Friday, March 15, 2013


  1. Woodside's $US2bn cash conundrum

    AS a hole opens in Woodside Petroleum's oil and gas production outlook, the case is building for management to pull off a big acquisition or return some of its cash pile to shareholders.

    Or it could do both.

    That's the view of Citigroup analyst Mark Greenwood, who says Australia's second-biggest oil company after BHP Billiton could afford to launch a $US1 billion ($960m) buyback of its own shares - even if it spends another $US1bn buying a new asset.


    Calls for either a buyback or raised dividend are growing louder amid increasing doubts about three Australian liquefied natural gas, or LNG, growth projects that Woodside Chief Executive Peter Coleman inherited from predecessor Don Voelte last year.


    Mr Greenwood says a final investment decision on the Browse LNG project in Western Australia state, due in mid-2013, is expected to be pushed back until 2015 at the earliest, partly due to a "prohibitively high" construction cost of over $US45bn.


    Another growth project, Sunrise LNG, is mired in a political dispute with the tiny nation of East Timor over where the gas should be processed, while an expansion of the Pluto LNG project is stymied by a shortage of gas.


    Already aware of a looming revenue crunch, Mr Coleman last year agreed to buy a stake in the massive Leviathan natural gas discovery offshore Israel for more than $US1.2bn. However, while a final investment decision on a smaller domestic gas project could happen this calendar year, Mr Greenwood doesn't expect a decision on a larger LNG project until at least 2015.


    Our energy future is cast in stone

    THERE is a new gold rush under way but it has nothing to do with the precious metal.

    This rush is actually all about energy, and more specifically is focused on the huge shale oil and gas reserves that have been discovered and are progressively being developed across various parts of Australia and elsewhere in the world.

    In short, Australia's shale-gas rush has reached ignition point, with a number of listed companies leading the chase.

    Through a refined drilling technology process known as fracking, the enormous reserves being discovered and developed have the potential to make Australia self-sufficient in terms of energy supply in the longer term.

    That's good news for energy consumers, and should ultimately lead to lower prices

    Beach Energy chief Reg Nelson noted that the shale story was just beginning.

    "The whole point is, what we've tapped into to date in terms of oil and gas is the so-called conventional supply, and that is oil and gas that has escaped from where it is formed, in the shales, and into pockets closer to the surface of the earth, so it's easy to find. That's why it's being tapped into. But 90 per cent of it is probably still down there and so what this (fracking) is doing is to tap into the source."

    The shale revolution that started in the US and is spreading globally has major implications for energy prices. Rather than a deficit of energy, there is now a surplus. In the US, domestic oil production has risen from eight million barrels a day in 2005 to 11 million barrels recently, and imports have fallen from 13 million barrels to about seven million barrels a day.

    There are few forecasts today for a strong rise in the price of oil. The consensus view is that oil will trade between $US75 a barrel and $US125 a barrel over this year.

    Over the next 18 months the new flows from the Australian shale industry will expand sharply as the number of wells drilled increases, horizontal drilling techniques increase access to deposits, and a number of companies start producing gas and oil from shale.

  2. Chinese target gas in $49bn splurge

    AUSTRALIA is holding its lead as the top destination for Chinese direct investment with $49 billion invested, helped by a surge in gas investments, but the rest of the world is catching up fast.


    In a joint report published yesterday, KPMG and Sydney University's China Studies Centre said Australia has 13.2 per cent of China's total foreign direct investments, just ahead of the US's 13.1 per cent.

    Brazil, Russia, Britain, Nigeria and South Africa follow, all behind Canada -- whose Chinese holdings were hugely boosted by last year's $14.6bn CNOOC-Nexen deal.

    This trend is viewed by Hans Hendrischke as part of an inevitable geographic diversification by China. Professor Hendrischke said that although Chinese investment into Australia rose by 21 per cent last year compared with 2011, "there is no denying that the rest of the world is hot on our heels and aggressively competing for Chinese capital".


