11/06/2009 - 00:00

Gas sector wields unprecedented influence

11/06/2009 - 00:00


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IN a capital-starved world those businesses that continue to invest stand out more than ever before.

IN a capital-starved world those businesses that continue to invest stand out more than ever before.

Even with the business cycle starting to slow, last year's most influential in business was spread widely, reflecting relatively easy access to capital and debt.

This year is very, very different.

Small and medium enterprises have been largely sidelined as they hunker down to conserve cash. Even the major miners have been hit for six, taking a lot of reputational damage with project closures, delays and desperate bids for Chinese investment.

The sector standing head and shoulders above all this is Western Australia's gas sector. While global prices have slumped along with oil, longer-term issues such as energy security and the lead times for production have resulted in LNG becoming a counter cyclical investment.

In addition, the sheer scale of the developments, the huge construction workforces and the never-ending royalty streams are a recipe for influence that is unmatched by any other sector in Australia.

Governments faced with short-term unemployment and debt that extends out for years see LNG as a useful salve for both.

Hence the power of Don Voelte, as CEO of Woodside Petroleum, becomes clear. While Mr Voelte is American, he's been here long enough to fashion Woodside, WA's biggest company and operator of the North West Shelf, into an instrument of his own. After a showdown with former premier, Alan Carpenter, he now has a new state leader to resume dialogue with, at a time when his industry's star is one of the few shining.

Mr Voelte has also gone out of his way to put his roots deeper into the WA community. In the past six months he has become a director of WA Newspapers Holdings, adding to his non-executive role at the University of WA's business school board.

Boosting the stocks of Don Voelte and Woodside in general is the presence of one of Australia's leading businessmen, Michael Chaney. The former Wesfarmers boss currently chairs both Woodside and National Australia Bank - a foot in each of the two most resilient sectors during the global financial crisis.

WA born and bred, Mr Chaney is credited with turning Wesfarmers into the nation's best performing major company, giving conglomerates a good name again. He is also a favourite of the influential arts community for his leadership in corporate support.

Of course, the influence of both these men is aided by the fact that Woodside is promising big investment at a time when little capital expenditure is taking place.

Interestingly, the LNG industry's rising power has highlighted the divisions within it. Though most of the gas fields are jointly owned by multinationals, these apparently incestuous relationships belie much jockeying for control - as can be seen between Woodside and Chevron over the Wheatstone project.

Chevron Australia managing director Roy Krzywosinski is a name few outside the LNG industry will know well.

While he is yet to establish himself outside the industry, Mr Krzywosinski's influence in WA is hard to ignore. At the helm of a $50 billion project, the Chevron chief is leading the single biggest capital investment in Australia at a time when so much else has ground to a halt.

The power of those in LNG need not be read just in the dollar terms of their investment. Even their greatest critics highlight the influence the sector has, no doubt helped by employing armies of public affairs and lobbyists of the highest calibre.

In a recent criticism of the federal government's white paper on Australia's energy security, the DomGas Alliance - an umbrella group of WA's domestic gas users - claimed the LNG industry had hijacked the process, diverting the focus from Australian industry and households to promoting the export of energy.

DomGas pointed out that gas players dominate the government's consultative committee, notably Woodside, Shell, Santos and the industry's own umbrella group the Australian Petroleum Production & Exploration Association.

If that isn't influence, what is?

On the flipside of this is the waning of other stars. It may only be a temporary blip but 2009 has not been a good one for the major miners.

BHP Billiton's decision to close down the Ravensthorpe nickel project after just eight months of operation was a case study in brand damage. Not only was the closure yet another black mark against BHP's ability to successfully deliver on innovative developments, the process was handled very poorly and hurt the new state government.

Hundreds of mine staff were unexpectedly sacked at the peak of concern regarding the impact of the financial crisis. The closure came despite significant state investment and promises to employees that had prompted a mini-boom in both Ravensthorpe and nearby Hopetoun.

Ironically, much of that may become background noise as the massive news of BHP and Rio Tinto combining their WA iron ore assets puts local BHP Iron Ore chief Ian Ashby into the frame as the initial CEO of the joint venture. Mr Ashby is not as visible in the wider community as his cross-town rival Sam Walsh at Rio Tinto, whose influence just jumped a notch or two with his admission to the Rio board and proposed new role as chair of the iron ore joint venture.

Last year, Fortescue Metals Group founder Andrew Forrest was Australia's richest man, riding high on a tidal wave of iron demand. This year, he's slumped out of the rich list's top 10 and has had to deal with negative headlines due to a trial relating to his company's stock market announcements.

Nevertheless, Mr Forrest's efforts to create 50,000 indigenous jobs have endeared him to the community to a degree not achieved by most corporate leaders.

The global crisis has also affected the influence of Alcoa. WA-bred Alcoa Australia chief Alan Cransberg's operations are the most energy intensive in the state and have the most to lose in a fight that LNG producers appear to be winning. While Mr Cransberg is on the West Coast Eagles and Black Swan Theatre boards, there is a perception his focus is very internal as a result of aluminium's price plunge.

Perhaps the biggest financial crisis victim is that of professional director Peter Mansell. Last year, the respected lawyer was nursing his wounds after seeing off a challenge by rich lister Kerry Stokes, who wanted his scalp as part of his move on WA Newspapers.

Late last year, Mr Mansell lost round two of that battle, while being embroiled as a director in the collapse of two major companies - OZ Minerals and Great Southern.

Property is not flavour of the month right now, though its importance to the economy means it is never far from the surface. Nigel Satterley is recognised as the biggest mover and shaker in this field, closely followed by builders Len Buckeridge and Dale Alcock.


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