So the world today …… is under stress. The world’s energy, water and food resources are under pressure, as the global population heads towards 9 billion by 2050 and hundreds of millions of people move out of poverty in the emerging economies. Global greenhouse gas emissions will continue to rise, alongside demand for energy.

Innovation a lucky dilemma

Good afternoon. Thank you for that kind introduction … and thank you all for being here today, innovation in Australia is a very important topic to discuss. Of course, it’s helpful if we innovate with a future in mind.

I’d like to open with a short video. Last month, Shell released its New Lens Scenarios, showing what our world might look like, 20, 50 even 100 years from now.

Shell has been developing scenarios to explore the future and deepen its strategic thinking for 40 years. The aim of Shell’s scenarios is to help people anticipate the future to make better decisions. They set out multiple, contrasting views, and create plausible, quantified stories around them.

Our scenarios are part of an ongoing process used in Shell that challenges our executives’ perspectives on the future business environment. They help the company see opportunities and risks more clearly, help us to apply innovative thinking and use these insights to make informed business decisions.

I will give you some of our global ideas and then I’d like to talk about Australia, policy and the role of innovation.

The World

Interesting isn’t it.

So the world today …… is under stress. The world’s energy, water and food resources are under pressure, as the global population heads towards 9 billion by 2050 and hundreds of millions of people move out of poverty in the emerging economies. Global greenhouse gas emissions will continue to rise, alongside demand for energy.

Many countries are making the journey from rural to urban societies: according to one projection, the world will build the equivalent of one new city of nearly 1.5 million people every week for the next 40 years ….. that’s a new Perth being built every week. Much of this growth is going to happen just a short flight away in Asia.

The revolution in information technology is gathering pace. According to the CEO of Google, 5 Exabytes* of information were created between the dawn of civilization and 2003. But a similar level of information is now created every 2 days. Social media is transforming human interaction: the world is better connected than ever.

*(Exabyte (1 000 000 000 000 000 000 bytes, 5 Exabytes = All words ever spoken by human beings.)

As these forces re-shape the global landscape, taking important business or policy decisions has never been harder. Yet decisions taken today will have profound economic, ecological and social consequences that will shape the course of the 21st century.


Despite these significant advances, the current business environment also bears many similarities to that of the early 1970s. The world has entered a lengthy period of macro-economic volatility, in the wake of the financial crisis of 2007-8.

And, just like 40 years ago, economic uncertainty has triggered political upheavals: the crisis has accelerated the shift in economic and political influence from West to East.

Businesses and policymakers must also contend with new uncertainties. I tend to think the art of good government is doing as little as possible but as much as is necessary. Getting the policy settings right isn’t easy - because good policy doesn’t always translate into good politics, as is painfully obvious in election years, be it America, Europe or Australia. And, given the future of 9 billion people, we really need to get it right. This is a shared future and one that will be felt by us all. Communities, industry, academia and government all have a responsibility to examine what role we will play in meeting the demands of the future. Good decisions will likely define how successful or unsuccessful we will be.

Australia, Government, Policy

I believe Australia itself faces some difficult choices in this global future. I have talked before about Donald Horne’s adage of the ‘Lucky Country’ which of course had a double-edged meaning.

While obviously blessed with great beauty and natural resources, he was actually challenging Australia’s attachment to the past, saying: “I had in mind the lack of innovation in Australian manufacturing.” He continued, “Australia showed less enterprise than almost any other prosperous industrial society.”

That collision of optimism and realism is what I term the ‘Lucky Dilemma’.

Australia has an abundance of natural resources and yet struggles to reconcile this potential with the challenges of economic bottlenecks, cost pressures, productivity challenges, and the pervasive short-termism that is dominating political agendas globally.

There shouldn’t be a dilemma. Australia can use the best of its natural resources and develop the innovation, enterprise and experience that underpin a thriving economy. But Australia’s future economic choices are complex, involve tougher trade-offs than seen in the last decade, and will require political resolve to build consensus about the way forward.

Australia I believe has a big role to play on the global stage. Clearly the ripple effects of the financial crisis and the shift in global power structures play out here. But also, Australia sits right on the cusp of Asia at the heart of much of the world’s projected growth, and it can be an important player.

