Spun out over turtles and Russian roulette

SOME people think you make your own luck. Others think you’re born lucky. Right now Slugcatcher reckons the chaps running Chevron must be wondering what they have to do to improve their good fortune because so much has been going wrong over the past few weeks that you would have to think that someone has upset the petroleum gods.

The obvious problem that everyone in Australia is familiar with is the flatback turtle that calls the western side of Barrow Island its home and which may, or may not, stymie the Gorgon gas project.

But the turtle is a small problem compared with a shock profit result from Chevron, the second-biggest US oil company, plus a rather nasty turn of events in Russia.

On the profit front, Chevron became very much the odd man out late last week when it reported a lowly 18% increase in second quarter earnings to “just” $US4.4 billion ($A5.75 billion).

Outsiders unfamiliar with the performance of big oil at a time of super petroleum prices will find that comment about a business earning a three-month profit of “just $4.4 billion” a bit hard to swallow. But the point about the profit is the percentage movement, which is about half that of Chevron’s competitors; ExxonMobil rose 36% to $10.36 billion in the second quarter, and Shell was up 40% at $7.32 billion.

Chevron offered lots of excuses, such as costs associated with hurricane damage in the Gulf of Mexico, but it was hardly alone in suffering expenses like that.

The simple truth about Chevron’s profit is that it was poor, and investors will be demanding to know what management proposes to do to improve – or, perhaps even suggest that it’s time for new management.

A call along those lines might even be magnified if events get worse in Russia, which they have a habit of doing. The problem in the country which jails recalcitrant oil bosses over unpaid tax has a familiar ring to it – alleged unpaid tax.

In Chevron’s case, the dispute involves the Caspian Pipeline Consortium that it runs on behalf of a syndicate that includes BP, Shell and ExxonMobil. The Russian Government claims the pipeline group owes $175 million in back tax, a pitiful drop in the Black Sea for the oil majors, but not an issue which you would like to see get out of hand in a place which still settles tax bills at the barrel of an AK47, followed by a few years in the gulag.

By the standards of missed profit targets, and the potential for a run-in with balaclava-hooded tax collectors, the flatback turtle is positively small beer – or is it?

So far, the media spin from Chevron and the WA Government is that the turtle issue can be handled comfortably, and Barrow Island can still be home to turtles and a gas processing plant.

The Slug hopes so because about 10 years of planning and countless millions of dollars have gone into the design and marketing of Barrow as the best place for Gorgon gas – dismissing a mainland site preferred by environmentalists and some arms of government.

What particularly worries a few casual observers of the turtle issue is whether the Australian Government, via its surprisingly green Environment Minister Ian Campbell, might yet step in as he did with the orange-bellied parrot issue in Victoria, effectively jamming up another energy project, in that case a wind farm.

Given Chevron’s run of bad luck, and its preference for spinning its story to a select few friends in the media while avoiding its critics, it would not be a total surprise to The Slug if it is misreading the turtle issue as badly as it misjudged its profit, and allowed a tiny tax dispute get out of hand in Russia.

Spin, as they say in the laundry, is part of the cleaning process – but it will not remove deep stains.

Note: The views of Slugcatcher are not those of APPEA.