Economic Reforms in Australian Oil and Gas Industry †Free Sample

Question: Discuss about theEconomic Reforms in Australian Oil and Gas Industry. Answer: Introduction: Oil and Gas has emerged to be a necessity of current generation. It is recognised as the ultimate source of energy due to the utilities provided by the resources. Australia is an active member of the OECD group that promotes policy and reform to improve social and economic well being across the globe. It is the largest exporter of coal and is one of the only three exporters of hydrocarbon (Schmitt, 2007). Along with that Australia is known for exporting natural gas and it is a net importer of oil. According to the Australian Petroleum Production and Exploration Association (APPEA) report, the oil and gas industry contributes around $32 billion of the real GDP of the nation that amounts to 2.6 percent of the GDP. This amount is expected to get doubled by the end of 2030 (Massola, 2014). Currently, the Australian Oil and Gas industry has been facing several problems related to employee conflicts and minimum wage rate. Along with that, the industry employs around 150,000 Australians which is in verge of risk due to the current conflicts in the industry. The paper has been developed to study the current situation in the Australian Oil and Gas industry by referring to a primary article written by Massola (2014) and discuss the necessary micro-economic reforms that are required to mitigate the problems (Massola, 2014). According to Massola (2014), the Australian government needs to make changes in the Industrial relations systems to save the investment of $180 billion made on liquefied natural gas projects. James Massola says that if the government does not make any changes in the industrial relations policies, it will risk the 150,000 jobs in the oil and gas sector of the country (Massola, 2014). First of all, it is important to understand the current level of oil and gas production of Australia before understanding the need of economic reforms. Currently, Australia has been a net importer of natural oil. It can be seen from the figure given below that the consumption of oil has increased at a high rate in the recent years and the production has also fallen at a high rate. Hence, it impacts the GDP of the nation negatively (Inkpen and Moffett, 2011). Figure: Australian Petroleum Production and Consumption Source: (Krupa, 2015) Furthermore, when considering the production and consumption of natural gas, it can be seen that consumption has gradually fallen in the year 2013 with an increase in the production. Hence, the economy has been able to earn good revenue from export of natural gas. A figure has been provided below for better understanding. Figure: Australian Natural Gas Production and Consumption Source: (Krupa, 2015) Considering the above facts, it can be seen that the industrial conflicts with the employees in regards to the minimum wage rates and working arrangements will impact the production of natural gas and oil in the country. It will gradually bring the upcoming projects in risk and negatively impact the jobs of the Australian people. Furthermore, the industrial conflicts will impact the export amount and finally the GDP of the nation. Hence, there is a need of micro-economic reforms that can be helpful in mitigating the industrial conflicts and save the industry from downturns in the future (Peck, 2008). Under the current circumstances, the Australian Petroleum Production and Exploration Association (APPEA) have demanded effective changes and additional flexibility to work legislations. The Abbott government promised to take prompt measures in order to control the existing situation. Through the identification of the Fair Work Act, the Abbott government called for determined industrialised relations reforms directed towards oil and gas industry reducing the operational costs of the businesses (Rose and Stevens, 2008). Also, the economic reforms have supported the LNG investment to ensure further high-cost projects in the oil and gas sector. The Australian government wanted to change the structural framework of the existing industrial relations legislations so that recent LNG projects can be operated at the highest standards reducing some of the existing costs (Industry.gov.au, 2016). Also, the Abbott government voted for open business tactics securing the mutual interest of every ele ment attached to the industry such as unions, buyers, business organisations, sellers and intermediaries (Gravelle, 2015). Moreover, the governments decision to reduce the penalty rates had been significantly appreciated. Also, considering the request of the APPEA, the government identified the essentiality of workplace reforms in the labour market. Meanwhile, some of the economic reforms taken by the government would ensure bigger fines in case of illegal strikes called by trade unions. The testing of the skilled foreign workers under the labour agreements had been restricted to some extent so that the power of the labour unions could be controlled (Subroto, 2012). Evidently, the economic reforms in the oil and gas industry in Australia have included wage decision so that the position of the unskilled labours can be improved. According to reports, the pay increment of a barge welder has been registered to be 44% since 2007 to 2014 (Massola, 2014). Therefore, the Abbott government promised to change the existing labour market wage structure in the oil and gas industry for effective industrial relations. The settlements of the economic reforms directed towards oil and gas industry must ensure legal sustainability of the industry. Moreover, the Abbott government can improvise additional alterations to regulatory arrangements so that the standards of the industrial relations and business regimes would be improved (Broadman, 2016). Furthermore, a newsletter on general policies must be produced to embark the framework of rights for sustainability of the industry. Along with that, benchmark regulatory frameworks can be identified to protect the rights of the human resources attached to the oil and gas sector. Invariably, efficient policy measures and attributes can deliver significant regulatory practices to control the future LNG projects in the most effective ways. Through the identification of LNG investment opportunities, future oil and gas projects and high-cost upbringing in the Australian oil and gas sector, the role of the Abbott government and economic reforms directed towards the industry have been featured in the discussion. Conclusively, the role of the Abbott government in LNG investment is impeccable reducing the high costs of the industry. Moreover, the changes in the industrial relations legations have opened up new dimensions for the sector in order to improvise in the futuristic projects. Also, the wage structure of the unskilled labours and other primary reforms have been accurately valid for further growth perspective of the oil and gas industry. References Broadman, H. (2016). Political risk in the international oil and gas industry.Energy Policy, 14(2), pp.178-180. Gravelle, J. (2015). Effective Federal Tax Rates on Income from New Investments in Oil and Gas Extraction.EJ, 6(01). Industry.gov.au. (2016).Offshore Petroleum Regulatory Regime. [online] Available at: https://www.industry.gov.au/resource/UpstreamPetroleum/OffshorePetroleumRegulatoryRegime/Pages/default.aspx [Accessed Sep. 2016]. Inkpen, A. and Moffett, M. (2011).The global oil gas industry. Tulsa, Okla.: PennWell. Krupa, J. (2015). The oil and gas industry: A nontechnical guide.Energy Policy, 57, pp.644-645. Massola, J. (2014).Oil and gas industry pushes Tony Abbott's government for industrial relations overhaul. [online] The Sydney Morning Herald. Available at: https://www.smh.com.au/federal-politics/political-news/oil-and-gas-industry-pushes-tony-abbotts-government-for-industrial-relations-overhaul-20140406-zqrh9.html [Accessed Sep. 2016]. Peck, J. (2008). Tax Burden of the Oil and Gas Industry.Journal of Petroleum Technology, 20(12), pp.1345-1348. Rose, A. and Stevens, B. (2008). Distributional impacts of oil and gas tax reforms.Energy Economics, 10(3), pp.235-241. Schmitt, H. (2007). Environmental politics and the oil and gas industry.Natural Gas, 13(1), pp.13-16. Subroto, H. (2012). Challenges facing the international oil and gas industry in the 21st century.Energy Policy, 20(10), pp.913-919.