Increased research investment required in upstream energy sector: BCG

In an address to APPEA’s 2014 conference, the Houston-based leader of Boston Consulting Group’s (BCG’s) North American Oil & Gas practice Alan Thomson presented new analysis that showed Australia’s upstream sector was well behind in the innovative stakes.

“Australia has about 3.4 per cent of OECD petroleum production, which is set to rise sharply in the next few years, but in the past decade, Australia has accounted for only 1 per cent of inventions, as measured by patent activity,” Mr Thompson said.

“Looked at another way, Australia spends about $US150 million annually on upstream research and development, which is a very small fraction of the $US5 billion plus invested by the world’s top ten oil and gas companies.”

Mr Thomson said there were historical reasons for Australia’s low research and development in the upstream sector.

“Australia is one of the youngest petroleum producers in the OECD, so it has been able to import technological solutions already developed. The local sector has also lacked strong government support and incentives for research and development.”

Mr Thomson said Australians were famous for their ingenuity and had proven their ability to solve challenges in upstream energy when the need arose.

Mr Thomson said a bigger research and development effort could make a material improvement to the global competitiveness of Australia’s upstream petroleum sector.

“Innovation is key to reducing costs, which of course is on the major challenges for the next wave of LNG projects currently on the drawing board.”

He said government could play an important role in the form of tax subsidies and leadership, with Norway a great example.

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