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Description of the gas market in Australia.

Analysing the future trends of the gas market in Australia

Outlining sustainable procurement practices for AGL.

Analysing the impact of new technologies on the end customers of gas (in general) and AGL (in particular).

Analysing the impact of new technologies on the gas producers

Developing a project integration management plan emphasizing procurement. See the sample Procurement Management Plan template as a guide.

Explained in terms of concepts from lectures/text

Adequate depth (dot points can be used but must have at least a paragraph of explanation)

Overview of Gas Market in Australia

 A large part of the Australian population is dependent on the resource of natural gas, which is widely available in a few distinctive parts of this country. The Gas markets are concentrated in three parts of the country namely, Eastern, Western and Northern. AEMC or Australian Energy Market Commission is the policy adviser to the Government of Australia (Aemc.gov.au, 2018). Along with this, AER, COAG, and AEMO take important role in the procurement and distribution policy of natural gas (Al Hinai et al. 2014). AGL is a provider of electricity and gas in Australia and occupies a leading position in Australian gas market.

 There are three independent market operators that regulate market operations in three parts of the gas market. AEMO or Australian Energy Market Operator looks after the market operations in South-eastern Australia. IMO or Independent Market Operator takes care of Western Australia. Retail Energy Market Company Ltd or REMCo is the retail market operator in Western Australia.  

Figure 1: Energy Supply Chain

(Source: Eex.gov.au, 2018)

 The state purchasing boards procure natural gas from the gas producers through State Purchase Contracts or SPC. Through these contracts, the states are entitled to get discounted rates of natural gas. The supply of natural is dominated by a few suppliers that control the supply chain management (Eex.gov.au, 2018). There are few components such as energy commodity, network of services and Retail Services that constructs the supply chain of natural gas in Australia.

  Local distribution network within each small area delivers gas to the business and household properties of that area. Retailers are only responsible for the billing section of the service. Among these retailers, there are few agents that also own the generation process of energy.  

  Apart from these participants, there are the intermediaries who offer a range of services to the consumers. Some of these services include security devices and other necessary information on use and procurements of energy, including natural gas (Banks, 2017). Apart from the four above mentioned bodies, each state has their own regulatory boards that regulate Australian gas market under their limit of jurisdiction.  

Australia is a renowned producer in the world in case of liquefied Natural Gas production. Since the trend of 2018 is showing that prices of crude oil are going to touch a higher level, Australia stands a chance of taking a leading position in the production of LNG. As per a newspaper report published in the Sydney Morning Herald, Australia is poised to take the leading position from Qatar in LNG (Latimer, 2018). This report also informs that Department of Innovation, Industry, and Science has assumed that LNG export of Australia may reach to $35 billion in by the end of 2018.

According to Fleming & Measham (2015), the Australian market for natural gas is aimed at increasing the production and export without creating any adversities on environment and participants in the supply chain management. As per the study of Rodger & George (2017), in this transforming situation companies that are equipped with sustainable practices are going to be benefitted from the surge in the Australian market of natural gas.

Key Market Players and Regulators

Government is creating pressure on the Australian gas companies to reduce export of natural gases so that in the time of volatile energy prices government can ensure smooth supply of natural gases.

Australian gas market has witnessed many mergers and acquisitions in the last few years (Kavonic, 2018). It can be expected that issues regarding export control would be resolved by the end of this year. Kavonic (2018) opines that short-term contracts among the market participants of gas market can be threatening because of volatile prices.

AGL or Australian Gas Light is one of the major energy providers that supply electricity, gas and solar power. AGL has many issues that are creating obstacles to the adoption of Sustainable Procurement. Having an excessive number of suppliers is one of the reasons, for which this company is more vulnerable with respect to the loss of the suppliers. Effects of sustainable development have produced great results in energy market of Saudi Arabia (Islam et al. 2017).  

This company is also facing problems because those suppliers that do not provide profits to the organisation. Sustainable procurement policies are emerging as a new model for procuring natural gas from the producers as it has the potential of value addition in the services (Meehan & Bryde, 2015). This is definitely an opportunity, of which Australian gas companies should adopt. Apart from value addition, it is also beneficial for reducing production cost. Sustainable procurement is not only related to the benefits of public and business houses, but it is also positively connected with the overall development of the Australian economy. Sustainable procurement considers social, environmental and economic impacts of introducing these practices (Ford, Steen & Verreynne, 2014).

 Gas companies have adopted strategies that keep a check on unnecessary consumption pattern. They have done it by managing the demand for gas in the particular areas.  

Gas companies have also adopted processing of natural gas so that they create minimum impact on the environment. Companies are applying select technologies that can reduce environmental hazards. Australian gas companies are following sustainable procurement policies.

In this respect, AGL can adopt Six Sigma for improving the quality of supply chain management. As a result of the sustainable policies, it can reduce the distribution cost. Reduction in the cost would enable AGL to increase their profit margin.