    The most recent Australian Bureau of Statistics figures show that at the end of 2011, China's direct investment still accounted for only 2.6 per cent of the total investment in Australia.

    The report points out that while 73 per cent of China's investment from 2006 to 2012 had gone into mining, over the past year the nation's focus has shifted substantially, with just 48 per cent going into mining.

    Gas was the next biggest target, receiving 42 per cent of Chinese investment -- up from 18 per cent over the past six years as a whole -- with renewable energy receiving 2 per cent and other areas, including agriculture and real estate, totalling 8 per cent.


    The report says "the shift away from mining indicates a lagged response to changes in domestic conditions in China and global markets" -- with a construction slowdown and a consequent drop in steel demand.

    In contrast, demand for liquefied natural gas rose rapidly over the past two years. But the report warns that while Chinese companies can be expected to continue bidding for Australian LNG projects, the nation "is also actively looking at other gas supply options", including in Russia and its neighbours in central Asia.

    The influx of Chinese investment is being increasingly concentrated in Western Australia, which received 56 per cent of the inflows in 2012, and Queensland, with 33 per cent, followed by South Australia with 5 per cent and the rest below that.

    The spread of accumulated investment over the past six years is much broader, with WA holding 32 per cent, Queensland 31 per cent, NSW 21 per cent and Victoria 14 per cent.


    The size of deals in Australia is large, on average, compared with China's deals with other countries, with more than half in 2012 being worth more than $193 million, and 30 per cent worth more than $482m.

    The report says food security, "which has emerged as a key theme for China", may further broaden the nation's interests in Australia, as well as infrastructure, real estate and hospitality investment, especially through joint ventures.

  3. Shell remains silent on Wheatstone

    Royal Dutch Shell has completed the selldown of equity in its Prelude FLNG project but remained silent on the timetable for the proposed exit from the Chevron-led Wheatstone development.

    The Anglo-Dutch giant issued its annual report on Thursday night and confirmed that the latest of three Prelude selldowns, to Taiwan's CPC, was finalised over the past three months. The profit Shell may have booked from CPC's buy-in was not disclosed.


    There was also no mention by Shell of when it expected to sell its 6.4 per cent stake in Wheatstone, the 8.9 million tonne a year LNG development near Onslow. Shell has decided to quit its stake because it is too small and it prefers to be operator of projects it is involved in.

    CPC now has a 5 per cent stake in Prelude and joins South Korea's KOGAS (10 per cent) and Japan's Inpex (17.5 per cent), along with operator Shell (67.5 per cent).


    It remains unclear whether Shell is planning a further equity selldown in Prelude; the deals with KOGAS and CPC were seen as agreements with customers, while the inclusion of Inpex is also of strategic importance because the Japanese group operates the Abadi project off Indonesia.

    Shell has a stake in Abadi, which could be developed as FLNG based on the Prelude prototype.

    Shell trumpets Prelude as an "idea born and developed as part of an innovation-stimulating program called GameChanger".
    Shell's strategy is to produce replica FLNG vessels to the one used on Prelude for development of other gas fields, thereby gaining from what should be an ever-falling unit construction cost of the massive vessel.



    Miners warned of land lock changes

    The State Government could open vast swathes of WA to explorers, flagging changes to the law to crack down on land banking by the industry's bigger players.

    The big miners, including BHP Billiton, Rio Tinto and Fortescue Metals Group, have long been accused of "tenement parking" in the Pilbara and across the State - abusing bottlenecks in the approvals process for exploration tenements to slow down their grant by the Department of Mines and Petroleum.


    Under existing rules, a mining company is not required to pay rent on tenements that have not yet been granted, and they do not have to meet compulsory exploration spending requirements.

    But the tenements remain locked up, with competitors prevented from gaining control and launching their own exploration programs.

    According to DMP figures, more than 6000 tenement applications are still outstanding, down from a peak of 18,000 in 2007.


