The winner is really Woodside, and the reason for the verdict lies in the small print of the deal struck late last week between the government and the company over the proposed Pluto liquefied natural gas project

The broad terms of the arrangement, and the ones widely reported by the popular penny press, are for Woodside to proceed with Pluto as an export-oriented development, and for domestic gas deliveries to start, oh, around five years after the first shipment, or after the shipment of 30 million tonnes of LNG.

But, apart from the tonnage and time factors, which are pretty important, five little words lie at the heart of Woodside’s win, they are: “Providing it is commercially viable”.

For some reason, ignorance being a good one, Slugcatcher’s media friends seem to have skipped lightly over the commercial test which is applied to all resource project agreements in WA.

For example, and this tells the story, the big iron ore miners in WA have agreements which specify that they will use their best endeavours to develop a steel-making industry based on local iron ore.

Guess what? It has never happened.

Why? Because making steel in such a remote part of the world is not commercially viable, and the companies can prove it, and the government has no choice but to accept that proof.

So why, The Slug asks, will domestic gas sales from Pluto be any more commercially viable than making steel?

The correct answer to that question is perhaps it will be, and perhaps it won’t be. So for the government to wave its political stick in the air and claim a great victory over Woodside is nonsense.

As far as The Slug can see, this is how events unfolded, with the twists in the tale all leading back to a single procedural error made by Woodside in its desire to get things done quickly – it failed to strike a separate State Agreement which would have dotted all the i’s and crossed all the t’s, and not left loose ends hanging around, such as what to do with Aboriginal rock art, and how to handle domestic gas obligations.

There is also the growing problem of dealing with a government bureaucracy which has been thoroughly gutted by resource companies riding the boom. On the one hand companies expect quality government, while on the other they poach all the best government decision makers.

Leaving the deficiencies of government aside, sometime last year Woodside pressed the “go” button for Pluto, and assumed everyone was on board. They weren’t. What followed was an ugly period of name-calling because the government wanted a commitment to sell some of Pluto’s gas to domestic customers.

Well, now we have it – sort of, with terms that are undoubtedly in Woodside’s favour given that five years of LNG shipments, or 30 million tonnes, whichever comes first, is a truckload of cash flow which will comfortably cover Pluto’s capital cost.

Once this has happened, it’s time for the “commercial viability” test which, we are told, will be determined by negotiations in good faith.

Now what might a commercial test be? How about profit? Or to be more specific, profit earned from domestic sales versus profit from exports.

The Slug might be naïve, but it seems to him that it will be awfully easy for Woodside to argue at some future date that the profit margins from exports so dramatically exceed domestic sales that commercial viability has not been proven – just like the steel dream of governments of 40 years ago.