speech

energising asia

Nigel Hearne - Managing Director

Nigel Hearne

President
Chevron Asia Pacific Exploration and Production

Monday 27 May 2019
APPEA Connect Series: A regional perspective on natural gas - challenges and opportunities

I’d like to begin by acknowledging the traditional custodians of the land on which we meet today. And I pay my respects to Elders past and present. Thank you, Andrew, for your kind introduction and congratulations on your new role, leading APPEA – which is the genesis of so many creative approaches to the industry. 

I’m so pleased to be back to this forum and to Australia, my home for the past few years.

On my way, I marveled at something I usually take for granted. At San Francisco airport, my United flight queued up on the taxi way. I noticed we were behind planes from Virgin Atlantic, Delta, Southwest.

When I transferred in Sydney, my United flight taxied past planes from Singapore, Qantas and Japan airlines. If your United flight gets delayed, maybe you jump onto Qantas, and you’re still under the same roof.

My point: Lots of different airlines use the same runways, terminals, and infrastructure: it’s a system that’s streamlined and interconnected. Why? To best serve the customer. To most efficiently get that customer from A to B.

Today, I’m here with a challenge: isn’t it time we thought about natural gas and Australia the very same way?

What I mean is:

  • Let’s start with the market, instead of the rocks.
  • Let’s work together, instead of alone.
  • Let’s think “integrated gas,” instead of “LNG.”

The time has come for change. But why? After all, we’ve done remarkable things here.

  • By one estimate, Australia’s LNG exports last year jumped almost a quarter.
  • That’s a massive increase – especially from projects in Western Australia.
  • And there’s more to come that will strengthen Australia as the leading exporter of LNG.

Impressive. But could we have done better? And to be clear, I’m excluding no one here:

  • We have an overcapitalised business, both on the East coast and West
  • We have very little shared infrastructure. Instead we’ve got bespoke capital investments. They increase costs and could strand resources.
  • And we have a shortfall of affordable and reliable domestic gas.
    • The recent approval of a New South Wales LNG regas facility is a welcome step toward closing the gap.

How else can we put the Australian molecule to its best advantage? That’s what we should be asking – because if we scan the global landscape, it’s clear that the old ways won’t work. And there’s a lot riding on finding new ways that will.

Billions of people in the world today can’t access reliable energy.

In the next 20 years, the world will contain 1.5 billion more people. They have as much right as anyone to the benefits of affordable and reliable energy.

Around the world, the desire for a cleaner environment drives a growing appetite for cleaner-burning natural gas.

IEA tells us that, over the past 30 years, natural gas consumption has grown at an average of 6 percent per year. Over the past two decades, demand in China has been even stronger – with consumption growing, on average, 13 percent a year.

We can expect considerable growth in demand from India and Pakistan as well.

With South Korea and Taiwan, these five countries saw LNG imports increase the most during the first half of 2018.

It’s tempting to ask: given that kind of growth, why can’t we just carry on as we’ve done before?

I’ll invoke the advice of a very practical philosopher:

“Even if you’re on the right track, you’ll get run over if you just sit there.”

Let me tell you: the supply side isn’t sitting still.

Today’s LNG customer has choices. Lots of them.

Customers in Asia can choose how their demand is supplied: by coal or oil or renewables.

Customers in Asia can also choose where that energy comes from: First they’ll look at their own fields and then they’ll look beyond.

Here’s one example: North America’s natural gas system is interconnected, and is clearing to a global market.

I worked in Pennsylvanian’s Appalachian Basin. There I saw part of the North America business firsthand.

Cargoes of LNG are already moving from the Gulf Coast to Asia. And that’s without pipelines being built.

I can see a time when Appalachian gas finds its way to Asia, too. Why?

Ships are just pipelines on water. Ships are the key to moving us to “integrated gas,” beyond domestic gas and LNG.

Why is the North America model working so well? Companies, communities and governments are working together. They’re motivated by flexibility, transparency and efficiency. And now, as a result, they serve a global market.

Here’s the bigger picture of the global market.

Look how many arrows point to Asia, from North America, Africa, the Middle East and Russia.

Australia has one advantage in Asia above all others: proximity.

Australia’s molecules should be top of the stack – especially given Asia’s growing appetite for cleaner natural gas.

But in today’s world, those molecules face strong competition.

Other basins – like North America – are getting more efficient and lowering cost. Just like North America, competing in this region means everyone working together.
Synergies can connect Western Australia’s 11 trains of LNG and domestic gas plants.

That frees up more ready supply in Asia… for Asia.

That will put Australia at the top of Asia’s supply.

Making those connections isn’t as complicated as it might seem.

Have you ever been to London and ridden on the famous London Underground? Did you look at the iconic map to figure out where to go?

You know, it bears no resemblance to how tube stations are actually laid out geographically.

Why is the map is drawn that way? For the rider.

The map is another model of flexibility, transparency and efficiency… to serve the customer’s need to get from point A to B.

If we put customers’ needs first, how can we leverage our best attributes to supply the Asian market?

  • Could we approach liquefaction as a service?
  • Could we share infrastructure and technology?
  • Could we leverage our collective capability?

Let’s be creative.

Serving the market, can serve us.

Think of what that green light for the regas terminal will do: it will bring extra volumes of domestic gas to shore to power local industry and homes and boost capacity in east coast projects.

The North West Shelf is on the verge of a new step in the right direction: Woodside as operator is leading the partners to transform the North West Shelf into a competitive tolling asset.

That kind of creativity and partnership will energise the Australian molecule to energise Asia.

That’s our calling, our noble cause. To make good on it, we’ve got to do even more.

As Michelangelo said: “The greater danger lies not in setting our aim too high and falling short, but in setting our aim too low and achieving our mark.”

As an industry, we must commit to a new kind of dynamic LNG marketplace. One where buyers and sellers find more flexible, efficient and creative agreements to serve the Asian marketplace.

Michelangelo could see a statue in every block of stone. Let’s view our “block of stone” the way Michelangelo might:

  • Let’s start with the market, instead of the rocks.
  • Let’s work together, instead of alone.
  • Let’s think “integrated gas,” instead of “LNG.”

This is our cause: to drive progress with reliable, cleaner – and the most competitive – natural gas.

Together, we can energise Asia.