    The DMP last year established a "special project taskforce" to look into the problem after claims Fortescue had locked up more than 57,000sqkm of the Pilbara in unclosed tenement applications, some more than five years old.


    A senior DMP official told _WestBusiness _yesterday that the department would recommend the Government amend the Mining Act to prevent the practise.


    Acting deputy director-general for approvals Ivor Roberts said abuses of the application process included examples of mining companies that had lodged and withdrawn applications repeatedly over the same ground, or stalled Native Title negotiations to delay the grant of tenements.


    "The department will be reviewing all outstanding applications including those held by major iron ore companies," Dr Roberts said.
    "Application parking is not consistent with the principles of the Mining Act, which encourages ground turnover to ensure areas are being adequately explored for potential resources."


  4. Rally targets Newcastle coal terminal

    Opponents of a new coal terminal have staged a protest rally in Newcastle to highlight concerns that extra coal dust will prove a health hazard to local residents.


    Dozens of community groups attended Saturday's Stop T4 parade and rally against the fourth coal terminal proposed by Port Waratah Coal Services.

    Coal Terminal Action Group (CTAG) spokeswoman Annika Dean said recent coal dust monitoring in suburbs close to coal trains and stockpiles found significantly higher levels than national standards.

    "NSW Planning Minister Brad Hazzard has so far failed to take responsibility for the unacceptable risks posed by T4 to community and environmental health," she said in a statement.

    "It's time for the minister to hear our community, and to reject T4."


    Australian Greens Senator Lee Rhiannon said the federal government was "up to its neck" in funding coal rail lines, giving a "leg-up that coal companies do not deserve".

    "Federal Infrastructure Minister Anthony Albanese is funding an empire of coal rail lines but closing his ears to the concerns of local residents."

    Ms Rhiannon said the money would be better spent on clean, renewable energy projects.


    Associate Professor Nick Higginbotham, a member of CTAG's Dust and Health committee, said pollution from T4 would be a significant threat to public health.

    "Most affected will be the 32,000 people living alongside the coal corridor from Newcastle Port to Rutherford, the 23,000 children attending Hunter schools within 500m of the coal rail and the 23,000 residents living within two kilometres of T4."


    Nature Conservation Council of NSW spokeswoman Kate Smolski said a fourth terminal would double the volume of coal transported through Newcastle, with a corresponding increase in dust pollution.

    It would also double mining development in the Hunter Valley, including up to fifteen new open cut coal mines, leading to the destruction of waterways and forests and loss of rich farmland, she said.
    Comment was being sought from the state and federal governments.


    Maritime Union fuels Julia GIllard's war on foreign workers

    THE Maritime Union of Australia has launched a new assault on foreign workers, demanding up to 56 days' extra pay if Australian crew come into contact with them.

    The demand - calls for 28 days' pay and an additional 28 days' leave if a vessel operator or owner "engages foreign labour in the demobilisation or mobilisation of a vessel that has been working on the Australian coast".

    The union's draft EBA demand also includes $495 a day in allowances for workers on the Inpex-dominated Ichthys LNG Project being constructed in the Browse Basin, the nation's second-largest LNG project.

    This includes a special $250-a-day payment linked specifically to the Inpex project.

    It also calls for "hard-lying" allowances of $60 a day if there is no satellite reception and/or internet reception in cabins, $60 a day if there are no TVs, DVDs or radios, and $40 a day if there is a non-compliant galley.


    The EBA demands four-star hotel accommodation for workers, and private health insurance.

    The MUA demand opens a new front in the union fight against foreign workers.

    An MUA spokeswoman said "The MUA is committed to ensuring these negotiations continue in good faith," she said. "Our members have identified safety, training and security of employment - especially in relation to the use of temporary foreign workers - as their primary concerns in these negotiations.

    "MUA members are not against the use of overseas workers where there is a genuine skills shortage. However, they have been increasingly concerned as some employers have turned to the 457 visa scheme to undercut local labour conditions and wages or to avoid investing in the training of local workers."