HIGH FLYERS THINK TANK
National Research Priorities Strategic Forum
The Shine Dome, Canberra, 26-27 June 2002
National research priorities from a resource company perspective
by Bob Watts
Bob Watts is Vice-President Technology and Chief Scientist for BHP Billiton. He is responsible for the company's Technology Development Laboratories in Australia and South Africa and for groups implementing new technologies in several other countries. He develops the corporate policy for interactions with educational establishments and external research providers. He is a member of the physical sciences panel of the ARC and sits on several university advisory groups. His previous appointments include ICI Masson Professor of Chemistry and Head of School at the University of Melbourne, and Chairman of Chemistry at the University of Washington.
I was a bit concerned, initially, at being asked to talk here, primarily because I was only given a week or so's notice and secondly because I have not been following the establishment of these research initiatives as closely as perhaps I might have been. But, that to one side, it did not stop me from developing a few ideas and certainly a few opinions, as I usually have.
When I was thinking about the whole area of research initiatives, it seemed to me that the government can really establish priorities in three areas. It can define the fields of R&D that are in accord with the national direction; it can decide on methods of financial support – in this country, with respect to universities and CSIRO, especially; and, thirdly, it can determine the geographic locations where that research and development is conducted, both within the country and, by policies between different countries, which country you do it in. And that is an important thing for a company such as ours to think about. I am going to talk for a few minutes about each of those three areas, starting with the question of priorities in fields of R&D.
I am going to start with the experience I have had over the past few months with the ARC, where, as you know, earlier this year the government announced priorities in four areas and said that about one-third of the funding has to go into those four areas. This immediately produced a howl of outrage, including from the Academy of Science, I think it is fair to say. I was not consulted about that howl of outrage, although I am a Fellow and I would have written to Anderson dissociating myself from that. I thought it was actually a very good thing to do, but anyway – a majority of one in 315, probably. Not to worry.
It seemed to me that to put one-third of your resources into what might be called unusual or high-risk or focused areas is a good thing to do. My financial adviser tells me to have one-third of my money in that sort of thing, and two-thirds in the safer, more established stuff, so it fits in exactly with the financial adviser. Having said that, though, it seems to me that if you are going to have a focused, designated area of national priorities, whether it comes from ARC or from the outcomes of this present panel, it is absolutely imperative that those areas should persist and that they should be coupled with ongoing government support to take the outputs from that R&D and turn it into something that is of economic value to the country.
That led me to ask a pretty serious question, and maybe somebody here can tell me the answer – where is the opposition in setting these priorities, and where is the community? To put that into perspective: in my company, although I basically look after the R&D and new technology development budget across the company, I have to work within policy guidelines that are not established by me talking to the people in my labs but are set from the people that run the businesses. So one of the things I find a little bit surprising, when I look at the current exercise, is that the government has not said, 'We want your R&D to be in accord with this sort of initiative.' As I said earlier, that initiative, whatever it ought to be, should be one that is supported by the opposition. Otherwise you know what will happen three years from now or whenever – it will all get thrown out and all the money is down the drain. So that was what I thought about the initiatives being earmarked. If it is long term – the Japanese or Singapore policy – it is great; if it is thrown out with the next government, then we are back to square one.
There is also a problem with establishing policies of that type and saying your priorities are A, B, C and D. The problem is that many specific interests in the R&D community – the universities, CSIRO or wherever – are threatened by those initiatives. What that means is that they will go out of their way to subvert it. At dinner last night I made a comment that yes, the minister said 43 per cent of the ARC proposals fit with those four ARC initiatives, policies, directions, priorities, whatever. But I have read well over 100 in the past few weeks, and I can assure you that some of those 43 per cent are pretty spurious. I have also been involved with several discussions outside of the ARC, in terms of, 'Where is the minerals industry going?' and things like that, and I can assure you that there are some very serious conversations going on around the country on how you can plug in to these new linkage grants in such a way as to keep doing what you are doing but appear to fit in within your policy. So to me it is imperative that the people that distribute this money are very careful about staying within those priorities and understanding where they are set.
That is priorities and fields of R&D. Let's move on to methods used for supporting R&D, again as I see them. Basically, I came out with three areas in which the government funding for R&D goes. One of those is into generic funding of areas of general interest to industry (I am talking now from an industry perspective), the second one is where the government allows specific competitive advantage proposals, and the third one, of course, is where industry just funds something separately from the government. I will not say much about the third one, but of the first two, in the generic one the CRC program is for me a classic. The new large linkage scheme, setting together several centres of excellence and so on, is one that potentially fits into this.
