COP ConocoPhillips

   By Robb M. Stewart 
 

PERTH, Australia--In a world of constrained capital and depressed energy prices, natural-gas exporters will need to work more closely and find new ways to share infrastructure to grow, industry executives say.

Collaboration emerged as a key theme at a major liquefied natural gas conference held here this week against a backdrop of weak oil and gas prices and an industry under pressure to protect balance sheets. Australia has been an epicenter for multibillion-dollar investments in liquefied natural gas facilities in recent years, but also a string of delays and cost blowouts at these big projects.

"We must put collaboration ahead of our industry's natural desire to immortalize our own activities in concrete and steel," Andrew Smith, chairman of Royal Dutch Shell PLC's (RDSB) Australian business, said in a speech closing out the gas conference.

"Australia's LNG industry will deliver greater economic value and better international competitiveness when we get better at the sharing of infrastructure on commercial terms," Mr. Smith said.

He echoed comments made during the week by executives at other major energy firms. Total SA (TOT) Chief Executive Patrick Pouyanne said it was the duty of companies to cooperate to improve project economics, while Woodside Petroleum Ltd.'s (WOPEY) boss suggested cooperation could be extended to sharing intellectual property under license to help speed up industry advancements in technology.

In an interview ahead of the conference, Geoffrey Cann, Deloitte Touche Tohmatsu's Australia director for oil and gas, said companies need to avoid getting swept up in a groundswell of enthusiasm and "get it done at all costs" mentalities.

"The industry needs to collaborate a lot more to deliver projects at a dramatically different cost formula than they can achieve by just developing them on their own," he said. "If they are unable to figure out how to do that, then these projects will struggle economically in the long run."

Mr. Cann said energy companies don't ultimately need to own some infrastructure after it is built, potentially opening it to shareholders, such as pension funds, that are happy to own a long-life, low-return asset like a pipeline.

Shell's Mr. Smith in his speech said even greater collaboration is needed to rein in costs.

"As industry leaders we must come to terms with the fact that local opportunities exist in a world with constrained capital, particularly in a period of depressed commodity prices, and collaboration will be key to continued growth," he said.

Energy companies regularly join forces. One of the most recent LNG projects to begin production, the Chevron Corp. (CVX)-led Gorgon project off Western Australia, brought in companies including Shell and Exxon Mobil Corp. (XOM) But executives said cooperation needs to be extended.

On Thursday, the Australian Competition and Consumer Commission granted three recently developed LNG projects on the country's east coast the right to share for a five-year period maintenance schedules, providers and techniques. The change will allow the plants, all closely located, to better coordinate the use of a limited number of independent maintenance crews to help avoid disruptions.

Mike Utsler, chief operating officer at Woodside, said the Perth-based company had approached companies including Chevron and ConocoPhillips (COP) about approaching the competition regulator to see maintenance cooperation extended to LNG operators in Australia's north and west.

There is an imperative for the industry to come together to look at collaboration and standardization operations to survive and thrive, Mr. Utsler said.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

April 15, 2016 04:07 ET (08:07 GMT)

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