LNG.”

“But it’s particularly a challenge for Australia given the remoteness of our operations, and indeed for those in the services sector to build the services and maintenance there from the ground up.

“This is why collaboration is so important to determine what regions in which the investment will occur.”

Australia, meanwhile, faces structural disadvantages, because while it is a massive LNG producer it is small fry in the oil and gas market overall, and its industry is widely spread across the Great South Land, with assets concentrated mainly along the north coast while capacity, infrastructure, people and capital are focused in the south and east.

Cullinane said this remoteness of operations coupled with small economies of scale drives up the cost of services to support LNG operations and makes it difficult to drive down costs of delivered LNG.

She said world-class efficiency can be achieved using joint operator-supplier teams by leveraging contracting strategies structured to proactively reduce cost by eliminating waste and non-value adding activities and rework.

Meanwhile the new players in the US, including Cheniere Energy which is likely to trigger the country’s LNG wave, will disrupt global patterns of LNG trading with their access to flexible shale gas supply.

Cullinane warned that such “non-traditional” players could be expected to optimise their contract and asset portfolios, encourage new applications and markets and be agile enough to capitalise on new opportunities like the emergence of small-scale LNG.

The Monadelphous difference

Cullinane pointed to Monadelphous as one contractor that exemplifies that pivot from construction to operations and maintenance-focused business, as evidenced by the firm’s 8% increase in revenue associated with the maintenance services while the its traditional engineering construction revenues declined .

This was a stunning result considering the vast majority of oil companies posted a loss for the December quarter of 2015 due to low oil prices.

Monadelphous has also progressed its strategy to extend its core services to overseas locations and is targeting work in US shale gas in collaboration with a US partner.

While all this is happening, Accenture’s latest research points to a buyers’ market with prices, particularly in Asia, Australia’s prime target for LNG exports, lower than over the last few decades.

Accenture estimates that the three countries that made up about 60% of global LNG imports in 2014 – Japan, China and South Korea – who also happen to be Australia’s largest trading partners, could account for much less than that figure in the future.

“The use of LNG for power generation is now challenged with coal proving resilient, nuclear likely coming back on stream in Japan, the costs of renewables falling, energy conservation and planned pipeline gas imports into large markets like China,” Cullinane said.

Australia’s evolving natural gas market is now having to “grow up” and compete with many more sources of supply, and Cullinane says the country can’t remain content at becoming the world’s biggest LNG exporter next year if it wants to stay competitive.

“Operators and marketers need to act now to increase their competitiveness in a market where supply will exceed demand at least for the next five years, where markets are more global, with the emergence of new contract structures and gas linked pricing, and where customers are more geographically diverse,” she said.

Woodside’s edge

Cullinane said the benefits of new digital technologies were legion, yet Woodside was one of just a few in the Australian LNG industry to have actively embraced new predictive analytics technology, which Accenture believes is a key enabler of competitiveness.

Basically, digital technology is used to improve integrity and reliability, workforce productivity, safety and overall operating efficiency, and drive down operational costs.

Accenture believes 80% of all plant losses are preventable, and that implementing digital technology such as predictive analytics has been shown to reduce this impact.

The firm is working with Woodside to implement predictive analytics for maintenance and process-control across its Pluto and other LNG assets, providing the Perth-based oiler real-time insights into operations and driving proactive maintenance strategies and support decisions across production, safety and risk management.

Data is accessible to Woodside engineers at any time, from anywhere in the world.

“If we only implement lessons learned, we will be destined to a game of catch up with other producing geographies,” Cullinane warned.

“Australia cannot afford to just keep the pace, we need to leap frog.

“Given what is likely to be a long term low commodity market as well as a buyer’s market, Australian operators and service companies together must embrace the future.

“With our newly minted, technically advanced industry, we have the opportunity to leap frog and to do more in terms of collaboration, innovation and digital technology than other regions.”