"It's not an either or situation," Mr Coleman said yesterday. "It's not a situation of choosing James Price Point versus floating.
"We spent almost $2 billion to get James Price Point to work. I don't know how people can expect companies to spend any more money than that trying to make a development commercially viable.
"James Price Point simply didn't work. Period. So talking about local content in the context of a project that won't get built is kind of a hollow discussion."
Mr Coleman was talking after handing down Woodside's $US873 million ($966.1 million) interim net profit, up 7.5 per cent on the six months to June 30, 2012. Woodside declared an US83¢ interim dividend. Woodside shares fell 60¢ to $38.10.
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Unions accused of strangling gas boom on the waterfront
ReplyDeleteby: ANDREW BURRELL
CRUCIAL materials needed to build Australia's biggest resources development - Chevron's $52 billion Gorgon gas plant in Western Australia - are banking up on the wharves at the Australian Marine Complex, near Perth, in the latest blow to the project.
Chevron claims the 40 per pent cost blowout it has experienced so far on the Gorgon project at Barrow Island, 1000km to the north, is linked to the poor labour productivity and go-slow tactics of the militant Maritime Union of Australia.
The company, Australia's biggest foreign investor, says waterside workers at the AMC take three or four times longer to load a vessel than in other parts of the world.
Chevron also released photographs to The Weekend Australian that it said showed congestion on the wharves of the AMC, where Chevron's contractors are manufacturing equipment and materials needed to build Gorgon.
MUA WA secretary Christy Cain blamed Chevron for the delays and the soaring price tag of building Gorgon, which is due to be completed late next year.
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Mr Cain said productivity had improved at the AMC and the higher wages being paid to his members represented a tiny part of the project's overall costs.
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Chevron Australia boss Roy Krzywosinski said the nation had a two-year window to tackle productivity and industrial relations reform or it would miss out on up to $150bn of potential investment in LNG.
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Gas giants win battle with union
by: Andrew Burrell
AUSTRALIA'S oil and gas industry has claimed a victory in its battle to stem rising labour costs after the maritime union backed away from controversial demands for its offshore members to be given Qantas Club memberships, iTunes cards and daily payments for being forced to share toilets and cabins.
The claims lodged by the Maritime Union of Australia as part of talks over a new enterprise bargaining agreement had angered the industry, which is already concerned about higher costs and poor productivity in building projects in Australia.
Confirmation of the backdown came after the Fair Work Commission called union and industry representatives to a confidential meeting in Melbourne this week in a bid to avert industrial action over the MUA's list of demands.
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Mr Cain said the MUA was seeking a provision to protect Australian jobs by asking industry to consult with the union before importing foreign labour.
"In doing so, we are acting in the national interest and we make no apology for this," Mr Cain said.
He said the union also wanted to see a roster change from five weeks on, five weeks off, to four weeks on, four week off.
This was the industry standard and was necessary to reduce the amount of time members spent away from their families.
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The debate over rising costs and productivity in the oil and gas sector came as industry veteran Kevin Gallagher broke ranks this week by saying that poor leadership and management were also significant factors in Australia's perceived underperformance.
Mr Gallagher -- who is the managing director of oil and gas contractor Clough and the former head of Australia's largest industrial project, Woodside Petroleum's North West Shelf project -- told The Weekend Australian that management had a bigger influence on Australia's productivity than policy.
"When I hear people say that Australians are a low productivity workforce and culture, I dispute that," he said. "Because when you plan your operations well, when you manage them with competent people, when you communicate the objectives and the targets clearly to your workforce, I think Australian workforces can be as productive if not more productive than any other workforce in the world.
"It comes down to the competency of the leadership and the competency of the management. I would argue that the productivity issues are more about those kinds of issues than they are about politics."
Japanese push for gas price cut
ReplyDeleteby: Matt Chambers
ASIAN LNG buyers are putting more pressure than ever before on Australian suppliers as they try to force down prices ahead of new US supply.
Woodside Petroleum chief Peter Coleman said recent LNG price negotiations, which included price resetting over the Pluto LNG plant with Japanese buyers, were as hard as they had ever been, despite contract talks being limited to current Japanese prices, not future supply.
