Downstream value-adding is a strategic issue for a country like Australia, which has a resources-driven sector of a scale that has significant impact on the national economy. The question of why producers are not doing more to 'value-add' is often asked. In Australia this debate takes place within the context of: an era of unprecedented growth in demand for resources driven by the rapid urbanisation of China, India and others; impending legislation and uncertainty around carbon pricing; rapidly rising energy costs; significant supply-side shortages including infrastructure, skills and manufacturing capacity; and significant industry consolidation of primary resource producers with commensurate improvements in market power. There are several examples of resource-based industries which have developed their business along the complete value-chain; for example large oil and gas producers successfully span upstream and downstream operations including refining and petro-chemicals as well as retail distribution of fuel and other products. Relevant frameworks that provide insight and understanding into the strategic issues around value-adding are reviewed and examples of the application of these frameworks to companies and industries which have successfully adopted a strategy of integrating along the value-chain, as well as those players who have focused on parts of the value-chain are presented. The issues around value-adding in Australia are then reviewed with reference to these frameworks and it is concluded that the issue is a conflict between the objective companies who wish to maximise financial value versus the desire of governments to increase economic benefits. An approach to aligning these objectives is proposed.
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