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Interview

with Ross Skerman, Managing Director, RLMS

18.11.2010 / Energyboardroom

After working with Delhi Petroleum for over 15 years, you founded Resource and Land Management Services (RLMS) in 1990. What vision did you have for the company at that time?

At that time, I could see that there were problems in the relationship between the stakeholders and the oil and gas industry and how this relationship would develop. At the time there were major legislation and environmental changes taking place: I looked at Resource and Land Management Services (RLMS) being exactly what it says: looking out for the environment and looking after approvals for projects, but also being able to take a project from inception to its conclusion.

Today, after 21 years of operation, we still follow exactly the same strategy: we work with clients, mainly entrepreneurs, small start-up companies and major companies with specific large-scale projects. The RLMS team works with them to develop their strategy to ensure that they receive approvals for their projects in a timely manner. If these companies do not pay attention to this early stage work, they can spend a long time going down the wrong path. That still happens today, even with the enormous number of advisers in government, private enterprise and the companies themselves: if they haven’t got the strategy right to get the approval at the beginning of a project, it isn’t worth moving forward.

RLMS’s experience in the industry now means that we are able to advise companies on timeframe and budget in ballpark terms early in the project. Many of the projects that come through the door these days require around $1 billion AUD to complete, due to the sheer scale of what is being attempted in Queensland: from power stations to pipelines and transmission lines.

These high costs can be an entry barrier for smaller companies, but many of them have the final ambition of being acquired by a larger party. In order to be an attractive prospect these companies need to demonstrate that they know what they are talking about and have assets valuable enough to be an attractive prospect. These assets could include the company’s approvals, their acreage, drilling, technology, or even their personnel.

I would have imagined that as companies built up their competencies in these areas where RLMS offers its services, the company might have been forced to change its business model.

The governments in both Western Australia and on the eastern seaboard are working hard to perfect their legislative approach to the industry. There is so much legislative impact that keeping on top of the changes is very much a full time job: those involved in the legal side of the industry would be the first to acknowledge that. This is a part of what RLMS does; in addition keeping our clients up to date on the latest development in land access, exploration and production approvals, GIS technologies for data control and maintaining an up to the minute assessment of oil and gas reserves across the community, so that all our clients are kept up to date with the latest developments in the region.

Every year we produce a document known as the Upstream Gas Report (aka a CSM or Coal Seam Methane Bible!), which is a much sought-after document in the region. It details the history of resource companies that operate in eastern Australia; how they got to where they are now: their reserve base, asset base, their contracts, which pipelines they are using and why, plus the mapping for each of the parties. RLMS has done due diligence studies on nearly every pipeline in the country over the years, for purchasers and for sellers, and so the company has gained a lot of knowledge. We’ve kept ourselves up to speed by acquiring data on every pipeline, every power station, water lines, slurry lines, transmission lines, railways, and roads. If it’s linear infrastructure, it’s RLMS.

How is the competition?

I am sure this will bring a broad smile to a lot of my competitors, but whilst there are a lot of wannabes out there, rarely do any of them focus solely on the strategy of getting from point A to point B with a product: doing route selection, the approval process, the landholder/stakeholder negotiations, the compensation packages involved in acquiring that corridor of land; registering the easements and finally handing the project over to construction.

Today, many large engineering construction firms farm out this work to an expert like RLMS. As a result, the company is involved in joint ventures with several engineering and construction companies as well as with the government. For instance, RLMS did much of the work for the Queensland Coordinator General in bringing the players involved in the Queensland LNG projects together into a common corridor, with common access and common pathways to get through to Curtis Island.

How well do the big players work together?

Once the momentum started building and they realised that the approvals were a responsibility of the government, everybody toed the line. I was very impressed with how they came together. There will be more of this togetherness as their projects move forward. The biggest guns in the world are vying to develop this industry in Gladstone. They‘ve all got to learn to live with each other.

How much of RLMS’s business comes from the oil and gas industry?

At the moment the company is engaged in a major private transmission line project across the top of Queensland, which is a bit of a deviation from oil and gas, but normally we’re 75-80% oil and gas.

Although Queensland’s LNG projects are either approved or in the process of being approved by the state and federal governments, the approvals coming out of Canberra and Brisbane have many conditions: every one of those needs to be categorized into an environmental management plan or an operational management plan, which is the specialty of our company. As a result, we expect to have a long involvement in these projects, whether we work for the government, the proponent or the construction contractor.

What kind of opportunities do you have for growing the business when you see the industry from this perspective and projects at such an early stage?