In the words of my friend, Tony Shepherd, President of the Business Council of Australia, who recently gave an address at the AICC in Sydney:

“Australians are waiting for the call, the vision for the future and the plan that’s going to help us get there……We have an unprecedented opportunity to lock in prosperity and high living standards for future generations. We are at one of the great tipping points of global history. But we can’t see where we are heading.”

As I have said, government should be as small as possible, and as big as necessary. Innovation is a place that government can usefully play. It can drive innovation and investment … for example, by providing practical incentives to support the development of promising new technologies and by making it easier for small and medium-sized businesses developing those technologies to succeed.

Governments also need to prioritise education, with a greater emphasis on boosting the number of graduates with the skills needed to tackle some of these big issues. When I think of the skills shortages we see in WA, I am proud of the work we are doing with our partner universities through initiatives like the Global FLNG Training Consortium. It’s takes a coordinated, focused approach, to deliver the best results.

Investors look for certainty in their return, fiscal stability is critical. Being competitive in the world to attract investment means getting policy settings right. I’d like to see Australia as a place where there is encouragement of exploration and R&D. Recently the Federal Government announced plans around proposed changes to the Research & Development tax incentive regime. While removing the R&D tax incentives brought about a budget benefit on paper, what return will it ultimately deliver? With innovation comes smarter, better, more efficient ways of doing business. R&D ultimately benefits the consumer, the business community and governments through increased taxation revenues. Governments should be looking at why we are not investing in innovation, rather than removing incentives to do so.

Business and Innovation

So what are the next steps? How do we create the space needed to innovate, to meet the challenges we will collectively face over the next 100 years?

These are big questions and I do believe major businesses have a significant role to play …in part, because of our extensive value chains and the depth of talent that our employees can bring to expand knowledge of the issues. But also because we have the ability to think big long-term and be innovative.

So it makes sense that innovation should be part of our thinking. When we talk about innovation, it’s not just an ipad or a new app, it’s fundamentally examining the way we do things, thinking differently on every level to drive change.

One industry that I believe is doing its bit to reconcile the potential in both Australia’s natural and human resources is the oil and gas sector.

From our perspective, innovation will play a key role in keeping Australia competitive. Shell plans to invest around $30 billion dollars in Australia over the next five years. This part of the world is key to our growth strategy. But we need to innovate to ensure our Australian interests remain viable.

You only have to look at the Prelude Project, Shell’s (and maybe the world’s) first floating LNG facility, which will be located right here off WA. This innovative project came to being because government didn’t have in place restrictions, hurdles or obstacles which hindered ground-breaking innovation.

The right policy setting from governments on this project ensured that when we saw a problem - how to access gas which was previously too challenging to access—and we saw a future: one in which gas was in unprecedented demand as the cleanest burning hydro carbon in that 9 billionth person world, we were able to imagine a solution of this scale.

And through pioneering technology innovation, we have been able to develop the first FLNG facility. The facility will be located above the Prelude gas field, more than 200kms off the coast of Western Australia.

This kind of project is important. Being bold and innovative gives us an opportunity to demonstrate to governments and policymakers what we as an industry can offer. And it also reinforces the need to look beyond their immediate jurisdictions.

The Future

The scale of this challenge is huge, and the need for innovation is great.

We need to be willing to experiment more and accept that at times we will fail.

Businesses need to accept that some ideas will not lead to profitability immediately and that we may need to move forward even without the proper policies and incentives in place. Having the right tax settings will help us in that regard.

Innovation, thinking differently, driving change, really is an investment in the future. I compare it in my business to drilling an exploration well. The potential payoff is big, but there are no guarantees.

We need to confront hard issues now; we need to ensure that we are setting Australia up for success. Putting the right long-term policy and frameworks in place, ensuring we can compete confidently in a very competitive and dynamic global market.

Likewise I believe we, as business leaders, must also be clear about what we expect from governments and other stakeholders. And government must listen.

We must drive decisions today that will have a profound economic, ecological and social impact. These decisions will shape the course of Australia’s role in meeting future energy demands in the 21st century. Australia can lead, we can be great innovators and pioneers - we can harness the can-do attitude that has defined our nation for the last 200 years.


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