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The Future Made in Australia Act

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The Australian government’s vision for a Future Made in Australia, which is to be enacted later this year, is set to become the core of the government’s industrial policy, and will encompass existing and new initiatives. The vision is aligned to reshoring and onshoring, which is one of the 2023 trends in Australian manufacturing. Announcing the Future Made in Australia Act in Queensland last Thursday, Prime Minister Anthony Albanese said the US is pursuing what they call a ‘small yard, high fence’ approach to critical industries. He listed the policies of the European Union, Japan, Korea and Canada, and proclaimed, “This is not old-fashioned protectionism or isolationism — it is the new competition”. “We must recognise there is a new and widespread willingness to make economic interventions on the basis of national interest and national sovereignty. And – critically – none of this is being left solely to market forces,” he said, while promising to champion global markets and free trade, and to build bilateral and multilateral co-operation.

The new Act will include existing government initiatives such as the $15 billion National Reconstruction Fund, the skills agenda, and initiatives to encourage Australian-made batteries and solar panels, the Hydrogen Headstart program and the Net Zero Economy Authority. New incentives for local and offshore companies to invest in Australia’s renewables and advanced manufacturing capacity are to be fleshed out in the May Budget. “Part of the objective here is about Australia presenting potential investors with ‘a single front door’. A clear path to investing in Australia, in Queensland, in hydrogen, green metals and advanced processes with an aim to decarbonise the manufacturing industry,” he told his largely Queensland audience. “In this time of transformative opportunity, our government will not be an observer or a spectator – we will be a participant, a partner, an investor, and enabler. This new wave demands a new approach – and since the last election, our government has been laying the foundations to deliver it …. In next month’s Budget – and beyond – we’ll be building on that foundation.”

Responses to the announcement have been mixed, ranging from acclaim from clean energy advocates, scientific groups and workers’ representatives to qualified, lukewarm reception from business groups to specific caveats from the Productivity Commission and Weld Australia. Weld Australia welcomed the Act as a critical opportunity to bolster local economic participation in heat induction bending services. Yet it warned that government must ensure that enforceable, local content thresholds are formally incorporated  to achieve the desired results. The Productivity Commission’s new chair Danielle Wood told media that Australia can’t pretend the Act will be without cost, and that subsidies demand well-defined exit strategies. “We risk creating a class of businesses that is reliant on government subsidies,” she told the Australian Financial Review. If we are supporting industries – such as pipe fabrication – that don’t have a long-term competitive advantage, that can be an ongoing cost. It diverts resources, that’s workers and capital, away from other parts of the economy where they might generate high-value uses.” Since then, Treasurer Jim Chalmers has said Wood’s points had already been addressed by government.

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WHS Duties for Manufacturing Industry

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SafeWork NSW, the workplace health and safety regulator in NSW, acknowledges manufacturing as a cornerstone of a strong Australian economy. The regulator has an ongoing commitment to manufacturing which ensures a safe work environment for all workers — achieved by working with NSW businesses to reduce work-related fatalities, serious injuries, and illnesses. As part of its education outreach, the regulator will be attending Australian Manufacturing Week, given that the expo attracts diverse manufacturing industries and heavy steel fabrication companies. “It also attracts a large variety of WHS duty holders,” says Natalie Martin, Director of Investigations, Engineering and Enforcement at Safework NSW. “We want to connect and engage with the various WHS duty holders across manufacturing.”

Regulatory Priorities

SafeWork NSW’s Manufacturing Sector Plan was developed to influence safety improvements in NSW manufacturing. In 2023, SafeWork identified specific regulatory priorities across risk types and sectors which includes fire safety in manufacturing. Martin says, “Our regulatory priorities were designed to ensure employers and workers understand their WHS duties so all workers have healthy, safe and productive working lives.” SafeWork has been notified of multiple workplace incidents involving collisions between mobile plant, inadequate guarding, bypassing of safety devices and ineffective energy isolation. “We find there is usually more than one factor contributing to an incident,” says Martin. At the moment, the regulator has a strong focus on people and plant, with forklifts in the spotlight.

