Australia’s oil and gas sector contributes 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.

National Energy Resources Australia (NERA) and CSIRO recently released the Oil and Gas: A Roadmap for unlocking future growth opportunities in Australia, a high‑level guide to addressing some of these challenges and uncertainties and ensuring the long-term viability of the sector.

NERA Chief Executive Miranda Taylor said regulatory uncertainty and a lack of Australian-led innovation had contributed to an environment in which the Australian oil and gas industry was either unable or unwilling to take full advantage of the technological advancements of Industry 4.0.

“We are currently in a period of unprecedented technological disruption and as global industries are shaped and formed through these advances, the oil and gas industry must keep pace,” Ms Taylor said.

“To capitalise on these opportunities, we must adopt bold thinking, challenge our beliefs around what makes us competitive and transform our approach to how we innovate.”

CSIRO chief executive Dr Larry Marshall said the Australian oil and gas sector had an opportunity to reinvent its future through innovation and improve its market position.

“We believe this sector can continue to contribute to Australia’s future economic prosperity, which is why we’re investing not only in solving today’s challenges but also in the breakthrough science we need for tomorrow’s solutions like our new Deep Earth Imaging,” Dr Marshall said.

The Roadmap has identified four high-impact pathways to growth that are enabled by science and technology:

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 include improved exploration success; advances to drilling and well completions; and improving hydrocarbon recovery.

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 include robotics and automation and remote operations; and optimising operations and supply chains.
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 include water quality and reuse; reducing greenhouse gas emissions; and efficient and environmentally-sound decommissioning.

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 include integrated energy services; small and mini-LNG and small floating LNG for small and marginal fields; LNG for heavy transport; and higher-value products.

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.

Challenges and advantages facing the Australian oil and gas sector

Advantages	Challenges
Strong position in LNG	High-cost environment
Considerable conventional resources	Regulatory uncertainty
Large untapped unconventional prospective and contingent resources	Establishing Social Licence to Operate
Proximity to Asian markets	Low prices, commoditisation, and declining exploration
Leading research institutions and capability	Domestic innovation and commercialisation challenges
	Low levels of collaboration