Cardno thought leaders: Inside Australia's oil and gas industry

Source: Cardno -


31 January 2014

Cardno has provided services to oil and gas clients ranging from global corporations to local, specialised companies for more than 30 years.

The industry has been steadily growing in Australia recently, and the country is set to become the world’s largest liquefied natural gas (LNG) exporter within the next four years.

With a suite of new LNG export projects coming online, Cardno is well placed to deliver strategic solutions to oil and gas production clients throughout the region.

However, the industry faces several challenges, such as rising costs, global competitiveness, declining productivity and environmental concerns.

Cardno experts Paul Webber (Sector Leader - Energy, Australia and New Zealand) and Anthony Lane (Senior Principal – Cardno Lane Piper) provide some valuable insights into this burgeoning sector in Australia.

Q: What is the economic outlook for the oil and gas industry in Australia and what opportunities are there for future growth?

Paul: Expenditure on liquid natural gas (LNG) project infrastructure in Australia is in excess of $200 billion.

This engineering, construction and commissioning phase is projected to peak in 2014/15, with production, operations and maintenance continuing for up to 30 years.

These LNG projects will produce gas from conventional and unconventional sources, such as coal seam gas (CSG), to be processed, cooled to a liquid state and transported to Asian markets.

As major oil and gas projects wind down, new projects are beginning to address domestic supplies. The Kipper Tuna Turrum project in Bass Strait will be the largest oil and gas project on Australia’s eastern seaboard.

A new source of unconventional oil and gas, shale and ‘tight’ gas, is a significant development. Though this sector is in its infancy, shale gas is expected to rival CSG with regard to future commercialisation.

Q: What are the key challenges facing the industry and how can companies like Cardno ensure best practice?

Anthony: Aside from ongoing issues like rising costs, diminished productivity and reduced global competitiveness, the Australian oil and gas sector must maximise energy production, while protecting environmental resources.

This task grows as petroleum hydrocarbons require more investment and technological sophistication to commercialise, and opinion polarises over land use and resource issues.

The exclusive use of sustainable energy sources is an ultimate goal; however, practical, political and economic realities dictate petroleum hydrocarbons, namely gas, are likely the best transition to achieving this end.

Extraction techniques, such as hydraulic fracturing (fracking) and directional drilling, are required to recover deeply-situated resources.

While not as environmentally detrimental as some claim, they are not without risks, including the potential to spill or leak drilling fluids, cross contaminate aquifers or release contaminated water into surface water systems.

An important trend in the petroleum industry has been the transformation from a vertically integrated business model encompassing production, refining, transmission/distribution and retail.

Most companies have divested retail service stations or have partnered with major retailers to optimise use of capital and minimise contamination risks.

Cardno must ensure best practices are employed to identify and minimise risks as part of these divestment programs.

This is achieved by implementing engineering, environmental and administrative solutions, thereby safeguarding our natural environment.

Cardno maintains these best practices by continuing engineering and environmental excellence, providing innovative solutions, mentoring staff and working with others to further our profession and communicate with affected communities about real environmental risk.

Q: Do you foresee continued growing demand for oil and gas across international markets?

Paul: Demand for energy fuels is largely driven by China and Japan. China’s economic growth has slowed, but it is projected to remain in excess of 7.5 per cent.

After the 2011 tsunami, Japan drastically reduced dependence on nuclear energy, leaving coal and petroleum hydrocarbons to fill the gap.

Coal remains an economical source of energy worldwide but is not particularly clean or an efficient fuel for peak load power generation.

Natural gas is cleaner, more efficient for peak power generation and a very good complement to sustainable energy sources that cannot generate sufficient or reliable power for retail and commercial customers.

The unconventional United States shale sector has been developing for some time and will continue to grow quickly, with production forecast for 50 years and beyond.

Canada, Argentina, Russia, and Mozambique are also experiencing rapid growth in exploration and commercialisation of oil and gas resources.

Australia is showing signs of reduced productivity and price inflation in the sector, but it is important to remember our proximity to Asia.

After Qatar we remain first cab off the LNG export rank and have gas supply contracts with our clients for about 20 years.

Q: How important is it for companies to engage with local communities and how can they ensure projects benefit ordinary Australians?

Paul: The oil and gas industry understands how important it is to have a social license to operate.

Exploration and production (E&P) activities can impact upon farming or grazier activities, while local communities have experienced adverse effects from fly-in/fly-out labour and from the migration of local workforces into higher paying E&P jobs.

The perception that unconventional oil and gas activities, such as shale and CSG, will permanently deplete or contaminate major aquifers motivates many individuals to protest against the industry.

The keys to good community relations and a successful project are operating in a transparent fashion, ongoing stakeholder engagement and clear communication of scientific facts.

Cardno has written social impact management plans for proponents and its water services and our environmental expertise adds to project, community and governmental cooperation and bodies of knowledge.

Q: What are the top environmental concerns relating to the industry and how can they be addressed?

Anthony: The oil and gas industry moves billions of barrels of oil and billions of cubic feet of gas from production through distribution and, ultimately, to points of consumption, largely without incident.

However, the industry sometimes fails to protect the environment and suffers consequences, such as closure of operations, brand damage and financial penalties.

The risks include leaks and spills resulting in contamination of land, surface water, groundwater and marine environments.

Traffic accidents can have grave consequences if a petrol tanker is involved.

In CSG and shale gas E&P the key issues are fracking, groundwater resource depletion and contamination during the field development phase, as well as land-use disturbance during gas production.

Site contamination can be a problem for the petroleum industry in Australia with thousands of surplus distribution and retail service stations, in the process of being closed following remediation.

These potential impacts can be addressed by good planning and sound science.

It is essential to arrive at realistic assessments of risk and deliver proportionate responses in management and remediation.

While resorting to non-rational solutions or political positions may protect the environment in the short term, they will result in economic damage in the medium and longer terms.

A more informed strategy is required for the rational development of these unconventional gas resources in Australia, while also protecting the environment.

Q: What are the key areas of focus for Cardno in oil and gas in the coming years?

Anthony: Cardno is engaged in all phases of oil and gas projects, from exploration to development, operation and closure of facilities.

We are also involved in social infrastructure development, particularly where the industry interacts with traditional owners and imported workforces.

Paul: The CSG and shale E&P industry is still nascent in Australia and Cardno is able to draw on our experience in the United States where innovative approaches to fracking have improved the acceptance of this technology.

The deployment of environmental science and groundwater hydrology capability to assessment of risks to groundwater systems will aid the development of unconventional oil and gas.

LNG construction projects, particularly in Queensland, have required our engineering and construction materials testing capabilities.

These facilities will be operational for many decades and will demand ongoing operation and maintenance work.

Anthony: Cardno provides remediation and site closure for petroleum companies in the Americas and Australia.

This has involved refineries, distribution terminals, land and seabed pipelines, as well as retail service stations.

The scale and complexity of these closures will only increase and Cardno is well positioned to serve this oil and gas sector into the future.





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