WOODSIDE managing director Peter Coleman has called for a major rethink of the way engineering contractors and resources companies approach the development of new projects.
With costs having risen sharply, he said there needed to be a greater focus on construction during the early design phase.
With current methods of plant design, “most of the high-end professional design goes into the technology of processing at the plant, not into the construction of the facility,” Mr Coleman told a Business News Success & Leadership breakfast this week.
Mr Coleman said Woodside was changing that mentality.
“[The company is] moving from a process engineering-driven outcome to a construction-led design approach … [starting with] an end in mind, and designing a plant to fit into that desired construction activity,” he said.
It was unrealistic, Mr Coleman said, to expect to be able to operate any differently with current cost bases.
One of Mr Coleman’s first tasks at Woodside, after joining the company two years ago, was to announce cost increases and construction delays at its Pluto liquefied natural gas (LNG) development.
More recently, he announced the company would not proceed with a land-based LNG development at James Price Point, after costs blew out to more than $40 billion.
Woodside and its joint-venture partners are evaluating alternative development options for the Browse Basin gas fields, with a floating LNG plant considered the most likely after it signed an agreement with Shell.
Mr Coleman added to that speculation when he said the company’s plan B “probably floats”.
He believes the big opportunity for Perth is to become a technology hub for the oil and gas sector, with highly skilled high-paid jobs.
“The world is fundamentally changing for LNG … so, Perth has a real opportunity here,” Mr Coleman said, adding that Perth’s characterisation of just five years ago as a “sleepy hollow” was well and truly over.
He warned, however, that the opportunity would not translate to reality without Perth and Western Australia as a whole being able to adapt to big and not entirely predictable changes.
“If we think the future involves us doing the same as we’re doing today, then we’re going to have a disappointing future,” Mr Coleman said.
“If we’re going to continue that growth wave then we need to do things differently, and we’re fortunate enough as a society that we do have the wherewithal to do things differently … we need to use those adaptation skills to confront whatever the new order is and whatever the new challenges are.”
Looking ahead, he said Perth could become the next Aberdeen or Stavanger, referencing the cities in Scotland and Norway that have become major oil and gas centres on the back of North Sea developments.
To keep some perspective, though, he noted that Perth would not rival Houston, which attracted 105,000 delegates to its recent Offshore Technology Conference.
He believes Woodside’s depth of technical knowledge is an important asset, and will help to sustain the business, but must constantly be improving.
“Technology is our future … but if we maintain and lock in on our current technology base, we will be average in 10 years and out of business in 20,” Mr Coleman said.
Speaking about his time at Woodside, Mr Coleman said a major focus had been improving the corporate culture.
“Culture is what drives sustainable workplace performance,” he told the breakfast.
Mr Coleman said assets came and went, but for long-term success a business needed a culture of achievement, renewal and refreshment.
He likened Woodside to being a young adult, having gained confidence and learned valuable lessons from some of its earlier forays during its teenage years.
He also said the company was learning to live without its parent, presumably major shareholder Shell, which has already sold a large portion of its Woodside stake and is looking to sell the remainder.
Mr Coleman said he found an extremely strong sense of community and goodwill when he joined Woodside, but also found many employees were not happy.
A major contributor to this was problems at the time with Pluto, which has performed better than expected since commissioning began.
Mr Coleman said another surprise was his discovery that Woodside was not a company that welcomed change or uncertainty.
“Someone said to me when I was still new that what I saw as evolution, a lot of people in the company saw as revolution,” he said.
He acknowledged that driving change was made more difficult by the company’s strong earnings outlook.
He anticipates 10 years of strong revenue from its existing assets, including the Pluto and North West Shelf LNG plants and its offshore oil projects, and noted that such an outlook seemingly provided little impetus for change.
“Sometimes change can come most easily if you are standing on a burning deck, because that way everyone in the organisation can see why you need to change, and can rally around it,” Mr Coleman said.
Despite that difficulty, he said feedback he had obtained from other business people indicated Woodside was making progress with its program of cultural change.
Additional reporting by Claire Prideaux