Is Woodside Petroleum a de facto state oil company?
Is Woodside Petroleum a de facto state oil company?
That was an inference that could be drawn from Premier Colin Barnett’s decision to dive into the speculation over whether BHP Billiton was preparing to make a takeover bid for Woodside, initially by buying a 24.3 per cent stake in the Perth oil and gas company which Shell has on the market.
“Hands off,” Mr Barnett said very clearly at the opening session of the Australian Petroleum Production and Exploration Association’s massive annual conference held in Perth this week.
The premier was voicing his concerns from a very safe vantage point. He has no direct say in the deal whatsoever and can only suggest the WA government can make things difficult for a company that needs state approvals for everything it does.
“If Woodside were taken over, industry would lose something,” Mr Barnett said.
“You would lose a closeness to government that you probably would not be able to recreate. I would urge hands off Woodside; not a good move for your industry.”
The subject is clearly a touchy one for the premier, who does not need the loss of local ownership at a time when other issues regarding the sector are already flaring up as domestic industry needs clash with those of multi-national investors and their global customers.
WA manufacturers are bemoaning empty factories as steel fabrication and other major works associated with development go offshore. Many businesses in the south of the state, including minerals giants like Alcoa, have a long-running campaign about the lack of cheap gas to fuel their operations.
And the state is already heavily reliant on two behemoths in the form of iron ore giants Rio Tinto and BHP that dominate the north-west.
It appears that, to Mr Barnett, even Melbourne-based BHP, the world’s biggest miner, is viewed as a foreign entity. Perhaps only a shift of BHP’s corporate headquarters to Perth, as Woodside did 20 years ago, could change that parochial perception?
On top of these difficult issues, the oil and gas industry wants to bring in more foreign workers to speed up development – as they gear up for a monumental few years of development that is set to peak in 2014.
These conditions create an awkward moment for Mr Barnett, who has to finely balance the perception that enormous resources profits for multi-national companies are not flowing to domestic industry. Perth-based Woodside helps square the ledger, a little.
“It is not a parochial point of view, it is a global point of view,” Mr Barnett said. “Other countries around the world in the petroleum industry, and particularly in natural gas, require either a state-owned petroleum companies to be part of projects or require production sharing.
“It’s a good thing in Australia that we don’t do that, we allow private development, but it is also fair and reasonable that we retain Australian participation.”
So is Woodside unusually close to government?
It is not, according to its outgoing chief executive Don Voelte, who has headed the company for the past seven years.
On the public record, Mr Voelte had a volatile relationship with the previous Labor state government, especially over then-premier Alan Carpenter’s demand that 15 per cent of all gas projects be carved out for domestic consumption.
That relationship changed with the arrival of Mr Barnett, who took advantage of the proximity of Woodside’s offices across the road from his.
But Mr Voelte is adamant his company’s good relationship with the conservatives was no different than any other big company.
This difference, he asserts, was the leadership that Woodside showed in developing the north-west’s LNG production through Pluto, which has helped state and federal governments put pressure on multi-nationals to develop long-held reserves.
“I think they (government) saw that as a catalyst to propelling the LNG story to the forefront,” he said.
“I had a lot of feedback from my colleagues in the industry and they’d say ‘damn it Voelte, I just got out of a minister’s meeting and they say ‘if little old Woodside can do Pluto on their own, 90 per cent or 100 per cent, why can’t you build ...’ you fill in the name: Gorgon, Wheatstone, Ichthys, blah, blah blah.”
The Woodside chief went further, suggesting his company’s development push put pressure on other leaseholders to use their tenements or lose them.
“I think it created the retention policy,” Mr Voelte said.
“They (government) would say ‘we don’t buy the story any more and we don’t understand why you’ve sat on these resources for 50 years, 40 years, 30 years.
“A lot of government officials recognised Woodside’s boldness, our independence and aggressiveness.
“Woodside is the underdog that could.”