  AGL has developed their sustainable procurement plan by including stakeholder’s interest in procurements. It has developed the services by promoting supplier diversity. Instead of depending on the suppliers for the supply of natural gas the company has developed the quality of suppliers.  

  Inclusion of latest technology in providing services to the consumers can create value-addition in the products and services as it enables them quick and cost-effective services. The inclusion of customer interests in the AGL services, the company can expand its realm of business. Increase in the trust level with benefit AGL's policy of customer retention.   

  Usage of latest technologies has increased the expectations of the consumers of this company. This is because the use of technology has made the business efforts of the company. Consumers expect that the company is more capable of providing cost-effective services to them.

Trends and Sustainability Practices in the Gas Market

 As all the energy companies are vying for customer attention, AGL needs to offer a unique service to the consumers. This would make sure that the organisation is not losing their valuable customers.  

 AGL has concentrated on making their services based on technology so that they can provide better services to the consumers. It has not only made their services simple but has also improved the company policies and service regulations.  

  The rapid expansion of automated technology has reduced the time of production. Technologies such as control systems, handling big data and presence of sensor in their supply chain management have brought transparency in the services by AGL.  

 The effect of mobile technology has also modified the reach of AGL to its consumers. Presence of mobile technology has made services of AGL, safe and real-time. One of the main highlights of this technology is that it is efficient and makes a minimum error. Because of mobile technology AGL is able to communicate with their customers from any place.

Use of technology has made it easy for AGL to go along with the rules and regulations applied by government authorities and boards. The presence of security features has enabled this company to ensure data protection for customers.

   The project manager of a project organises the task so that there is a minimum waste of resources in course of Project execution. The stages of Project Integration Management are divided into five stages, that are Initiation, planning, execution, monitoring-controlling, and closure. AGL can proceed with Project Integration Management through six ways.  

The first stage is to produce a Project Charter that would contain initiation of the project idea. The charter is significant, as without it project manager cannot commence with the project. It follows the project management plan that contains step-by-step procedures of the proposed project. The participants of this project should consider the plan as the roadmap for the proposed

Procurement process

Department

Time allocation for the process

Initiating the procurement request through AGL procurement department managers

Procurement department

10-15 days

Developing of technical advancements on Gas production, quality requirements and identification of constraints

Technical department

20 days

Procurement process for providing a new way to the company's Gas supplier for transition from traditional approaches

Technical process Implementation to extract the natural gas from the environment

Technical department

20 days

Preparation and arrangements to transport the raw extracting natural Gas to the collecting point

Technical department

15 days

Processing of the refinery of the extracting natural Gas

Technical department

20 days

Request approval by procurement department

Procurement department

1 days

Purchasing authority

Marketing department Of AGL company

10 days

Proposal review of the AGL procurement plan

Operations management department of AGL

2 days

Contacting the AGL management responsibility 

Procurement department

5 days

Table 1: Procurement management plan for AGL

(Source: AGL, 2018)

The roles and responsibility in the procure management of AGL is to organize an issue identification committee for providing transparent information to all of the company's stakeholders (AGL, 2018). The role and responsibility also determines the concernments of the procure management department of the company for the carbon constrained future.

Identification of the procurement needs reflects the review of the Australian renewable fund. It can be considered that the procurement process of the AGL Company will be required for sustainability development of the future resources. It can be further stated that, concernments on extracting the natural gas will allow the gas suppliers for transition from traditional approaches (De Silva, Simons & Stevens, 2016).  

It will also bring an innovative approach in the AGL Company’s operations management. The extraction of natural gas and concernment of using renewable energy source will assist the company for unlocking the investment for huge amount renewable energy generation.

The procurement needs will also highlight the requirements for conducting the retailer led trial of the AGTL Company. It can be observed that, the using of renewable energy help the company to thrive in Australian fuel industry. The procurement process of extracting the natural gas will also reduce the total investment business capital of the company.

Impact of New Technologies on End Customers and Producers

The procurement process or the project integration management will also direct the company to apply the emerging technology in the technical operations of the company. The procurement process arranged for using the renewable energy sources regarding emerging technologies to reduce the electricity augmentation costs of the company.

On the other's hand company also approached resource management plan review in the procure management plan, For this reason AGL company arranged  some training session for the company employees to gain the knowledge regarding resource management.

In the vendor process of project integration management AGL Company will also concern to describing the process which the company vendors or suppliers will use for sustainable development. Timesheet approval from the procure management end is also a vital, activity in the procurement management plan. It also includes the invoice processing, status reporting, contact renegotiation, status reporting and the last of all the scope change requests.

Conclusion

 The report has identified the issues that are responsible for creating issues in the operation management of AGL. It has also evaluated the Gas Market of Australia, to understand the role of gas providers in Australian Gas market. The report has indicated the upcoming trends in the Natural Gas market of Australia. In a circumstance where the oil price is reaching a higher, level every day. This has expanded the chance of market-capturing for AGL.  