It’s important to try to diversify within the broad industry, but everybody needs data and everybody needs maps. RLMS has expanded its capabilities in the GIS sphere by developing a rather unique programme of alignment sheet generation. We produce significantly advanced alignment sheets utilising data from multiple sources, directly from our GIS database Whether building a road, a railway line, a pipeline, a slurry line or a transmission line, all linear projects need an alignment sheet system that displays all the requisite data onto one sheet from point A to B. In the past these would have been in the form of major pieces of paper, but now they are very detailed digital images. Today, if you want to go through a project and investigate the environmental aspects or the native title aspects or the construction aspects, you can make a specific sheet to examine those particular data sets, which means that the alignment sheet is not cluttered with superfluous data.

How much of your work comes from a project-by-project basis and how much is done through long term agreements with companies?

RLMS has a repeat business rate in excess of 90%: once we have a client on the books we do not lose them. We service them well; keep them informed of events within their region even when they are not actively working a project in the area. Many of these projects last for two or three years; once it has gone to construction, we have options to put environmental monitors onto projects, but preferably RLMS deals with the front end.

I am more into the entrepreneurial side of the business, and in the past RLMS has taken equity in projects we have really believed in.

This gives the company various options to develop a binding relationship between the proponents and the people who will work for them. Unlike engineers, who are usually hesitant to get involved in the equity side of a project, I like taking the risk and seeing that risk rewarded. Plus it helps our staff to really get stuck into the project: we get very involved when we are in that situation and we understand more about the economics and financing of the project. We have done this for example with the Queensland Hunter Gas Pipeline, a major infrastructure project spanning over 800km.

How many big pipeline projects are there still left to do in this region?

There are still quite a few new projects, as well as a significant amount of upgrading to be done on existing pipelines. Moomba to Sydney is a pretty old line and is continually being upgraded. The Hunter pipeline connects the eastern seaboard. The projects on the drawing board will include pipelines such as Moranbah / Wallumbilla to Gladstone, both needed to take more gas to the LNG facilities there. Gas lines in New South Wales will also be significant in terms of supplying more gas for the LNG plants in Queensland.

How have the attitudes of landholders and stakeholders changed over the last twenty years as this coal seam gas industry has appeared in the state?

From my perspective I see an awful lot of hype: a lot of exaggeration of minor issues not being handled well. However, you need to bear in mind that a person’s land is their castle, and if there is something wrong then the industry needs to do a much better job of explaining whether or not it is a serious issue. If it is an issue then the industry must take charge of it, and examine all its implications.

This seems to be an important turning point for the oil and gas industry in Queensland. Do you see this as the first big moment for the coal seam gas industry here, or is this just one step along the way?

We’re taking an enormous step. The major companies have been producing for at least five years in escalating proportions, but ten years ago production levels were at virtually nothing. To go from there to where we are now is a significant step. For every train of LNG that is produced, we need as much gas as we are currently using on the eastern seaboard again. This is a quantum leap for the industry, and something that needs to be managed very well. It will be a test of faith for everybody to see the first project start up, but I believe that things are progressing well.

Is production going to spike as soon as that first plant is ready?

The ramp up is fairly significant into it, but then that ramp up could come from existing contracts; it could also come from gas storage by that stage, as projects are under way. There are various options for procuring the large initial tranche of gas but it inevitably means a significant increase in production and hence many wells. Currently, you would not be able to find any gas available for projects outside LNG, because people are waiting and preparing for what will be needed there.

The growth of the CSG industry in Queensland has taken many people by surprise. RLMS has just returned from the UK where we did presentations for some of our clients, and in general, people that haven’t been paying attention to recent developments in coal seam methane here in Queensland have been gobsmacked by the sheer speed with which it has happened, and about the amounts of money involved.

If we were to come back to RLMS in five years time, what would you like to have achieved with the company?

These will be a very interesting five years. I have resisted expanding in the past: RLMS has fifteen staff with over 300 years of relevant resources experience! We have a very low-key company structure in place: I treat all my employees as family. We like the quality of the jobs we get, and the interaction with the people we work with. I don’t see that really changing.

As RLMS’s database grows and the alignment sheet generation and GIS technology develops, this is where the company will grow. My ambition is to provide an indispensible service for any company looking to start in the oil and gas industry in Queensland. It started with due diligence and approval work on gas pipeline corridors but soon expanded to cater for linear project needs of power, water, waste, slurry systems, haul roads, access tracks and so on….even outside the original oil and gas experience. It’s a good business.

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