Duties and Obligations

All duty holders must be aware of their work health and safety duties, which are not transferable. One person may have more than one duty and more than one person can have the same duty. A strong culture of safety is integral for business. This is underpinned by strong leadership and a genuine commitment in promoting a safety culture in workplaces. “When Safework is making enquiries, we consider every duty holder, this includes designers, manufactures, importers, suppliers, installers and the end user”, says Martin.

Consultation and Hierarchy of Controls

Consultation is essential in managing WHS risks and is a legal requirement under the WHS Act. All duty holders need to collaborate to develop ways to manage risks. Designers, manufacturers, importers, suppliers, installers, officers and persons with management or control roles all have responsibilities to provide information to help other stakeholders minimize safety hazards in manufacturing and fabrication. When it is not reasonably practicable to completely eliminate risks, a ‘hierarchy of controls’ must be used by duty holders to minimise risks. Eliminating the hazard and risk is the highest level of control, followed by reducing the risk through substitution, isolation, and engineering controls. Reducing the risk through administrative controls and protective personal equipment (e.g., mining plant and equipment) is the lowest level of control as these controls’ effectiveness relies on human behaviour and supervision. Administrative controls are not enough on their own and should only be used to supplement higher level controls. “Some incidents indicate a lack of awareness of the hierarchy of control, often a control that’s too low level has been implemented, such as providing instruction, training and supervision only”, says Martin.

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South32 Warns Against IR Changes

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South32 chief executive officer Graham Kerr has joined other mining executives in warning industrial relations (IR) reforms, including the ‘same job, same pay’ policy, would potentially harm the industry. “I think the industrial relations reforms are going to probably set back productivity and not take it forward,” Kerr said. The Australian Government’s ‘same job, same pay’ legislation law will require host employers to pay labour hire workers the same rate as direct employees performing the same job. A number of mining companies have expressed concern that the legislation, which is set to be enacted by the end of 2023, will put additional pressure on what is already a fragile labour market. After releasing its financial year (FY23) results yesterday, South32 said it expects production costs across its global operations to increase over the coming financial year – which is likely to impact financing required for manufacturing growth as well.

In addition to increasing costs, Kerr believes the IR changes ran the risk of dampening Australia’s attractiveness to foreign investment. He said the company invests in its workers, offering fair pay. South32 is the latest company in the Australian mining industry to warn against the reforms, with the Minerals Council of Australia (MCA) calling for the legislation to exclude service contractors. “The Government must listen to the legitimate concerns of all businesses, given the impacts of this proposal reach into all corners of the economy,” the MCA said.

BHP Australian President Geraldine Slattery recently told the American Chamber of Commerce higher pay is not sustainable when mining already offers some of the highest paid careers in Australia. “Australia has one of the highest labour costs in the world (including costs of mining plant and equipment) – around 12% higher than in the US,” Slattery said. “We are proud to be a high-paying industry. Changes to industrial relations policies are of particular concern, and like many businesses such as steel fabrication in the mining industry – we believe they will have a negative impact on Australia’s competitiveness and jobs.

Slattery raised concerns that pipe fabrication operations at BHP’s Olympic Dam copper mine in South Australia could be harmed by the reforms. “We believe ‘same job, same pay’ could increase the operating costs of our existing operations (in SA) by nearly $200 million per year and maybe up to $500 million in a worst-case scenario,” she said. “The hit to the value of any potential growth plans in SA could be anywhere up to $US2 billion ($2.98 billion) and this would make it much harder for any South Australian investment case that has to compete with alternative options in other parts of the world.”

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Aerospace Metal Fabrication – Points to Consider

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Steel fabrication has applications in multiple industries, such as the mining industry. The aerospace industry is also  hugely dependent on metal fabrication work since it requires a lot of tools and technology to build aerospace infrastructure. Aerospace fabrication requires high precision and tight tolerances with the finest-quality materials, skilled personnel with extensive experience utilizing state-of-the-art equipment and technology, and the capability to perform complex assemblies and integration that meet the most stringent industry regulations. It combines traditional pipe fabrication methods and assembly techniques with advanced material assembly, production processes, and procedures that differ from other metal fabrication processes. As a result, there are certain points to be considered when evaluating fabricators for an aerospace sheet metal fabrication project. This blog will elaborate further in this regard.

