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Balancing the People Equation

APPEA, Perth, April 2014

How Enhanced Collaboration

Can Help Solve Labour

Challenges in the LNG Industry

1

• Blog: www.geoffreycann.com

• Twitter: @geoffreycann

• Email: gecann@deloitte.com.au

• Phone: +61 (7) 3308 7125

• Youtube: www.youtube.com/user/gsccann

• LinkedIn: au.linkedin.com/in/geoffcann

About your presenter: Geoffrey Cann

2

Collaboration comes in many forms and at different levels

Gas

market

Incre

asin

g c

om

ple

xit

y a

nd

fo

rmality

of

str

uctu

re

Asset value

“Pool our assets”

Industry value

“Build our industry”

Operations Value

“Pool our service needs”

Regulatory/

Infrastructure

“Strength in numbers”

Damage control/ Self-preservation

‘We’re all in this together’

APPEA

“Our natural advantage”

Resources Councils

Surplus goods disposal and

Shared services outsourcing

JVs and

Common Engineering

‘Politeness is the

poison of

collaboration.’

- Edwin Land Inventor

3

Similarities in businesses provides a basis for collaboration

1.Similar lifecycles

2.Homogeneous

product

3.Same region of

operations

1.Common

infrastructure

design

1.Common

stakeholders

2.Common

regulators and

standards

1.Similar inputs

2.Similar cost

drivers

3.Common

contractors and

suppliers

4.Common labour

pool

5.Similar skills and

capabilities

required

1.Common

message

platforms (social,

traditional)

2.Shared message

to public

Asset value

Industry value

Operations Value

Regulatory/ Infrastructure

Damage control/ Self-preservation

= People related

4

The benefits of collaborating around people are significant

People challenges include:

• Attraction and retention of talent

• Labour and skills shortages

• Managing employee turnover/retention

• Compensation expectations

• Productivity and employee engagement

‘No one person,

no one alliance,

no one nation, no

one of us is as

smart as all of us

thinking

together.’

- James Stavridis

Navy Admiral

As long as companies act individually, the prospects for retaining skilled

employees, improving sustainable productivity and driving labour costs down

are limited

5

The benefits of collaboration are compelling, but are

hindered by common road blocks

Barriers to

collaboration

Benefits Barriers ‘Effectively,

change is almost

impossible

without industry-

wide

collaboration,

cooperation and

consensus.’

- Simon Mainwaring

Award winning branding consultant and social media specialist

6

Case Study: What would Canada do? The top workforce challenges reported by Canada’s petroleum

industry in 2011 were:

There was high demand for engineers, technicians, technologists,

trades, operators, supervisors, specialists and business and operations

support personnel in the oil sands sector

• Attraction and retention of workers in hard-

to-recruit locations (63%)

• Labour and skills shortages (57%)

• Managing employee turnover/retention

(52%)

• Benefits and compensation expectations

(50%)

• Productivity and employee engagement

(31%)

• Unsustainable

increases in

compensation

• Increased incidence

of on-site poaching

and competition for

labour

7

What conclusions did Canada reach on collaboration?

• Educational institutions to develop:

• Work integrated learning programs

• Vocational and professional training courses

• Industry social media campaigns to target youth

• Community work to target youth, women, immigrants and

Aboriginal communities (percentage representation of these

groups was low and had not changed in almost a decade)

• Joint workforce and capability planning across producers,

contractors and service suppliers to attract and retain workers in

hard-to-recruit locations and target in-demand occupations and

skills

• Joint training programs for common skills and trades

8

Seven pre-conditions must be in place to foster greater collaboration

1 Alignment around a common need

2 Invested champion

3 Window of opportunity

4 Sense of urgency and importance

5 Top-level executive support

6 Compatible corporate values

7 Transparent method of working

‘Alone we can do

so little; together

we can do so

much.’

- Helen Keller

9

A philosopher’s caution

“Your corn is ripe today; mine will be so tomorrow. 'Tis profitable

for us both, that I should labour with you today, and that you

should aid me tomorrow. I have no kindness for you, and know

you have as little for me. I will not, therefore, take any pains upon

your account; and should I labour with you upon my own account,

in expectation of a return, I know I should be disappointed, and

that I should in vain depend upon your gratitude. Here then I

leave you to labour alone; You treat me in the same manner. The

seasons change; and both of us lose our harvests for want of

mutual confidence and security.” – David Hume

10 Point of View: Collaboration in CSG-LNG

Appendix

11

Collaboration can eliminate duplicated efforts, underutilised infrastructure and poorly optimised workforce scheduling