I need to say right up front – and some of you already know this – that at least from the perspective of BHP Billiton we have a lot of problems with the CRC model. Initially, I think, we were enthusiastic supporters. We were looking at eight or 10 of them initially. We got essentially no value from those. We now look extremely carefully at any new CRC proposal, and only under exceptional circumstances will we join in a CRC one. Some of the observations we have made are that the research program will only add value to us when we put a lot of careful, one-on-one attention into the research program, not just going along to the odd meeting, but you have got to be very actively involved. If you turn your back for a moment, there is a very strong tendency for the researchers – people in the universities, CSIRO or whatever – to decide that they are the ones that really know how the research dollar should be spent. So unless there is a very careful and close interaction between our people and the CRC people, it is money down the drain. I can give you a long list of CRCs of that type, but I won't right now. See me afterwards!
So if I look at the current round of proposals that are going in – and I am going to make some specific comments on a couple of them at the moment – there are two in the environmental area that I have been asked to get involved with, to one of which we said yes, we will support the proposal, and one to which we have said no. The one we have said yes to, with some hesitation, is the proposal for a CRC in CO2 sequestration and so on. I pick on that because it is of specific interest to our oil and gas activities. As some of you would know, there is an awful lot of CO2 comes out of the ground when you tap into an oil well or a gas well, and that has to be captured. There are programs around the world, and the previous incarnation of this CRC, the petroleum one – although we had doubts about that – is at least picking one program that may add value.
The one we are not supporting – and this is, interestingly, against the general trend in the minerals industry – is a CRC for sustainable minerals production. The reason for that is quite simple. I could not see, nor could my colleagues see, what the value proposition was, except that I was told, 'The value proposition is that the minerals industry needs to be seen to believe in a sustainable society.' I said, 'What do you mean?' I looked at the list of initiatives, and all the things that are covered under it are already being done across the country in various research centres, and I got concerned that this was just another method of tapping into these new resources. So that was one where I could not see an explicit value proposition.
Having said that, one or two of the CRCs have been of considerable, great value to our industry. One is the A J Parker centre, of course (a national one based in Perth), and the centre for mining technology and so on in Queensland is another.
Another way of doing research – which I am a strong believer in for an industry such as ours – which is also generic, is the use of industrial consortia such as AMIRA, which Dick Davies heads up. That is a program which taps into a lot of government support by collecting money from across the minerals industry, focusing it on a particular problem that is usually of wide-ranging importance at the operational level, and then backing the university or CSIRO or CRC to get government funding to solve that problem. It adds a lot of value, I think, to the nation as well as to us.
There is one other institution that I wanted to make particular mention of in this funding thing. It happens to be one that we support, but I think it is another example of what you can do. That is the BHP Steel Research Institute at the University of Wollongong, where BHP Steel puts half a million dollars a year as basic cash into funding two or three Chairs, and then, with a very active, hands-on involvement with their research programs, it supports proposals to the ARC and other funding institutions that essentially bring in, I think, about $2 million a year to that university. It has been very successful; it has gone into its second incarnation. It is of tremendous value to the local community, tremendous value to their business, and is producing a lot of good students as well. So that sort of model, where a company such as ours adopts a particular institution, can also be valuable.
The third area I wanted to say something about, just briefly, is the fact that government can affect the geographic location. This comes about in several ways. First of all, as I think I indicated earlier, it can determine which country you do it in. For a company such as ours that is particularly important because, as you are probably aware, we are in a large number of countries and have a lot of activities in a lot of countries. Within the country, governmental agencies can usually determine in which region – state, in our case – the work is done, and government can even decide in which institution it is to be done. There are some noises, I think, in the government at the moment as to whether or not some institutions should concentrate on teaching, for example. Many years ago when I worked in Canada, I think the Ontario government decided that its 16 universities should not all do research. That sort of government intervention is important. And, associated with that, I think that the schemes we heard about from David Strangway are really important, that the government actively encourages institutions to specialise. That is a policy that I am particularly supportive of, and I guess Andrew's talk yesterday on Tasmania was an excellent example of how they are tailoring their policies to their region and their resources.
