03/12/2009 - 15:43

Comment: Voelte's early Christmas gift

03/12/2009 - 15:43


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For all the clout that multinationals Chevron and Shell might normally expect to wield, it is clearly Woodside boss Don Voelte who wears the pants when it comes to the Browse LNG venture in the Kimberley.

For all the clout that multinationals Chevron and Shell might normally expect to wield, it is clearly Woodside boss Don Voelte who wears the pants when it comes to the Browse LNG venture in the Kimberley.

That is abundantly clear from the state and federal governments' ultimatum to the five Browse partners to support use of the James Price Point LNG hub north of Broome within 120 days or lose their permits.

It is unequivocally an early Christmas present for Mr Voelte and Woodside, which as 50 per cent owner of the Browse project, has grown increasingly frustrated with its partners reluctance to back the onshore plant option and get on with development.

With the stroke of the pen, Woodside has effectively been given everything it desired.

Mr Voelte virtually admitted as much today, when asked if there was anything in the governments' decision that didn't suit the aspiring WA-based LNG giant.

"I haven't heard anyone say this is preposterous," he responded, having earlier described the terms of the conditional renewal of the Browse permits as "brilliant".

Sure Chevron, Shell, BHP and BP can put forward an alternative - as long as it can get Browse developed earlier than the onshore option. Given that their only suggestion is to backfill declining output at the North West Shelf sometime after 2020, you can forget about that ever passing the government's muster.

More importantly, they only have 120 days to try and come up with a better idea. Metaphorically speaking, it takes Chevron and Shell longer than that to decide what brand of coffee to buy for their office coffee machine.

It also spells out in great detail a list of activities, costing $1.25 billion, which must be undertaken over the next three years for the leases to remain valid.

It is clearly no coincidence that a large portion of these details echo Woodside's own submission to government in July, when all the partners were asked to provide their own view of the Browse project.

What's more, the timing of the governments' ruling is exquisite.

Just three days ago, Chevron executive vice president George Kirkland was on Barrow Island celebrating the official ground breaking for the $43 billion Gorgon LNG project.

Speaking in front of premier Colin Barnett and federal resources minister Martin Ferguson, he also admitted out loud that developing Browse was some way down the list of Chevron's investment priorities, behind Gorgon and its $20 billion Wheatstone LNG venture.

"George, who I know pretty well, I guess he'd probably be pretty surprised this morning," Mr Voelte noted drily today.

Shell must also be rethinking its public questioning of the premier's determination to make James Price Point the only option for processing Browse gas.

Back in August, Mr Barnett declared he would use every possible avenue to prevent gas from Browse being processed anywhere but onshore in the Kimberley.

Asked to comment, Shell Australia chairman Russell Caplan suggested that such approaches could never force an outcome unless it was also supported by the commercial parties involved.

"Governments can say no to things ... but at the end of the day, (the premier) can't say that a project must be delivered," he said. "He can only say that a project can't be delivered."

"And those who are going to make it go ahead have to be prepared to invest ... to make it go ahead. They won't go ahead because Colin Barnett says it has to go ahead."

Maybe not - but Shell, Chevron, BHP and BP must now decide by April whether they are in or out. And staying in essentially means playing by the rules set by government and Woodside.

Mr Voelte is absolutely right when he says that waiting another 15 years to get a return on gas found almost 40 years ago is not good enough when the market is there, the means are available, government is supportive and the majority owner is ready to go.

He is also right when he says the federal government's growing willingness to enforce the "use it or lose it" principles enshrined in the regulation of oil and gas permits is proper and merely in line with general practice elsewhere in the world.

It should also now be crystal clear that the age-old practice of "stepping on the hose" of one project just because you would rather spend the money on another under your own control is no longer acceptable.

The question is now whether the government's new-found resolve will be extended beyond Browse.











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