Maximising Oil, Gas and Energy Margins: Sustainable Cost Strategies
Facing economic headwinds, the Australian oil, gas, and energy sector needs more than just cost-cutting. Sustainable success requires a strategic approach: aligning cost reduction with overall strategy, prioritizing demand-side operational efficiency, and ensuring robust implementation with continuous monitoring. This method yields significant, lasting savings, as shown by a major operator's US$110 million reduction, enabling reinvestment and long-term profitability.
The Australian oil, gas, and energy industry is under increasing pressure to reduce operating costs, including unit costs for aging assets, as it navigates diverse headwinds such as aging assets, regulatory approval delays, fluctuating global market prices, declining production, and the drive towards net zero. This pressure is evident in recent industry trends.
Origin Energy, for example, reported an 8% decline in revenue from its stake in Australia Pacific LNG due to lower global prices for oil and gas. Other companies are facing similar challenges. Santos is addressing late-life assets nearing closure, with increasing focus on capital-intensive decommissioning, and new project approvals are taking longer, resulting in approximately 200 role reductions (Evans, 2024). Beach Energy is targeting a 30% drop in field operating costs to achieve a unit cost of less than $11 per barrel of oil equivalent, with headcount already reduced by 23%, delivering approximately $50 million in operating cost savings (Toscano, 2024).
This trend of cost reduction is also evident at Woodside Energy, which has been reviewing its workforce requirements, resulting in structural organisational change and redundancies, following similar reductions during the integration of BHP Petroleum (Battersby, 2024).
But the question remains — are mere cost-cutting measures alone enough? Or do organisations need to adopt more strategic approaches to address root causes for sustainable, long-term efficiencies?
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