The liquefied natural gas sector is the most obvious area of failure and/or delay, whether it’s mating turtles on Barrow Island, or rock art on the Burrup Peninsula, or old-fashioned cost blow-outs that are hampering a series of developments.
But the LNG industry is not an orphan. Across the petroleum spectrum there is a trail of unfinished business.
Santos is shaping as the latest victim of a job half-done with Australia’s anti-monopoly regulator, the ACCC, warning that it might stop the proposed acquisition of the coal seam methane specialist, Queensland Gas.
Woodside Petroleum also has corporate issues, with shareholders in its takeover target, Energy Partners, showing much sterner resistance than expected.
What interests The Slug in all this is whether a pattern can be seen, and whether that pattern is caused by too much money sloshing around the oil industry, making everyone involved look to be an easy target for speculators and regulators alike.
The LNG problems are an excellent example of regulatory constipation that might not be so obvious if oil was not seen as an easy target.
But because profit margins are perceived as being sky high, government agencies imagine that they can slap any additional cost on a project and expect the owners to absorb it.
Rock art, which is worrying Woodside, and turtles, which have Chevron hopping around Barrow Island (and perhaps abandoning it), might not seem to fit the extra cost category. But they certainly are, simply because of the time delays caused by government inquiries – followed by inquiries into the inquiries.
At another time, when petroleum profit margins were thinner, a reasonable man might have expected government to lend a helping hand because the LNG proposals for Australia’s northwest will bring tremendous developments, and employment opportunities (and tax revenue) to the region.
Instead, what we have is the farce of government effectively blocking a series of multi-billion development proposals and appearing to be saying that it’s hard to find anywhere on about 6000 kilometres of coastline which is an acceptable onshore gas processing site.
Government interference is also at work in the Santos proposal to buy QGC. In this case the argument is not that Santos wouldn’t make a good owner of the coal seam methane producer, but that its ownership might give it too much control over the Australian east coast gas business – because it might thwart the development of a gas pipeline from Papua New Guinea.
With due deference to the brains behind the ACCC, the PNG pipeline will not fail because of a coal seam methane deal. It’ll do that simply because the gas is in PNG, a country which is falling apart at the seams because of bad government.
As for Woodside’s troubled acquisition in the US there is little fresh to say, just that it is another incomplete deal that was trumpeted loudly when launched, but now seems to be limping towards a conclusion.
Each of the examples used by The Slug has its own set of circumstances, but each also has a common thread – and that is the high cash flows in the oil sector, and a belief held by government and investors that now is a good time to frustrate and delay in the belief that a higher price can be screwed out of the industry.
The problem with that approach, as we have seen in the past, is that even the brightest idea quickly becomes too difficult – and incomplete becomes cancelled.
Note: The views of Slugcatcher are not those of APPEA.