"The buyers clearly have a very strong desire to see prices coming down over time -- the negotiations to date have been as tough as any negotiations our team can remember," Mr Coleman told The Weekend Australian yesterday.
Japan, the world's biggest LNG importer, has been increasingly vocal in its support of burgeoning US liquefied natural gas export projects as a way to drive down LNG prices into Asia.
Despite the call for lower prices, Mr Coleman this week said talks over LNG contracts that were open for renegotiation this year had resulted in strong pricing.
"Those contracts, which are extensions and renewals, run for a five-year period, then they get revised again -- they have in them a clause that refers to the landed price in Japan and elsewhere," Mr Coleman said.
He stressed that US, or Henry Hub, prices would not be a consideration until the US started exporting -- something that is scheduled for 2015.
"Henry Hub will come into that formula some point in the future, if it ever gets landed in Japan -- that's how we see long-term Henry Hub, or any new supply, affecting the prices," he said.
The changing gas dynamic, where buyers are pressuring Australian suppliers based on potential supply from the US, Canada and East Africa, may affect Woodside's next set of price negotiations, those from the Browse floating LNG project.
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Under an agreement with Shell, Woodside will operate the three FLNG plants designed to turn gas from the Browse Basin into LNG.
Once the first of the three ships, which are each expected to produce about 4 million tonnes of LNG a year, comes on line, the others are expected to be added at 15-month intervals.
Mr Coleman said Shell -- Woodside's biggest shareholder with 24 per cent stake -- had not made any recent comments about selling its interest in the Perth company. In 2010, Shell sold a 10 per cent stake in Woodside and said it planned, at some time, to sell its remaining stake.
"I suspect they are quite comfortable with their stake and if they divest it will be because they have other uses for the cash, not because they are concerned about the performance." Mr Coleman said.
Woodside's recent entry into Ireland's offshore Porcupine Basin was looking positive, despite a nearby well by ExxonMobil not finding commercial gas quantities, he said.
"They (the results of the Exxon drilling) were good. We understand that had residual hydrocarbons," Mr Coleman said.
"That would appear to demonstrate it's a hydrocarbon producing region, which is good news."
What needs to be found now is where the hydrocarbons produced would have migrated and been trapped.
The sun will rise over Woodside
ReplyDeleteWoodside's decision to opt for an offshore solution to develop the Browse Basin gasfield off north-west of Australia threatens to delay further any prospective development of the huge Greater Sunrise field, which lies between Australia and East Timor.
The Timor government has been pushing for an onshore processing facility as part of a Sunrise development. But competition from new exporters in North America and east Africa over the next decade will probably force the partners in Greater Sunrise to opt for a low-cost development if it is to get off the ground.
Woodside holds a third interest in Greater Sunrise, which includes the Troubadour reserves. Development is awaiting finalisation of arbitration between Australia and East Timor over revenue sharing before partners resume talks for the project.
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The first gas is expected to flow from Browse by the end of the decade, while any development of the Greater Sunrise project is unlikely to move forward for at least another year or two.
Before then, there is the possibility of the Leviathan project in Israel progressing, although its status will be unclear for at least the next few months, pending court decisions, and ongoing political wrangling over how much of the gas needs to be set aside for the domestic market.
As well, partners in this project have recently touted piping gas to Turkey, which may undercut Woodside's interest in taking part.
But the looming competition from new suppliers in the liquified gas market is forcing developers to rethink their approach.
''The lowest-cost supplier will get into the marketplace,'' Woodside chief executive Peter Coleman says. ''The floating LNG option for Browse allows us to change the cost structure. We think it has a 35 to 50 per cent cost advantage over a land-based development.
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That flexibility will be increasingly important as north American and east African projects move forward, since both sets of supplier are targeting Asian sales.
And then there is Russia, the sleeper in the market. Sakhalin, north of Japan, already supplies about 10 per cent of Japan's gas needs and about 5 per cent of South Korea's. As well, Russia wants to supply gas from stranded fields in Siberia to China, although progress has been limited.
At some point, many of the sticking points will be resolved, which will provide an added source of competition for exporters to north Asia, at a time when north American exports are on the rise thanks to the US shale revolution.
