Keynote address at the Sydney China Business Forum: 'Sustaining Water and the China challenge'

29 October 2013

Chairman of Worley Parsons Mr John Grill, delivered the following keynote address at the Sydney China Business Forum, 29 October:

Sustaining Water and the China challenge, by Mr John Grill

Napoleon once famously said: "Let China sleep for when she awakes, she will shake the world." And awaken she did.

Her rise as a nation to become the world's second largest economy and the extraordinary phenomena that is modern day China is one of history's greatest success stories. It's the reason we've come together today.

Like with every great success story, there have also been challenges.

I'm here to introduce a discussion on one of those challenges that most precious and fundamental of all resources, water.

Today, China is the largest consumer of water; water is also one of the country's most critical issues.

There are basically three reasons why China has a water crisis.

First, its water resources are not evenly distributed. While China's north and north-east regions are home to 40 per cent of her population, they are the source of around only 5 per cent of her water resources.

Second, with large scale urbanization and industrialization, China's water demand is expected to reach a mammoth 818 billion cubic meters by 2030. Approximately 50 per cent of demand will go to agriculture, 32 per cent to industry - driven specifically by thermal power generation - and the remaining 18 per cent for household use.

This situation is compounded by the fact that recycling is not widely used. As an example, China's industry currently only recycles about 25 per cent of its water compared to 85 per cent in other developing countries.

Finally, pollution from industry and domestic wastewater has worsened water problems by making 21 per cent of the country's surface water unfit for agriculture.

Water is a now top priority for the Chinese government in the 12th 'Five Year Plan' and is based on three goals: recycle, reduce and re-use. These goals are set against a series of binding targets: water intensity is set to be cut by 30 per cent and the water treatment rate is set to be at 85 per cent - all by 2015.

To achieve these targets, China is investing an estimated 4 trillion Renminbi between 2011 and 2020 on water-related projects. Its focus is on putting quotas on provincial water consumption; introducing higher drinking water standards through advance treatment technologies and plant upgrades; preventing water pollution through the development of wastewater treatment technology, monitoring and the development of environmental services companies; and encouraging the development of a desalination industry.

Water management

WorleyParsons is one of leading global providers of technical, project and operational support services to the major resources and energy multi-nationals around the world.

We are currently engaged in establishing best water practices for the hydrocarbons sector globally, a move backed by every major oil company.

Our experience in water management has also supported the coal seam gas industry in Queensland for the past decade. Specifically in the Surat basin, our role has been to address the security and sustainability of water resources in the local economy of one of Australia's most productive and intensively-farmed regions that relies heavily on groundwater extraction.

An emerging challenge for our customers, particularly relevant to China's recycle, reduce and re-use policy, is the issue of water stewardship: that is embracing all aspects of the responsible and sustainable management of water including abstraction, discharge, treatment and recycling.

Demonstrating good water stewardship will become a pre-requisite to achieving and maintaining a social license to operate, which supports a platform for sustainable economic, industrial and community development.

Good water stewardship is complemented by continuously improving operational efficiencies, introducing water into green supply chains - perhaps one day in the form of water credits, and developing industrial ecological solutions and technology associated with water management and sustainability.

One final area for thought around water sustainability is the food/water/energy nexus.

Particularly in China, two of the biggest challenges are food security and climate change. With her growing populations, urban migration and diminishing water, China's challenge will be to harmonize the relationship between industry, agriculture and people, all of which are competing for the same limited water supply.

WorleyParsons in China

We have a long and proud history with China including our acquisition of Chinese firm, Maison Engineers and Constructors in 2004.

Now renamed WorleyParsons China, today we are the largest international engineering, procurement and construction management (EPCM) service provider in China with offices in Beijing, Shanghai, Tianjin, Nanjing, Chengdu, Shenyang, and Hong Kong.

We are also one of the largest Australian employers in China, employing some 2800 people.

Our approach to our business in China is based on the premise of 'China roots, global reach'.

This sees us work with foreign companies investing in China and with Chinese companies investing domestically and also overseas.

Our customer base includes multi-nationals such as Shell, BASF and Chevron. Our Chinese customers include project developers such as PetroChina, CNOOC and EPC contractors such as Shanghai Electric.

Specifically in waste water, our work includes the Blue Star Xinghuo Chemical Project, the Shell Changbei CPF Project and the Oyu Tolgoi Mine Project, just to name a few.

We have also established China as one of our key global work share centers, incorporating high value engineering, China sourcing and prefabrication and servicing our projects around the world.

Working in China and Australia

In terms of success factors, around 75 per cent of our Chinese business comes from repeat customers.

I believe our track record gives us some good insights into working with local and global customers in China and to working with Chinese companies around the world.

As we've said, China's economic transformation especially since the late 70s has been remarkable. During this period, the government has created market incentives, encouraged private enterprise, relaxed protectionist policies and opened the economy to greater foreign trade and investment.

While these moves have accelerated China's transition as a developing nation, there is still more to do particularly in the area of competition.

There are still barriers to competition in the regulated energy and infrastructure sectors, especially with awarding major projects.

For international engineering companies, getting design accreditation in some sectors is still problematic. This continues to be an obstacle to working in the local market.

Also, inconsistent and unclear government policy, codes and standards still hinder the ability to make decisions around long-term planning.

However, it's pleasing to see efforts by the current Chinese leadership to address and lower barriers to competition.

Other than competition, culture, language and communication continue to challenge international companies operating in China.

Chinese companies investing or contracting in Australia also face challenges, particularly around non-technical risks such as licensing and permitting, health and safety, environmental impact issues, access to labor and compliance with local codes and standards.

Also, non-government authorities such as unions, community and lobby groups and NGOs can also impact the successful delivery of a project and therefore require consideration.

To conclude

China's urbanization and the associated changing demographic profiling along with the massive industrial development offers extreme environmental and water associated challenges and opportunities.

This will require government and the private sector to work together to minimize the impact and ensure sustainable growth for industry, agriculture and communities.

Our panel of industry experts will further explore these issues with you today.

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