David McCredie – CEO, Australian British Chamber of Commerce (ABCC), Australia
David McCredie, CEO of the ABCC, describes the state of Australia’s oil and gas industry, the challenges facing the chamber’s member organizations, the value that British companies bring to Australia’s economy, and how the ABCC will help develop bilateral relations.
Given your role at the ABCC, an organization overseeing hundreds of British companies—many of which are active in the Australian oil and gas sector—what would you consider the most impactful developments currently facing the industry?
In my view, the two biggest topics happening at the moment in the Australian oil and gas sector pertain to the North West Shelf and the LNG projects in Queensland. There are also considerable operations happening in the Bass Strait. In terms of landscape, however, the biggest change will come from the impact of the merger between Shell and BG Group. As the transaction continues to progress with the proper approvals here in Australia, and elsewhere around the world, the industry’s transformation will become more evident. This is primarily due to the fact that BG has invested USD 20 billion into the development of gas fields in Queensland, and Shell already has substantial investments on the East Coast through its joint-venture stake in Arrow Energy, together with PetroChina, not to mention their assets on the North-West Shelf.
The other interesting piece is the potential for deep sea drilling in the Great Australian Bight, as commissioned by BP. It is still very early stage, considering that environmental approvals have yet to be secured, but there is considerable interest. There are a number of statutory hurdles before that can progress, but there is an interest in potentially going down that path.
These are probably the two biggest changes within the structure of the sector from our perspective. And of course, there’s obviously a lot of pressure for all players across the value chain given the current pricing environment for oil—which has become almost untenable for many.
What is the relative state of industry sentiment and investor confidence that your member companies have expressed in this time of macroeconomic volatility within oil and gas?
Although the drop in price has come at quite a rush, in terms of the feedback that I’ve been receiving, most people are confident that the price will rebound in the medium term. We aren’t seeing the speed of change in the broader community away from oil and gas; in fact, gas is becoming more appealing than other commodities, especially in the context of climate change discussions. The increasing pressure to move away from coal will certainly help the LNG sector. The question is how much you can invest in the short-term, and what the returns are, if any, in the medium to long term. I haven’t seen a “turning off of the tap” as of yet, but there has been a slower pace with respect to getting new projects online.
Which areas of the Australian economy have you seen British companies display the most involvement in?
At the moment, the UK is the second largest foreign direct investor in Australia—the US being the first. We’re currently in the early stages of discussion, before negotiations, for the establishment of a free trade agreement with the European Union in 2017, though from a British perspective, there are some potential hurdles associated with the impending Brexit vote.
Especially from a historical perspective, there’s a very deep relationship between the UK and Australia. We probably have the most similar cultures among countries that are so geographically disparate in the world. Our institutions here are all based on the British style: the Westminster system, rule of law and use of common law, accounting practices, and educational standards are among the many models that we’ve inherited from the British. Consequently, all sorts of organizations from the UK have come to Australia to start businesses spanning every industry segment imaginable. We’ve seen a lot of successful businesses in the UK coming here, and vice versa, a lot of the successful businesses here going to the UK because of that similarity and culture.
We’ve seen a lot of prominent activity in the banking and finance arena from companies such as HSBC. In addition to banking, there’s also been a rush of legal firms—as they have globalized in recent times—particularly out of the UK. Some of those have been partnerships with Australian firms on a like-for-like basis, as is the case with Herbert Smith Freehills, while other firms including Ashurst and Norton Rose have been more of an acceptance of one brand globally. Furthermore, British pharmaceutical and broader healthcare companies GSK and Bupa have experienced longstanding success in establishing a presence within Australia. Agribusiness is also really strong suit for us as well. There’s a huge amount of British investment in this particular area—though, a lot of it traditional.
What would you considering the most defining qualities of the chamber that have truly allowed it to maintain its century-long history in this country?
The sheer breadth of the relationship between the two countries, and the fact that our cultures are so similar are the two main contributing factors. The relationship has been re-invigorated over the last four or five years starting back in 2011, when The Rt Hon. William Hague, the UK’s former Secretary of State for Foreign and Commonwealth Affairs, spoke to the Australian British Chamber of Commerce. In his remarks, he mentioned that it was the first time in 18 years that a British Foreign Secretary had visited Australia. When considering the role that Foreign Secretaries have, you’d imagine that we would’ve had a visit on a more frequent basis than that.
We’re actually now looking forward to the fifth AUKMIN Dialogue this coming April, an event in which the Foreign Secretaries and Defense Ministers from both countries come together. It’s held in London this year, but the location is normally set on a rotating basis; so, Phillip Hammond, the UK’s current Secretary of State for Foreign and Commonwealth Affairs visited last year for this specific event. There are a number of ministers planning to come to Australia this year, so we’ve definitely strengthened ties in that regard.
It’s also important for chambers to periodically re-invent themselves to maintain relevance within the community and among their members. To this end, how have you gone about reforming the ABCC to “keep up with the times”?
That was very much the question at the time I came into the organization in 2010. The board had actually made some significant decisions immediately prior to my appointment as CEO, which took an in-depth look at how the organization had progressed from the traditional models of when the Chamber first started in 1910, in which each state functioned independently of each other. The technological and communication landscape was much different back then. We have a much more interconnected world now, but the organization hasn’t really re-invented itself adequately in recent times. So, it’s been a great opportunity for not only myself, but also the Chamber to really develop and grow into a relevant and meaningful organization over the last six years. We’ve made steadfast progress in terms of expanding membership, events, and services, but there’s always more work to do. These efforts can focus on anything from providing more opportunities for members to connect to picking an industry where you might have more influence, or even driving reform agendas more effectively.
One of the things that we really see as a value of our organization, particularly over the last 12 months, is helping policy makers to understand the context in which they’re making decisions in Australia with global perspectives. From the Chamber’s point of view, there are a number of industries where the UK appears to be ahead in terms of policy generation and getting the settings right to provide the ecosystem. Take, for instance, two industries that are currently quite strong in the UK: infrastructure and fintech. There’s more infrastructure being built right now, particularly in New South Wales (NSW), than at any point in the last two decades. This is very much an agenda item pursued by the NSW Premier but also shared in view by the Prime Minister and his predecessor The Hon Tony Abbott. The opportunities to share learning and understand new techniques pioneered and developed on projects such as the Crossrail project in London, gives Australian’s a great opportunity to improve the outcomes and share that knowledge back into the UK. Australia is looking to invest heavily in massive transportation infrastructure in Sydney, Melbourne, and Brisbane—projects that can all reference significant learnings from the UK in terms of policy settings, funding models, and engineering concepts.
On the same note, the fintech boom in the UK has also provided substantial guidance in facilitating between the financial industry and technology startups. Australia has spent a longtime concentrating on the resource sector, which had largely helped the nation weather the global financial crisis. This apparent singularity also prevented the type of acute shedding that is often associated with recessions and often forges the birth of specialty niches such as fintech. A large part of our efforts now will focus on creating fluid stream of knowledge transfer between the two nations to help assist the development of growing industries and ecosystems currently outside the spotlight and help rebalance the Australian economy—a main priority under the new Turnbull government.
In terms of performance, capabilities, and reputation, where would you like to take the ABCC in the next three to five years?
We’ve already made material progress towards the growth strategies that the board put together over the past few years. We’re very much branching out from what had been a domestic focused strategy. That’s a reflection of where we were at the time. We’re really developing the bi-lateral space much further—having taken our first delegation ever to the UK last year. We’ve got another one planned in the first half of this year around fintech and people coming in from the UK for an infrastructure session in the later half of this year. We’ve also been working more thoroughly with our corporate Members and Sponsors to understand their needs and challenges.
In five years, you’ll see us a lot more visibly in government engagements, as we’ve been relatively quiet in this in this domain recently. There’s a huge amount that we’ll be doing in the triangulation of trade and investment. The reality of the world is that it’s becoming increasingly globalized. Bi-lateral relationships will continue to serve an important role as such. But, it won’t just be about what we can with the UK; it’ll be about what Australia and the UK can do together in third markets—whether that’s China, India, or other parts of the world. The importance of the strong relationship we have between the two nations in terms of culture and political views will continue to persist. For a long time, the UK has served as a key entry point for Australian companies looking to penetrate European markets. Similarly, many British companies have leveraged Australia’s geostrategic positioning as a springboard into Asia. So, we’ll continue to see that opportunity manifest and triangulation develop.
Lastly, one of the main challenges for us is catering to the sheer number of British organizations prospectively and currently operating here in Australia. We’re working with a small team at the moment, so what you might see in few years’ time is a team that’s growing larger than what it is now and delivering those improved services to our Members and Sponsors.