Subject: NYT: U.S. Chief Pushes Oil Giant's Moves Beyond Australia

New York Times

U.S. Chief Pushes Oil Giant's Moves Beyond Australia

by JANE PERLEZ

Published: August 11, 2004

PERTH, Australia - Woodside Energy, Australia's largest oil and gas company, is proud of its all-Australian pedigree that stretches back to unsuccessful wildcat exploration in southern scrubland 50 years ago. The company went on to discover the North West Shelf gas deposits that have become as much an icon to Australians as the Sydney Opera House.

Now, with a new American chief executive, Don Voelte, a former executive at Mobil and Atlantic Richfield, in place since April, Woodside is expanding its international reach. Before Mr. Voelte arrived, Woodside had beaten its American competitors into Libya, made oil discoveries in Mauritania that are expected to start producing in 2006, and grabbed exploration interests in Kenya and Sierra Leone.

"They didn't hire me to do Australia," Mr. Voelte, 51, said in an interview at Woodside's headquarters here. They chose him, he said, to continue the push abroad, and to double the size of the company in five years from its current market capitalization of 13 billion Australian dollars ($9.3 billion).

But one of Mr. Voelte's first challenges has turned out be very close to home.

Mr. Voelte warned the governments of Australia and East Timor in late July that Woodside would suspend development on the Greater Sunrise gas field that lies in the Timor Sea unless the two sides settled a bitter boundary and revenue dispute.

Mr. Voelte flew to Dili, the capital of East Timor, to deliver the news to the prime minister, Mari Alkatiri. The company also informed the Australian government that it wanted negotiations completed by December or it would pull out the Woodside workers at the project, which is valued at $3.7 billion. The field is estimated to hold eight trillion cubic feet of gas.

With national elections looming in Australia, most probably in October, and the issue of the Sunrise gas field tangled up in electoral politics, it seemed unlikely the dispute would be settled within Woodside's deadline.

Woodside spokesmen said that the company had decided to take a firm line because the continuing arguments between Australia and East Timor over the maritime boundaries made it impossible for the company to guarantee its customers that supplies would be secure.

"Sunrise was supposed to be on stream in 2004; now it's 2009, with a question mark," said Rob Millhouse, a company spokesman.

Woodside's partners in the Sunrise venture - subsidiaries of Shell, ConocoPhillips and Osaka Gas - have not announced their positions on the negotiations between Australia and East Timor.

Farther afield, Woodside considered the possibilities in Libya as early as 1998 and watched closely as Libya's confrontation with Washington began to dissolve, company executives said.

Australia's coalition government led by Prime Minister John Howard, a Liberal, is one of Washington's staunchest allies. Nevertheless, the Australian government encouraged Woodside in its efforts to overcome the constraints of the American sanctions law that sought to limit worldwide investment in Libya, the executives said.

Basically, the government took the position that it did not recognize the American sanctions. In 2002, the Australian government sponsored a trade delegation to Libya that included representatives of energy, livestock and grain companies. The government also allowed Libya to open an office in Canberra, the Australian capital.

Even before the sanctions were lifted, when Woodside approached Washington about operating in Libya, there was little resistance. "All they cared about was us not going into blocks which U.S. companies had been interested in," said Gary Gray, director of corporate affairs for Woodside.

Last December - three months after sanctions were lifted - Woodside signed an exploration and production-sharing agreement with the Libyan National Oil Corporation covering five blocks in the Sirte Basin and northern Libya and one in the Murzuq Basin in the west. Both are onshore sites.

Repsol of Spain and Hellenic Petroleum of Greece were part of the group with Woodside that signed a $100 million agreement. For Woodside, it meant getting in ahead of its major competitors, including Shell, Woodside's largest shareholder, with 34 percent, company executives said.

Shell tried to take over Woodside in 2001 by increasing its stake to 56 percent, a bid that highlighted Australia's longstanding sensitivities to foreign ownership. After a heated public debate, the Howard government rejected the offer saying it was against the national interest. The North West Shelf, which produces natural gas for Japan and South Korea, was given as one of the major reasons.

"Woodside is the operator of the project, and it is in the national interest of Australia that the project be developed to its full capacity," the Australian treasurer, Peter Costello, said in April 2001. The gas from the field has the "capacity to become our biggest export," Mr. Costello said.

Nearly 18 months later, Woodside won a 25-year contract to supply China with liquid natural gas from the North West Shelf field, outmaneuvering bids from Qatar and Indonesia. At 25 billion Australian dollars ($17.9 billion), the deal represents Australia's biggest single export contract.

Woodside is the operator of the field; its joint venture partners are Shell, BHP Billiton, ChevronTexaco, BP and Japan Australia LNG. The China National Offshore Oil Corporation, China's major energy company, took a 5 percent stake in the venture, which will supply natural gas to China.

The Howard government played a leading role in winning the China contract. At the request of Woodside's chairman, Charles Goode, Mr. Howard flew to Beijing to lobby the senior Chinese leadership. He argued that Australia presented the most secure supply of natural gas.

Shipments are scheduled to begin in about two years when a new port in Guandong is scheduled to be completed, Woodside executives said.

As an American leading a major Australian company, Mr. Voelte is not alone. An American leads BHP Billiton, and American executives are scattered through the Australian banking and insurance industries.

Since arriving in April, Mr. Voelte says he has already noticed differences - "really a lot of differences" - in the way business works, even though the countries are closely allied and their cultures are fairly similar.

"Americans are much faster to make decisions on less data," he said. "Americans are less patient." There is far less delegation of authority in Australia, he said. Even though Australia is less unionized than it was 30 years ago, "industrial relations are much different," he said.

From his experience at Woodside, Australian boards exercise far more scrutiny. If Woodside were contemplating entering an exploration agreement in a new country, the board would want to know the details, he said.

"It's not like, 'Gee, I wish you wouldn't do it, but go ahead and do it,' " he said.

Over all, he said, he would like to speed up the laid-back Australian style. "I've told people: 'We've got to go a little faster.' "

Even as he viewed his mission as pushing Woodside into more new ventures abroad, Mr. Voelte said he believed that the majority of the company's assets would be in Australia for the foreseeable future.

But it is not carved in stone, he said, that the majority of the company will always be Australian owned. "It's not a given that Woodside exists forever and forever" as an Australian entity, he said.


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