Prior Fabrication Experience

The success of an aerospace fabrication project will significantly depend on the prior experience of the fabricator. Upfront, the company must have the reputation and experience in the field to manage similar projects efficiently and effectively and to avoid costly mistakes. Workforce experience should also be evaluated as to how closely expertise and skill set relates to the fabrication of parts and components for aerospace. Finally, potential aerospace fabricators should be checked for references as a reputable and experienced heavy steel fabrication company will have many success stories.

Capabilities of Fabricator

Equipment and resources are vital to the successful completion and outcome of any fabrication project. To meet the necessary performance and production standards, aerospace metal fabrication requires cutting-edge design and manufacturing technology. With regard to precision manufacturing of aerospace parts, fabricators should be considered that utilize fully automated CNC programmed technologies such as cutting, stamping, punching etc. Automation increases and ensures that the highest quality standards are met in the manufacture of parts, components, and sub-assemblies.

Usage of Materials

Since some fabrication shops specialize in working with certain raw materials, it is necessary to ascertain if their expertise aligns with the customer’s material requirements. With regard to the modern aerospace industry, it’s highly likely that expertise would be in working with aluminum, and aluminum alloys and composites. This is due to the fact that aluminum’s lightweight, good formability and alloying, and relatively low cost make it a choice material in the fabrication of a variety of parts and components used in the manufacture of aircraft.

Standards and Compliance

Fabrication of parts and components for aircraft must be in compliance with national and international standards and regulations that govern the design and manufacture of aircraft. All parts must meet fabrication quality management standards for airworthiness in accordance with approved procedures. Governing authorities such as the Federal Aviation Administration (FAA) in the US, the European Aviation Safety Agency (EASA), and Transport Canada oversee and enforce regulations and approval processes for design, fabrication, and production standards. The fabricator should be knowledgeable of and in compliance with the regulations and procedures that govern the fabrication of aircraft parts.

Closing Statement

The aerospace industry is not simply about aircraft or spacecraft – it comprises both aeronautics and astronautics. The design, fabrication, and assembly of flying machines are an enormous undertaking, especially as it involves large numbers of human lives who are at risk if fabrication is not done properly. In an increasingly interconnected world, there are more expectations from fabrication companies with regard to its downstream processes, specifically its capability to crate and ship after product assembly is completed. Thus, with respect to the aerospace industry, fabrication companies should have a single mantra – best quality with zero errors!

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Manipulation of Oil Market

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Can oil markets be manipulated after knowing the process of determination of oil prices? This is the question which is being asked by traders who have observed unusual trends in the oil market – like the price of oil falling to zero and continuing to fall further. This was unprecedented in the history of the oil market and, as a result, investors who had taken long positions on oil found their losses increasing at an exponential rate. So, how does this manipulation take place and who are the major players in this area? Let’s find out more in this regard.

Activities pertaining to Oil Market Manipulation

As an example, a trader may be scheduled to purchase tens of thousands of metric tons of fuel, with the price tagged to the daily benchmark provided by S&P Global Platts. In order to save money, the trader would offer to sell small amounts of crude at a price lower than the current spot, or at a loss. The key factor that actually makes the trader money is that oil traders are not required to report their purchases and sales of crude – the process is voluntary. Platts bases its benchmark price based off of the information that traders voluntarily provide. Hence, when a trader reports a sale of the commodity below the current spot price, Platts takes this into account and lowers the spot price.

Next, the trader is able to make his purchase of fuel at a small discount, only a few dollars per ton, but the savings compound quickly. For instance, the trader is scheduled to purchase 100,000 metric tons next week at a price of $100 per ton (the current spot price). This week, the trader will sell some of his crude assets for $95 and report the sale to Platts. Platts will then take the trade into account and lower the spot price to $98 per ton. Then, the trader makes his purchase of 100,000 tons, effectively saving $200,000 on the purchase as the spot price is now artificially $2/ton lower.

Mitigation and Controls around Market Manipulation

With such a seemingly well-known scheme plaguing markets, it is tough to imagine how it can possibly still go on. Traders engaged in practices such as those described above do not view their actions as illegal because they did not involve “colluding with competitors, reporting fake prices or other obviously forbidden behavior.” And it would seem that from a legal standpoint, these traders are mostly correct.