There are many opportunities for collaboration across the LNG value chain

• Commissioning*

• Sequential shut downs / turn-

arounds

• Port scheduling

• LNG Production and Transport*

• Joint maintenance contracts

and crews

• Redirect gas supply

Gas fields and field operations LNG and ports

• Shared pipelines

• Co-invest in future

compression plants, water

treatment plants

Pipelines and water treatment

• Workforce sharing / HR

• Competency and Manning*

• Facilities management

• Housing and accommodation

• Land access practices

• Community relations

• Waste disposal

Shared services

• Logistics – fleet, air, bus, water

transport, freight

• Warehousing and lay-down yards

• Social investment

• Safety and Environmental

Management*

• Security and emergency management

• Excess assets disposal

• Environment

• IT support

• Accounting services

• Fraud detection

• Maintenance and Sustaining Capital*

LNG value chain

Operations value

* Note: For further details please see appendix

LNG and ports Pipelines and treatment plants Gas fields and field operations

12

The next phase of investments in assets could help build economies of scale

While today the three proponents’ have separately engineered infrastructure, value can

be generated in the future through common engineering as with the LNG plants

Asset

value

Player 1

Player 2

Player 3

Generation 1 Today Generation 2 Generation 3

Wellhead Field

compression Wellhead

Field

compression Wellhead

Field

compression

• Increased economies of scale

• Reduced procurement costs

• Reduced operating costs

• Optimised efficiency

Benefits

• Reduced parallel activities

• Increased flexibility

• Reduced training costs

• Improved reliability

13

Creating industry value requires high level of collaboration

Industry value will be enhanced through a more flexible gas market where all the

players will share capital assets to optimise utilisation

Gas market optimisation

Manifold

Pipelines

LNG plant

Manifold

Industry

value

Storage

Gas market place

Large gas Cos.

2nd tier gas Cos.

Mining Cos.

Manifold

Shipping

14

Competency and Manning

Identical facilities and processes is currently an issue, but can be converted to an advantage with collaboration.

• The competency and manning issue has resulted in personnel leaving the QGC team to join the APLNG and GLNG

teams

• The industry is also suffering from recruitment approaches from Western Australia

• All the training requirements are identical

• Each company will differ in the soft aspects of training reflecting their separate systems and cultures

• Setting up a separate entity to recruit and train technicians for all three facilities has many benefits

• Reduces parallel activities, reduces cost for all three parties, training a greater number of candidates eases the

supply and demand equation for personnel

• If this relatively straightforward enterprise can be established jointly between the operating companies a premise

has been created for co-operation

Urgent, very real issue for all three LNG operations is finding, recruiting and training operations and maintenance technicians

15

Commissioning

The three plants will be commissioned by Bechtel successively over an eighteen month period before being made

operational ready

• Availability of sufficient gas to commission any one of the plants on time to full capacity may be an issue

• All plants can be fully commissioned to nameplate capacity in succession

• Gas from Arrow can also be directed to which ever plant requires the additional gas for commissioning

• Benefits of an integrated commissioning management model

• Deliver gas to the plant that is ramping up to full production

• May (subject to commercial agreements) allow remaining plants to delay start up

• Optimise efficiency of each plant from start up

• Utilise common gas supply to ensure they can be commissioned to full capacity

• Obtain maximum efficiency when they are running to nameplate

• Start up of each plant would be programmed by a single entity following the commissioning

• Proof of competency of operators will occur on the first plant in a professional environment to meet the needs of all

three plants

• Ultimate flexibility realised as operators can be deployed across any one of the plants at any time to meet the

commissioning needs of each

Integrated commissioning model makes gas available from multiple sources

16

LNG production and transportation

The three plants will be commissioned by Bechtel successively over an eighteen month period before being made

operational ready

• Protocol for process optimisation is almost identical

• Identify operating envelopes for each major piece of equipment

• Establish where current operation is placed versus equipment limits, and proximity to best efficiency points versus

joint CSG availability

• Where the equipment is operating close to limits we will identify timing for additional train operation

• Possible benefits of collaborating on LNG production and transportation are:

• Energy efficiency

• Process optimisation

• Automation improvement

Optimising the production and transportation of LNG can be achieved through collaboration

17

Maintenance and Sustaining Capital

Collaborating in the maintenance and spare parts area has the potential to lower OPEX.

• Focus on planning & execution of scheduled work

• Materials management can free up capital

• Manage training costs by reviewing competencies required for day to day support and on an adhoc basis

• Benefits of a single Maintenance Management System:

• Greater ability to monitor costs

• Larger data pool for better analytics

• Reduced overhead costs

Joint planning. Scheduling and execution of large shut-down requirements could enable reliability and availability

18

Safety and Environmental Management

Proximity risk exists for all operators,, but shared environmental procedures and training will lower the overall risk of

environmental incidents

• Safety first culture can be rolled-out across the entire Curtis Island workforce

• More efficient work through better trained staff and lessons learned across plants

• Consistent requirements of vendors and suppliers

• Environmental risks are shared by all operators at Curtis Island

Standard training and operating procedures can be achieved through collaborating at a lower cost