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Geoffrey Cann - Deloitte - Cost control: Implementing strategies to improve productivity, reduce capital and operational expenditure

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Geoffrey Cann delivered the presentation at the 2014 South East Asia Australia Offshore and Onshore Conference (SEAAOC). …

Geoffrey Cann delivered the presentation at the 2014 South East Asia Australia Offshore and Onshore Conference (SEAAOC).

SEAAOC is Northern Australia's largest and longest established petroleum conference and brings together major players involved within Australasia's oil, gas and petroleum industries. The event is run as a partnership between Informa Australia and the Department of the Chief Minister - Northern Territory Government of Australia.

For more information about the event, please visit: http://bit.ly/SEAAOC2014

Published in: Business

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  • 1. SEAOOC 2014 Cost Control Darwin Thursday, 21 August 2014 9:30 – 10:00
  • 2. 1 SEAAOC 2014: Cost Control © 2014 Deloitte Touche Tohmatsu Contact me for more insights: Geoffrey Cann • National Director, Oil and Gas, Deloitte Brisbane • Strategy, transformation, cost reduction Blog www.geoffreycann.com Twitter @geoffreycann Email gecann@deloitte.com.au Phone 61-447-366-333
  • 3. 2 SEAAOC 2014: Cost Control © 2014 Deloitte Touche Tohmatsu North Americans are eyeing a promising market 0 2 4 6 8 10 12 14 2013 2014 2015 2016 2017 2018 2019 2020 Global LNG demand (bcf/d) Japan Korea China Other Asia & Pacific Europe India Latin America Source: RBC Capital Markets
  • 4. 3 SEAAOC 2014: Cost Control © 2014 Deloitte Touche Tohmatsu Latter half of the decade belongs to North America Source: IHS CERA, RBC Capital Markets Global Liquefaction Capacity Growth Outlook 2008-20
  • 5. 4 SEAAOC 2014: Cost Control © 2014 Deloitte Touche Tohmatsu Australia has a cost problem 5.44 4.93 4.82 6.95 2.88 2.43 2.17 2.31 1.58 3.26 5.3 4.1 3.6 2.5 4.3 0 2 4 6 8 10 12 14 16 Eastern Australia (CSG) East Africa (Mozambique) West Coast Canada (Montney) Western Australia (Conventional Offshore) US Gulf Coast (Haynesville) Integrated supply cost comparisons Estimated Capital Cost ranges Liquefaction Processing & Transportation Upstream Cost $10-12/mcf $13-14/mcf $11-13/mcf $11-13/mcf $10-12/mcf Source: RBC Capital Markets
  • 6. 5 SEAAOC 2014: Cost Control © 2014 Deloitte Touche Tohmatsu Source Deloitte’s Gas Factory We studied 60 cost problems in Queensland where oil and gas has been treated as a high margin business. It’s not. People Technical teams Poor communications Processes Bespoke processes Poor scalability Systems Siloed data Hand offs Organisation Siloed disciplines Technical incompatibility Performance Managed to time Cost over runs Supply chain Cost plus Low innovation Assets Custom built Costly maintenance Increased operating costs
  • 7. 6 SEAAOC 2014: Cost Control © 2014 Deloitte Touche Tohmatsu Innovation Collaboration We prescribe the twin antidotes of innovation and collaboration
  • 8. 7 SEAAOC 2014: Cost Control © 2014 Deloitte Touche Tohmatsu Source Deloitte’s Gas Factory Australia could innovate its oil and gas business model along the lines of a factory People Process teams Faster communications Processes Factory processes Scalable, repeatable Systems Architected data Transparency Organisation Integrated planning Responsive Performance Managed to cost Margin focused Supply chain Gain sharing Innovative Assets Standardised Lowest cost Decreased operating costs
  • 9. 8 SEAAOC 2014: Cost Control © 2014 Deloitte Touche Tohmatsu The biggest cost out prize is collaboration on common infrastructure Player 1 Player 2 Player 3 Generation 1 Today Generation 2 Generation 3 Well head FCS Well head FCS Well head FCS
  • 10. 9 SEAAOC 2014: Cost Control © 2014 Deloitte Touche Tohmatsu Seven pre-conditions must be in place to foster collaboration in oil and gas 1 Alignment around a common need • Skilled resources • Cost management • Asset utilisation 2 Invested champion • Chief Collaboration Officer 3 Window of opportunity • Right time and right areas 4 Sense of urgency and importance • Prioritise areas of focus • Develop an implementation plan 5 Top-level executive support • Align the key stakeholders and executives and gain support 6 Compatible corporate values • Values of openness and transparency 7 Transparent method of working • Transparent operating model
  • 11. 10 SEAAOC 2014: Cost Control © 2014 Deloitte Touche Tohmatsu A call to action 1. Measure and report on productivity 2. Define a productivity strategy, centred on innovation 3. Improve abilities to adapt to change 4. Match contract strategy with changing project risk profiles and environments 5. Collaborate with more and different organisations