Proving market manipulation requires a legal team to show clear intent to mislead markets in order to make a financial gain. Definitive proof of a person or institution’s intent has long been the snag in the legal proceedings for prosecutors. Within the confines of trading, proving intent is often too difficult, allowing many would-be market manipulators off the hook. However, the European Union and Platts have stated that they will be looking into the matter in an effort to make oil markets more efficient and safer for all traders.

Conclusion

The role of regulators and regulatory bodies in oil market manipulation is likely to grow in the coming days. The Commodities and Futures Commission (CFTC) has already received a number of complaints and claims in this regard and they have been involved in analyzing crude oil price aberrations to identify cases of market misconduct and the evidence supporting the same. As rogue traders or other individuals employ increasingly sophisticated manipulation methods, the security of the oil and gas market and related industries like steel fabrication needs to be equally robust – so that oil prices are subject to supply and demand and market sentiment factors and nothing else!

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Impact of US Regulations on the Oil and Gas Sector

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The Oil and Gas sector is considered to be a vital part of the US economy. There are many moving parts which make up this industry – some of these are conditions for drilling, mining plant and equipment, worker safety, environmental issues and chemicals management. With the rise in alternative energy production, there has been a corresponding increase in scrutiny and regulatory oversight of this sector. This has led to concerns that Oil and Gas may be adversely impacted by tightening regulations and this can lead to losses in the long term. Are these fears justified? Let’s discuss further on this blog.

Regulatory Process in US Oil and Gas

There is no national oil and gas company in the United States. Instead, there are numerous private businesses operating in the sector, including large international corporations. The activities of these companies are regulated on the state and federal level. To begin exploration for oil and gas drilling, the business must obtain a development permit, a drilling permit and an operating permit – the requirements for which are stipulated at the state level. There must also be a public review period, which is often disputed. All permits must be obtained prior to beginning exploration, or the applicant may face delays and financial and legal penalties. In addition to permits, there are various standards and rules that companies must comply with when operating in the oil and gas industry.

Impact of Environmental Regulations

Environmental regulations, such as those on methane leaks and oil spills, can be seen as having a generally positive impact on the gas drilling sector in particular. Existing measures aimed at reducing greenhouse gas emissions mainly have a negative impact on established coal power plants. The resulting economic impacts have led to an artificial acceleration in the natural gas sector. The government is interested in further exploration of shale gas and has taken measures, such as the House of Representatives-approved Natural Gas Pipeline Permitting Reform Act, to expedite the federal review process for applications for interstate gas pipelines.

The Clean Air Act

The effects of the Clean Air Act have mainly been positive for the gas drilling industry. The overall aim of the act is a reduction in the emissions of greenhouse gases, with a long-term goal of 95% reduction in volatile organic compounds. The act stipulates that operators must take measures to capture natural gas that escapes into the air (green completion). Also, there are incentives for businesses to implement this technology ahead of the deadlines. The technology allows for the natural gases to be caught and treated and then sold instead of being released as waste. The estimated revenues are expected to exceed the costs of compliance. The U.S. Environmental Protection Agency (EPA) suggests that while meeting the Clean Air Act regulations will cost $65 billion from 1990 to 2020, the savings realized from fewer premature deaths, lower health costs, and increased productivity will add up to $2 trillion.

Conclusion

While the implementation of regulatory initiatives ought to be simpler for large, multinational corporations, smaller companies may not be able to budget for the initial implementation costs. About 80% of the domestic oil and gas companies in the U.S. are very small, often with fewer than 10 employees. These initiatives may have a severe impact on the economic viability of these smaller operations.

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Indigenous Australians Seek to Block Santos Gas Project

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A group of Indigenous Australians has filed a lawsuit seeking to stop Santos Ltd from developing a $3.6 billion gas project off northern Australia, saying they were not consulted about the drilling. Tiwi Islanders from the Northern Territory’s Tiwi Islands are claiming they have not been adequately consulted about Santos’ Barossa gas project, the pipeline of which will run through Tiwi Sea country. Therefore, Senior Tiwi Traditional Owner, Dennis Tipakalippa, is taking the federal offshore oil and gas regulator National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) to court to challenge its decision to approve Santos’ plan to drill the Barossa gas field, saying he and his people were never consulted about the drilling.