One of the interesting things about allowing the institutions in this country to determine their priorities is the effect of such groupings as the Group of Eight. We have got this famous Group of Eight which has decided, 'We are the research, the groundbreaking et cetera, universities' – with a slight exaggeration, almost useless to a company such as ours. If I look at where we do our collaborative R&D, where are the really important institutions to us? Well, the University of South Australia, Wollongong as I have mentioned, Newcastle, Murdoch, Curtin – all those places that are not quite seen as proper universities. We are very active with those. They have got really outstanding researchers who do excellent work for industry. So you have to be a little bit careful when you say that the Group of Eight is it. I am somewhat inclined to let them get on with it and see how well they do! Remember I spent many years at Group of Eight universities.
Some specific comments with respect to the company. We are global – we are in many countries; our R&D programs make use of the best researchers we can find on a global basis. A lot of our work is done outside of Australia. If I looked at the breakdown, I would think less than half is done in this country. We use specific, locally-targeted programs – I mentioned the Wollongong one but we are also very active in South Africa, and a growing area is South America. I have mentioned the CRC program. Within the company, at the asset level, the people who actually do the work and make the money for us – they dig it up – they are the guys that would normally support generic research through AMIRA or some other organisation, through direct funding of that type. And at the corporate level, where I tend to operate and where I have the R&D labs reporting to me, our emphasis is on longer-term focused R&D that is aimed to give us competitive advantage – which it occasionally does – and that work is sometimes done in collaboration with outside organisations, of course.
Interestingly, Australian government policies I think have had, recently at least, relatively little effect – in fact, no effect – on our R&D portfolio. We have heard a lot about the tax concession. I have not been in a single conversation in five years with BHP Billiton where the tax concession has come into consideration as to what we do and where we do it. That might be heresy but it is the truth. And it is also fair to say that at this time the sort of priority setting we have got at the moment has not seriously influenced our thinking. We have not, till now, been actively involved.
Having said that, minerals R&D is an extremely important export earner for this country. I think Dick will produce figures amounting to about $3 billion a year for service to the minerals industry which arises out of that. We shouldn't just throw it out because we have got these new, glamorous areas coming up.
The resource industry: sunset, right? Nobody is interested in it; nothing interesting is done. One of the things you might like to think about with that is to look at the gravity gradiometer that our company just released about a year or so ago, which is absolutely state-of-the-art, pulls technology out of nuclear submarines and so on. So there is actually some remarkably groundbreaking technology going on in the resource industry. And another one – you go and work out how to link up several pipes in 9,000 feet of water in the Gulf of Mexico, and see what sort of new and startling technologies you have got to develop there.
I had one last point to make, having listened to the various contributions yesterday. I really think that if you want a couple or three thoughts to add to your list, I have to endorse Mike's saline land and water one. It is not just of incredible importance to us environmentally. As I indicated to you yesterday, it is probably the single biggest problem facing the resource industry. How on earth do you handle the growing amounts of saline water? To give you one example – where are the Queensland people? – we were told yesterday that 1 per cent on the coal in Queensland would more than cover their programs. There has been a long drought in Queensland. The coal mines up there are having to store their water on site, because they have to discharge it at the quality at which it came in. Because there has been a long drought, there is a huge build-up of saline water, which is now having to be stored in some of the active pits. (I guess they are not so active right now.) There are all sorts of corrosion problems coming in. That is another saline water problem that is growing. And in the case of our activities in Chile – Escondida, of which I think 30 per cent belongs to Rio and the rest [to us and others] – the biggest single problem we have got there with developing is that there is no water left except some saline water. It is in the Atacama Desert. So water is a huge problem.
In the case of biotechnology, I walk to work down the famous Parkville strip, and I think of the horror on the face of a couple of them once when I said, 'How would you like to help us with our bio-mining activity?' I have 80 people working in a lab in South Africa, using bugs to mine. That is an area where we could do something.
And, finally, for the social sciences and humanities, who were bleating yesterday that there won't be enough professors of Russian: if you really want to solve those problems you mention – like the Arabs from Afghanistan running into the World Trade Centre – I don't think you need another professor of Russian. What I think you should do is set up a serious social sciences-humanities research program and work out how on earth you can tap into the huge migrant resources we have got. If you ever get down to Melbourne, you will be driven by a Russian or somebody who speaks Arabic. In the western regions of Melbourne there are 40 different languages, and nobody has given any thought as to how to harness those for the good of the country. So there is something for you.