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''FLNG [floating liquified natural gas] has advantages for remote resources that require establishment of significant onshore infrastructure,'' Coleman says.
''The days of the big onshore plant in remote sites are being challenged, unless it is for super mega fields, and we haven't had one of those for a long time. LNG technology has had really only one business solution for the better part of three decades - a large
onshore plant with large tankage facilities being supplied by an onshore or offshore resource. FLNG allows us to fundamentally change the business model. We've got more [options] now.''
This technological solution will be especially useful in ensuring
the long delayed Greater Sunrise project makes it to the starting block, from Woodside's perspective, at least.
''Floating [LNG] technology for Sunrise will be derisked'' once Browse is operational, Coleman says. ''Any project has its time, and Sunrise is not quite there, because there are matters that need to be resolved between governments.
''Once we can resolve those, then the right development concept can be discussed - and technology is moving on.''
Economic storm clouds shift from Europe to Asia
ReplyDeleteThe fissures that have been quietly spreading through some of Asia's economies over recent months are now shaping up as yawning cracks. Emerging markets from Thailand to India plunged into the red amid a heavy sell-off, as investors reassessed the implications of another shift in the global economy.
India's currency, the rupee, has fallen to record lows against the US dollar. Currencies from Brazil and South Africa were also pummelled as investors fled back into US and European markets.
As the US Federal Reserve mulls winding back its super loose monetary policy, Asia is now faced with the prospect that the tap of cheap debt will be turned off.
The realisation of an end to the lavish spending that has been driving growth through the region has started to upend markets. In doing so, it has stoked memories of the bushfire that was the 1997 Asian financial crisis.
More worrying, some argue that if growth through Asia stalls, this could have serious implications for Australia, particularly as banks and miners have pushed deeper into the region over the past decade.
The Fed is tipped to begin winding back its $US85 billion-a-month stimulus program as early as next month, and currency flows are being turned upside down, moving out of emerging markets such as Brazil, India, Indonesia and South Africa and back to old world economies of the northern hemisphere.
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In just three months, India's currency has fallen 14 per cent against the US dollar, raising worries about the impact it will have on the country's substantial import bills and on an already large current account deficit.
Over the same period, the Indonesian rupiah has shed 12 per cent. Brazil's real has taken a hammering, falling 16 per cent, while the 7 per cent fall in South Africa's rand is in line with the Australian dollar.
Even so, the past week has delivered stark reminders of how sensitive Asia's so-called economic miracle remains to developments elsewhere.
Most of the focus has so far been on India and Indonesia, the two countries in Asia with the biggest current account deficits, making them the most reliant on foreign capital to make ends meet. The currencies and equity markets of both have plunged in the past week.
The Jakarta Composite Index has fallen more than 7 per cent this week. In India, the benchmark BSE Sensex is down 5.5 per cent.
In recent weeks, the Indian government has slapped import duties on gold and silver, and restrictions on the amount Indian companies can invest overseas without seeking approval.
The Reserve Bank of India is reported to have intervened in the currency markets to stem the rupee's fall.
The rupee's decline can be traced back to 2011, when gridlock around economic reform began to cast a shadow over the the India boom story.
In the middle of the past decade, India's annual growth was running at between 8 per cent and 9 per cent, but this year has slowed to little more than 5 per cent.
Others such as Indonesia have had to contend with a slowing China's falling demand for natural resources as the country moves away from investment towards a consumption-driven economy.
The Hong Kong-based head of Asian economics research at HSBC, Frederic Neumann, says even with the cracks, the current jitters are unlikely to evolve into a classic financial crisis.
"It's easy to draw parallels to 1997. But that would be misplaced," he says.
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One thing that threatens to throw global growth awry is China.
While not immune to global developments, its capital controls and the size of its market afford the country a degree of protection.
However, any rebound in growth is bound to be constrained by efforts to curb shadow financing. Even if regular bank lending expands, this may be insufficient to offset de-leveraging in other parts of the financial system that in recent years has provided the bulk of liquidity.
"In short … Asia remains financially squeezed," HSBC's Neumann says.
Families are struggling as the currency goes into freefall
ReplyDeleteThe headlines scream daily of India's economy in collapse, of a currency in freefall, having lost 15 per cent of its value this year, and 5 per cent in the past week.