“It’s all about our future generations. That’s what I worry for. What are they going to have, who are they going to be? Our lives are not just lived on the land, but in the sea – this home that we have loved for thousands of generations,” Tipakalippa said. Both Santos and NOPSEMA declined to comment on the lawsuit. NOPSEMA referred to its approval of the project, which said “consultation has taken place with relevant persons as required”, including with community-based bodies such as the Tiwi Land Council and the Northern Land Council. The move by the traditional owners comes after a South Korean court last month dismissed their application to block Export-Import Bank of Korea and Korea Trade Insurance Corp from providing loans for the Barossa project’s pipeline.

The Barossa gas field is located 300 kilometres offshore Darwin in Australia. It is operated by Santos with South Korea’s SK E&S as a partner and is due to start producing gas in 2025. Santos sanctioned the $3.6 billion gas and condensate project in March 2021, also kick-starting the $600 million investment in the Darwin LNG life extension and pipeline tie-in projects to extend the facility life for around 20 years. The Barossa development concept includes an FPSO vessel developed using steel fabrication with a processing capacity for up to 800 million standard cubic feet per day (MMSCFD) of gas and a design capacity of 11,000 barrels per day of stabilized condensate, a subsea production system, supporting in-field subsea infrastructure in the Barossa field, and a subsea gas export pipeline.

In the latest case, the traditional owners allege the drilling will threaten their culture, way of life and food sources, affecting the breeding patterns and nesting grounds of turtles, dugongs and whales. Santos was required by law to consult with people who might be impacted by the drilling plans and since the company failed to do that, the decision by NOPSEMA is invalid, the lawyers for the Traditional Owners said. Santos said in March that it undertakes consultation with all key stakeholders for all of its projects.

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Methane Leaks Spur Calls for Stiffer US Regulation

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In recent times, environmentalists have called on the Biden administration to crack down on methane leaks from low-producing U.S. oil wells, after new research shows they are releasing a disproportionate share of the potent greenhouse gas. As per a study by Nature Communications, such marginal wells are gushing some 4 million metric tons of methane on an annual basis – this is 6 to 12 times higher than the national average. However, low-producing oil and gas wells would be largely exempted from regular monitoring requirements the Environmental Protection Agency proposed last year.

The analysis underscores the potential pitfalls of the Biden administration’s plan to target new methane mandates toward bigger wells — and is lead to increasingly strident calls for edits in the final regulation the EPA is set to impose by the end of 2022.

Biden administration’s plan

“The science clearly supports stronger EPA standards to reduce the outsized pollution from smaller wells,” said Rosalie Winn, director of methane and clean air policy at the Environmental Defense Fund. “We must ensure rigorous pollution safeguards apply to these low-producing, high-polluting wells, which make up the vast majority of our oil and gas infrastructure (developed using steel fabrication).” According to the latest research, wells that produce fewer than 15 barrels of oil equivalent a day are allowing approximately 10% of their gas to leak into the atmosphere. Combined, these marginal wells are responsible for approximately half of the methane emitted from all well sites in the U.S. — even though they represent just 6% of the nation’s oil and gas production, the study says.

Methane

Methane, the chief component of natural gas, is responsible for 25% of global warming today. Because it’s such a powerful short-lived greenhouse gas, packing most of its punch in the first two decades after being released, reductions now are seen as a critical strategy to restrain near-term warming and limit temperature rise to the critical tipping point of 1.5 degrees Celsius (2.7 degrees Fahrenheit). Aside from environmental implications, methane leaks also have financial consequences. Estimated annual emissions from marginal wells are forfeiting some $700 million worth of natural gas  and fuel that could be used to power 3.6 million homes, the Environmental Defense Fund said.

Some oil and gas industry officials have encouraged the EPA to focus its attention on larger wells that make up the vast share of U.S. production, arguing the approach would be more cost-effective. The Independent Petroleum Association of America said the group’s assessments of emissions from small wells suggest that most of the leaks come from storage tanks and pressure vessels “that can be managed without the expensive leak-detection-and-repair programs demanded by environmental lobbyists.” “Specifically targeting small American producers with expansive new regulations is the wrong approach when prices at the pump are at record highs and the Biden administration is calling on the industry to expand domestic production,” IPAA spokeswoman Jennifer Pett said by email.

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