Growing Australia’s oil and gas supply chain

Australia’s oil and gas supply chain has the potential to add an extra $7 billion to the economy by 2030, but only if suppliers, operators, governments and research organisations work together to overcome systemic barriers to growth.

Our latest report for NERA (National Energy Resources Australia) is the first to analyse the size and composition of Australia’s oil and gas (O&G) supply chain. The domestic supply chain has been a valuable complement to O&G extraction, supplying almost 70% ($38 billion) of the goods and services that the industry requires. This supply chain will be critical to the continued development of Australian O&G. But it is not yet meeting its full potential.

Compared to global peers, Australian O&G suppliers are relatively young and capture a smaller share of both domestic and export markets throughout the O&G cycle. Based on analysis of national economic data and over 30 interviews with operators, suppliers, academia and industry bodies, this report finds there are three key challenges that limit opportunities for domestic suppliers in the medium to long term:

  1. Domestic suppliers tend to focus on work that either must be conducted locally or involves low levels of technical expertise. Growth opportunities are limited as these goods and services are unlikely to be exported, and much of domestic demand has already been met.
  2. Australia’s high costs have dampened suppliers’ export potential and made it harder for operators to invest.
  3. It is difficult for small- to medium-sized suppliers to start up and grow in the O&G supply chain due to the global, mature and complex nature of the O&G industry.

We find that a stronger, more innovative supply chain could be worth $7 billion more to the Australian economy in 2030 by capturing a greater share of both domestic and export markets, and enabling new Australian O&G projects to be commissioned.

However, it will take a coordinated effort for the domestic supply chain to reach its potential. Suppliers will need to develop deeper areas of strength and more advanced offerings, while operators, large contractors, government and research organisations can support and encourage local innovation to lower costs and improve productivity. Smaller suppliers and buyers would also benefit from jointly addressing priorities and pain points in the procurement process.

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