19/08/2015 - 06:02

Perth the big player in Australia's global energy scene

19/08/2015 - 06:02

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Securing Australia’s economic future will require a strong focus on harnessing the nation’s energy resources and further developing the global connections that provide pathways to both imports and exports. This is especially true in Western Australia, where energy is emerging as a sector of key state economic importance.

Perth the big player in Australia's global energy scene

Securing Australia’s economic future will require a strong focus on harnessing the nation’s energy resources and further developing the global connections that provide pathways to both imports and exports. This is especially true in Western Australia, where energy is emerging as a sector of key state economic importance. 

A recent academic study by researchers from University of Western Australia’s school of earth and environment, and the school of geography, planning and environmental management at The University of Queensland, has revealed that Perth is Australia’s most significant city in the energy sector. This research confirms a preliminary study in to energy networks conducted by the Committee for Perth.

Using social network analysis to identify the connectivity of the industry in various cities, the study reveals that Perth is the most significant Australian city in terms of global influence.

The study is contextualised by prior research focusing on discerning the world’s top cities – often referred to a ‘global cities’ or ‘world cities’.  These are cities that are seen to have a disproportionate amount of global influence and prestige, particularly in the business world. 

The usual suspects of New York, London, and Tokyo frequently sit atop global lists, and increasingly cities such as Shanghai, Dubai, and Singapore are seen to wield equally significant influence. Numerous rankings and lists have emerged over the past 10 years, compiled by interests as diverse as MasterCard, Foreign Affairs, AT Kearny, and Loughborough University’s Globalization and World Cities group.

While conventional global cities lists focus on advanced services such as consultancies, banking, and insurance, more recent lists focus on liveability, sustainability and other measures.

Moving to a more specific industry-oriented purview, the UWA/UQ study focuses on the energy sector – the first of its kind to do so. Two distinct corporate lists were used to evaluate the importance of various cities.  The first is the ASX, which includes about 2,000 listed corporations. In 2014, around 13 per cent operated in the energy sector extending across almost 50 countries with 600 branches in 192 cities.

Energy-related firms on the ASX range in market capitalisation from around $A30 billion to $A400,000 – including large-scale players such as Woodside and many smaller entities engaged in specialised drilling, consulting and engineering services. 

Therefore, while the ASX represents a national energy corporate roster, the scope of operations is global.

The second is the Platts list, which comprises the top 100 energy firms from around the world – many of which have corporate offices in Australia. Market capitalisations of Platts-listed firms are much more significant, as the top international companies of ExxonMobil, Royal Dutch Shell and Chevron operate in a multinational sphere at the commanding heights of the global economy.

Globally, Beijing, Houston, Dallas, and Moscow are found to sit atop the corporate energy hierarchy. However, Perth is found to be the top Australian city on both the national (ASX) and global (Platts) corporate lists. In 2014, Perth housed 117 of the headquarters (out of 242) of ASX-listed energy companies. On the Platts roster, only Woodside made the cut, but this alone was enough to place Perth within the global top 30 in terms of market capitalisation.

Beyond mere command-and-control functions in the energy sector, indicated by the presence of large corporate headquarters, Perth also held strong network positions at both global and national scales. Social network analysis reveals that Perth’s ASX connectivity is strongest by three different measures of centrality, an indicator of strength within the network: strong ties to other Australian cities; ties to key Asian markets such as South Korea, China, Japan, and the Philippines; and connections to Europe, Africa, and the US.

Similar connectivity exists in the Platts network, with strong ties particularly to China (Beijing).

So how does this research translate into something meaningful for Perth businesses? First, the benchmarking of cities has become an important means by which cities assert their capacity to attract and retain quality human capital and, in turn, economic global competitiveness. 

Perth has an opportunity to emerge as both a national and global leader in energy-related services, and the city’s global network provides the basis for further development of international relationships. 

Second, energy is a key sector regarding national security and resilience. With Western Australia’s increasingly dominant position in LNG, Australian policymakers will look to the state as a source of economic growth and stability. And third, at a local scale, planning for a growing city means understanding the drivers of future growth.

For the foreseeable future, Perth’s energy sector will play a dominant role, and will be shaped by the various international connections that have to date been forged by the global operations of its businesses.

About the authors:

Dr Kirsten Martinus is a lecturer at the School of Earth and Environment, University of Western Australia

Dr Thomas Sigler is a lecturer at the School of Geography Planning and Environmental Management, University of Queensland

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