But in the markets of Delhi, the discussion is far more prosaic.
Less concerned with currency fluctuations and deficits, the talk here is of the unseasonably high price of onions and tomatoes.
News of a ''brainstorming session'' by the finance minister - break out the butchers' paper - is seen here as busy work by a government that can't, or won't, find anything to actually staunch the economy's bleeding.
People are worried about an impending rise in the price of petrol, or electricity, and wondering if they can absorb another rise.
"Now, my family and I are spending double what I'm earning. Earlier, things were different and we were able to save some money," 42-year-old Omprakash Gupta said in a south Delhi market.
"The price of petrol and cooking gas is hurting us most. The rupee is going down in value compared to the dollar and the price of items are going up in the market."
India's rupee is Asia's worst performing currency this year, hitting a record low this week of 64.6 to the US dollar.
A quarter of its value has been wiped in two years, and it may fall further. Deutsche Bank has predicted it could touch 70 to the dollar in a month.
The cause is India's current account deficit, which, coupled with high inflation, low growth, and a stymied reform program, has sent foreign investors out of the market.
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Income levels have been rising in double digits in recent years, albeit from a low base. The average income is now $US90 a month.
But an estimated 400 million Indians still subsist on less than a dollar a day.
For these poor Indians, and for the ''aspirational'' class a step above them - those trying to break in to the bottom of India's already 300-million-strong middle class - even the smallest price rise has the potential to send them tumbling backwards, and they are vulnerable on several fronts.
A weak rupee means costlier crude oil, iron ore, coal, fertiliser, edible oil, and medicine, all of which India imports.
For the average consumer, that means food will be more expensive, because of higher transport and production costs.
Already, staples such as onions and tomatoes have experienced double-digit inflation because of poor harvests this year. This will be compounded by a weak currency.
The price of petrol is offset by costly government subsidies, but, as India moves towards deregulation, consumers will be hit by international oil price movements and the weakness of the rupee.
Power, too, unreliable as it is, will become more expensive. India imports millions of tonnes of coal a year to feed its growing power needs, and as these imports soak up rupees, that burden that will be passed on to consumers. But for now, the concerns remain the micro, not macro-economic.
"Everything is expensive now, but food and school fees are costing most," mother of four Kanti Saha said at her local market.
"A month ago, the price of onions was 20 rupees a kilogram, tomatoes were 30 rupees, and flour 20 rupees. But now onions are 80 rupees, tomatoes are 50 rupees and flour is 25 rupees.
"It is difficult to manage a household. Our income remains the same but expenditure continues to rise."
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After a decade of growth at 9 and 10 per cent, the economy grew at just 5 per cent last year.
Finance Minister P. Chidambaram held a crisis meeting this week, promising, "we cannot allow the rupee to go into freefall".
Hawke drops a nuclear-tinged poll bombshell
ReplyDeleteIf anyone is looking for a policy to liven up the election campaign, Bob Hawke has an idea: make Australia the repository of the world's nuclear waste.
''It's a no-brainer,'' he says. ''If you've got the safest geological sites in the world, why haven't you got the moral responsibility to make them available?''
Mr Hawke has made the argument before, and it's the one issue he raises when asked if he has achieved all he hoped for in the 22 years since he was prime minister.
''It could change the whole economic future of this country,'' he says. ''We have the world's safest geological sites in the Northern Territory and north-west Western Australia. We could make the world a safer place and totally change our fiscal position by creating an enormous continuing source of income, then you'd apply some of that income to environmental and Aboriginal causes. But no one's got the guts.''
Australia would have that responsibility even if it did not sell uranium, contends Mr Hawke. When I express doubt about his proposal, he says: ''Of course, because you're not - with respect - being intelligent about it. You're just being prejudiced, nimby.''
Mr Hawke gave this interview in his office at 100 William Street, Sydney, last month to talk about his wife and biographer, Blanche d'Alpuget, whose new novel is about the politics of 12th-century France and England.
Buy Sugar Free Sweets in Delhi and A cashew nut based sugar free sweet set in the shape of dumpling. Sugar free and low sugar content sweets are also made.
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