Australian LNG O&M Opportunities Guide

This opportunity guide has been commissioned by the Australian Industry Participation Branch of the Department of Industry to examine the procurement and contracting practices relevant to the O&M phase of major LNG projects currently being executed in Australia.
Whilst previous work in this field has concentrated on project opportunities for SME’s this guide is intended to focus upon the opportunities emanating from the operations and maintenance budgets of the LNG developers. It attempts to provide specific guidance in the following areas:

• How LNG O&M opportunities are placed into the market and the methods used by developers to source, bid and make awards.
• How SME capability information is obtained and used.
• What selection and award criteria are used to determine successful participants in competitive processes.
• How Australian SMEs might increase their chances of winning work in the O&M phase.

Economic Background

According to the estimates of Bureau of Resource and Energy Economics, the capital costs associated with LNG projects equate to $2.9 Billion per MTPA (based on Wheatstone). With a total capacity of 60.8 MTPA under development in Australia this puts the total investment value in the region of $176 Billion when using the BREE measure.
With the expected completion of the bulk of LNG project investment within the next few years the focus of the industry will inevitably, and by necessity, move towards preparing for the O&M phase of those projects.
This phase will be a dominant feature of the industry for the next 40 years and one which offers Australian enterprises enormous opportunity. It could, by our estimates, result in a range of opportunities of a broadly equivalent value to that of the capital project phase for Australian suppliers and contractors. This will be conducted in an arena particularly suited to local rather than international solutions for the most part.

Preparing For Change

Dealing effectively with this business challenge and shifting focus towards the opportunities that the O&M support phase provides is therefore of significant importance for LNG developers and Australian businesses alike.
Equipping SME’s with the knowledge of the strategies being contemplated by LNG operators is increasingly relevant and the timing and method of placement of those opportunities into the market place is now critical. Similarly equipping LNG developers with knowledge about the degree of market preparedness that exists amongst SME’s should also be of considerable value so that they are aware of any latent supply bottlenecks and potential shortage and quality issues.
The large scale of additional business volume is easily capable of swamping and overwhelming local capability and this guide is aimed at being of influence in shifting the engagement approaches of local enterprises.

Guide Structure

This guide explores the nature of the opportunities available to Australian SMEs from operations and maintenance requirements of LNG developers and aims to assist SMEs in navigating their way successfully through the competitive processes employed by operators who place their business into the market place.
The guide is therefore structured to look at current Australian LNG operations before going on to examine developments in the pipeline. It seeks to assess the boundaries of the opportunities available and then examines the processes by which those opportunities are placed into the market place. Finally it considers how contract award decisions are made. As the guide considers a somewhat complex procurement process, occasional professional insights from the authors have been highlighted in order to bring greater depth of understanding to the subject.

Key Guidance Points

We have provided 40 key guidance points in this guide with a number of significant observations and findings in the following categories.

• Total opportunity value, dimensions and timing
• Threats and risks of opportunity loss
• Opportunity mapping
• LNG plant supply demands and working practices

Research Methodology

Our research has relied to a large extent on publically available material gathered from developers, key contractors, government and agencies of government, industry associations and representative trade bodies. We have augmented this approach through the professional expertise and knowledge of the authors and through the use of relevant reports and other studies published prior to our own. It is, to the extent that we can reasonably ascertain, correct at the time of writing but is naturally affected by a dynamic and changeable business environment.
In building this opportunity guide we have also aimed to understand the experience of a typical SME in obtaining information about commercial opportunity and have therefore chosen to place a degree of reliance upon some information source types in preference to others (we have for example largely eschewed formal interviews).
These slight dependencies are by design, are freely acknowledged and are an intrinsic part of the brief provided to us which has sought to produce a comprehensive, accurate and influential report in both a resource-efficient and timely manner.

The full version of the report is below: