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Interview

with Michael Carmody, CEO, LPG Australia

28.04.2010 / Energyboardroom

Despite the long industrial history of liquefied petroleum gas (LPG) in Australia and this association being its representative body, it is still considered an “alternative” fuel. Do you see it evolving to become a “conventional” fuel?

Yes, most certainly. The aim of LPG Australia, in concert with the other gas associations, is to ensure first and foremost that gaseous fuels are firmly on the government’s agenda with regards to alternate fuels and Australia’s energy security policies going forward; and within the gas environment, to ensure that LPG, specifically within the automotive and traditional market segments, is recognized for its value and benefits.
What are the challenges in managing an association that has a very large and broad scope of member companies?

I think the challenges experienced by LPG Australia are similar to most national peak body associations around the world. The Association endeavors to provide a truly representative and cohesive picture of the industry – from the suppliers and refiners through to the equipment manufacturers and the professionals who install the LPG equipment on vehicles, and ultimately to government, the authorities, and the consumer. Within the association, there is a very broad membership base with different drivers in terms of the value and the relevance that our member’s seek from the association. The challenge for any association challenged within this environment is to create and sustain a portfolio of services which will provide tangible value for our members and hence relevance of the association. The aim therefore is to identify within the membership mix the commonalities in terms of value, and then package our service proposition accordingly.

What are some of those commonalities?

The commonalities fall into a number of areas. First and foremost is the ability of the association to advocate on behalf of our members. In terms of advocacy we are talking about engaging governments, state authorities and the end consumer, on the value and benefits of the fuel. For governments and consumers to make an educated decision they need to be well-informed. Collective advocacy is often a more effective platform than the individual advocacy efforts of each member.

The second area is policy development. Essentially, working with government and the authorities to ensure positive policy and regulatory outcomes for the industry and the community. Inherent in that function is the need for research, analysis, and expert commentary.

Very closely related to advocacy and policy development is the development and maintenance of national standards. National standards with respect to LPG are the regulatory platform on which safe and compliant industry practice is exercised. We have a very strong engagement with Standards Australia on the development and continued upgrading of those standards which, in turn, creates value for our members. Within national standards you move into areas of developing personnel competency – people who work within the industry – particularly in the area of dangerous goods.

If you were to add a fourth and crucial function in support of the previous three – advocacy, policy development, and standards development – it is sustaining an effective and efficient communications profile. It is one thing to be working hard in the advocacy and policy development areas, but unless you can communicate to your key stakeholder groups, including your members, a lot of what you do tends to pass unnoticed.

Connecting the above value proposition to our more senior council members is a relatively easier process than connecting our equally important members on the other end of the customer profile, such as the equipment suppliers and installers. The challenge is to ensure that these members connect the dots between advocacy and the development of an industry policy framework, to the development and sustainability of their business. Although they may not see the immediate relevance of that work, we need to clearly demonstrate that if industry fails to establish the necessary policy framework and national standards, they simply won’t have a business. With the broad membership base experienced in LPG Australia, that is the challenge: binding the two ends of the customer base together.

Given the benefits of the fuel do you think it should be included with equal regard as renewables in the clean energy discussion?

Yes, without hesitation. The industry is delivering a variety of initiatives across the energy, environment, climate change, and treasury ministries, which look at the broad issue of energy security going forward. As mentioned, first and foremost we have to get gaseous fuels on the agenda. Within that environment we then address LPG. The challenge for any peak body dealing with government is to first identify the ministries and departments who are engaged in policy development, isolate the appropriate policies and government initiatives, establish the industry’s position, then respond in a timely manner.

How do you coordinate your work across the other associations also promoting the benefits of gas?

There is a recently formed Gas Industry Alliance that is based in Canberra. Within that medium we align with the natural gas, liquefied natural gas (LNG) and coal-seam gas (CSG) communities. Within that collective forum we work on developing gas policy in the strategic sense and then contribute to the energy debate at the state and federal level.

What is the direct impact on LPG of the plethora of upstream natural gas projects and developments in Australia?

First and foremost it reinforces that as Australians we have an abundant fuel on our doorstep. With respect to energy security – our ability to service our domestic market and export – it hits both targets. Within that exercise we have the availability of extensive national infrastructure in which we can place LPG in the market anywhere in Australia at an affordable price. LPG is also the only fuel that we can retrofit to vehicles. We can go back into the auto industry and retrofit automobiles to enhance their efficiency and improve their impact on the environment. Going forward I see many opportunities for the LPG market to grow and prosper.

A growing concern for the petroleum industry is the issue of declining production and an increasing liquid fuels deficit. Why, then, given the abundance and benefits of LPG, is it not seen as a more obvious solution?

I think it is primarily a communication issue. One of the first things that struck me when I entered this industry is that we did not appear to be focused on advocating the economic and environmental benefits of the fuel; not only in key areas of government and state authorities, but to the end consumer in order to create demand for our product. Going forward, our aim is to improve our communication. The vehicle manufacturers fundamentally build cars to satisfy market demand. If there is a demand for an LPG vehicle, they will build it. Manufacturers do not have a “if we build it, they will come” mentality. The upfront investment in infrastructure and technology is quite extensive and it must be viable.

Australia is one of a handful of countries where autogas accounts for more than half of the LPG consumption. What makes LPG Autogas so successful here?

Industry investment and government incentives.

The industry has invested heavily in LPG infrastructure and technology and has worked closely with government to ensure that the fuel is supplied and delivered to industry and the private motorist in the most effective and efficient manner.

The government (we as Australians), has also invested in encouraging industry, particularly the vehicle manufacturing, fleet and taxi industries, and the private motorist, through the LPG Vehicle Rebate Scheme and the elimination of LPG excise, to transition from ULP and diesel to LPG.
The combination of industry investment and government incentive is a winning combination in terms of the development and growth of LPG as a viable, clean and cost effective alternate fuel.

What is your response to those who recognize the benefits of LPG, but still regard it as a transition fuel?

We have to remove the word “transition” from our language. Transition means temporary. Neither you nor I would buy into a transitional business for anything other than short-term profit. LPG is not a transition fuel. It is essential component of our nation’s future alternate fuels policy.

There is no doubt that, as the supply of oil decreases and the cost of gasoline increases over the next decade, alternate, environmentally friendly and cost efficient fuels will increase in value to government and consumers. LPG will be a significant part of that mix. We have extensive infrastructure and world leading technically to support the delivery of LPG nationwide.

There is a populist view favoring the electric vehicle which most consumers can relate to. However, once you remove the marketing veneer, the vehicles and technology have a long way to go before you and I have the confidence and assurance that the technology can deliver. But when that does happen, electricity will from part of the alternate fuel mix, along with LPG, biofuels etc.

Which do you see taking precedence for LPG going forward – feeding the export market or supplying domestic consumption?

I believe it is a combination of both. There is no doubt that there are a number of major LPG suppliers moving into the international market over the next few years. With the dominance that we currently see with gas and other commodities being exported from Australia, the ability to sustain and develop the national market may be prudent in a commercial sense. The Middle East will soon offer significant competition in a number of areas where we feel we currently have the advantage, LPG being no exception. Although the export market is very attractive at the moment I am unsure about its resilience going forward. It would be an interesting question to put to the refiners and suppliers about whether they feel the export market will be sustained at the growth they currently experience or whether they may need to turn inward and invest more in domestic infrastructure and consumption to keep both markets balanced.

The resources boom in Australia has set off concerns about possible labor shortages across industry. What are the main human resource issues for the LPG sector?

The area we may need to focus on in the near future is to ensure that the people who work in our industry are competent to perform their duties. At the moment, our members offer a high standard of training and professional development to their employees. However, one of the challenges in Australia is that, essentially, each state has developed its own regulations in respect to personnel competencies and qualifications. It is a perplexing system where you are deemed competent in one state, but once you cross the border your qualifications are not recognized. Companies need to meet the costs for those additional (and often common) training requirements.

The association intends to tackle this issue from the national level by establishing a national personnel certification program aimed at recognizing personnel competence and qualifications aligned to the Australian Qualifications and Training Framework. This will overcome the requirement for our members having to train and retrain their employees in a multitude of skills and knowledge-based state regulations. In doing so, competency profiles are recognized and awarded nationally allowing employees (and their qualifications) to move from state to state.

Are there any final comments you would like to add about LPG Australia?

As industry engaged in the supply and delivery of an essential alternate fuel, it is essential that we advocate and promote the value and benefits of the fuel as a environmentally friendly, cost effective alternate fuel to our key stakeholders: the government, state authorities, and consumer. We must continually inform and educate widely so that those who are determining energy policy are well informed about our product. LPG is not a transition fuel. It is part of the total energy solution for Australia now, and in moving forward. We need to ensure that our politicians and the community are well-informed. This is our most difficult

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