The big industry news last week was, of course, the green lights flashed from Canberra to the developers of the $20 billion Gorgon and $12 billion Pluto liquefied natural gas projects.
The big political news on the weekend was the Federal election called for November 24.
Obviously, the two events are connected with the John Howard-led Liberal Government appearing to be headed for a loss, but keen to be seen maintaining momentum in the national economy, and to put a final stamp on the resources sector should it be defeated.
So far, so good. Even Slugcatcher understands the way the political system works, and how governments are keen to be seen doing things, especially in an election environment.
That’s why Gorgon and Pluto got an all-clear, so they can be trotted out as illustrations of what you get from pro-business government.
The question left hanging, which no one will answer over the next five weeks, is whether both Gorgon and Pluto will proceed in accordance with the politically-driven announcements.
The Slug has been around long enough to have seen this big-ticket announcement game played repeatedly – only to result in nothing actually happening.
Back in the 1970s (and into the 80s) Alcoa’s Wagerup alumina refinery was “announced” in the lead up to two or three elections, but still took more than a decade to finally be built.
The same fate possibly awaits Gorgon, but perhaps not Pluto – and depending on how those situations evolve we might even seen as little bit of “corporate action” in the Australian petroleum industry, especially at the top end of town.
First Pluto, which seems to be a certainty. Woodside is super-keen to demonstrate its independence, and develop a gas-export project of its own, and while profit margins remain high, not even a $12 billion price-tag will stop it happening.
The political clearance last week that finally swept away a few remnant environmental and nonsense rock art issues was simply the icing on the cake. Woodside has also been doing its own internal “deck clearing” by exiting its African assets and focusing on opportunities at home.
Second Gorgon, which remains far less of a certainty. Unlike Pluto it is a joint venture, and the partners don’t seem to be able to agree on anything. Moreover, costs do not appear to have been reined in.
Last week’s political clearance was welcome, but might actually mean little if 25% owner ExxonMobil cannot be convinced it represents a good investment.
Third, the wild card. Slugcatcher is not even sure whether this has anything to do with politics, or is simply idle chatter from industry backrooms, but the word he’s heard is that BHP Billiton is ready to make a mega-expansion move with its petroleum division.
The new boy in charge of the world’s biggest diversified resources company, Marius Kloppers, is said to be contemplating a deal with the new player on Australia’s North West Shelf gas province, Hess Corporation.
Talk has it that BHP Billiton and Hess are steadily moving closer to together, in Australia and in the United States. The start of production at the Genghis Khan oilfield in the Gulf of Mexico (which has seen BHP Billiton and Hess working together) is complemented by an imminent start on exploration tenements acquired by Hess in Australian waters earlier this year.
With a work commitment of $US387 million Hess has bitten off a big mouthful and could easily be seeking a partner for part, or all of the WA-390-P block which lies on the Exmouth Plateau – one of BHP Billiton’s favourite locations.
Whether a deal is done on WA-390-P, or via deeper partnership affecting all of Hess’s exploration assets, remains to be seen.
But the climate for change is certainly ripe, both politically and commercially.