 This company has already applied many procedures of sustainable procurement. It can expect to reap the result of this sustainable approach within a few years. Adoption of management integration would also help the company is creating its space in Australia. The report has shown how AGL can apply Six Sigma to eradicate the issues in its supply chain management.

Australia is on the verge of taking a leading position in International LNG market. It has provided a golden opportunity in front of AGL. The company should master the idea of sustainable supply chain management to make a leading position in the industry.

Reference List

Aemc.gov.au, (2018). About Us.  AEMC. Retrieved from https://www.aemc.gov.au/energy-system/gas/gas-markets. Retrieved on 1 September 2018.

AGL (2018). AGL Essentials.Just low rates. Retrieved from https://www.agl.com.au/. Retrieved on 28 August 2018.

Al Hinai, A., Rezaee, R., Esteban, L., & Labani, M. (2014). Comparisons of pore size distribution: a case from the Western Australian gas shale formations. Journal of Unconventional Oil and Gas Resources, 8, 1-13. Retrieved from https://www.sciencedirect.com/science/article/pii/S2213397614000330. Retrieved on 29 August 2018.

Banks, F. E. (2017). The political economy of natural gas. Abingdon: Routledge. Retrieved from https://www.taylorfrancis.com/books/9781351402446. Retrieved on 28 August 2018.

De Silva, P. N. K., Simons, S. J. R., & Stevens, P. (2016). Economic impact analysis of natural gas development and the policy implications. Energy Policy, 88, 639-651. Retrieved from https://discovery.ucl.ac.uk/1474161/1/Manuscript-Energy%20Policy.pdf. Retrieved on 28 August 2018.

Eex.gov.au, (2018). The Energy Supply Chain. Energy Exchange. Retrieved from https://www.eex.gov.au/large-energy-users/energy-management/energy-procurement/energy-pricing/the-energy-supply-chain. Retrieved on 2 September 2018.

Fleming, D. A., & Measham, T. G. (2015). Local economic impacts of an unconventional energy boom: the coal seam gas industry in A ustralia. Australian Journal of Agricultural and Resource Economics, 59(1), 78-94. Retrieved from https://onlinelibrary.wiley.com/doi/pdf/10.1111/1467-8489.12043. Retrieved on 25 August 2018.

Ford, J. A., Steen, J., & Verreynne, M. L. (2014). How environmental regulations affect innovation in the Australian oil and gas industry: going beyond the Porter Hypothesis. Journal of Cleaner Production, 84, 204-213. Retrieved from https://espace.library.uq.edu.au/view/UQ:321689/UQ321689_OA.pdf. Retrieved on 26 August 2018.

Islam, M. M., Murad, M. W., McMurray, A. J., & Abalala, T. S. (2017). Aspects of sustainable procurement practices by public and private organisations in Saudi Arabia: an empirical study. International Journal of Sustainable Development & World Ecology, 24(4), 289-303. Retrieved from https://www.researchgate.net/profile/Md_Murad/publication/305345125_Aspects_of_sustainable_procurement_practices_by_public_and_private_organisations_in_Saudi_Arabia_an_empirical_study/links/59ed81f2a6fdccef8b0dcca6/Aspects-of-sustainable-procurement-practices-by-public-and-private-organisations-in-Saudi-Arabia-an-empirical-study.pdf. Retrieved on 29 August 2018.

Kavonic, S., (2018). Three Big M&A Ideas For Australian Gas. Forbes. Retrieved from https://www.forbes.com/sites/woodmackenzie/2018/05/29/3-big-ma-ideas-for-australian-gas/#488db98c256a. Retrieved on 28 August 2018.

Latimer, C., (2018). The top five oil and gas trends for 2018. The Sydney Morning Herald. Retrieved from https://www.smh.com.au/business/the-economy/the-top-five-oil-and-gas-trends-for-2018-20180125-p4yyw8.html. Retrieved on 28 August 2018.

Meehan, J., & Bryde, D. J. (2015). A field-level examination of the adoption of sustainable procurement in the social housing sector. International Journal of Operations & Production Management, 35(7), 982-1004. Retrieved from https://www.researchgate.net/profile/Joanne_Meehan/publication/278300342_A_field-level_examination_of_the_adoption_of_sustainable_procurement_in_the_social_housing_sector/links/55ae158308aed9b7dcdb23b1/A-field-level-examination-of-the-adoption-of-sustainable-procurement-in-the-social-housing-sector.pdf. Retrieved on 28 August 2018.

Rodger, J. A., & George, J. A. (2017). Triple bottom line accounting for optimizing natural gas sustainability: A statistical linear programming fuzzy ILOWA optimized sustainment model approach to reducing supply chain global cybersecurity vulnerability through information and communications technology. Journal of cleaner production, 142, 1931-1949. Retrieved from https://www.sciencedirect.com/science/article/pii/S0959652616319345. Retrieved on 28 August 2018.

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