THE DISTILLERY: Not just Browseing

Jotters explain why BHP Billiton's Browse was less important than its US shale, and why James Packer's lost interest in Echo.

It looks like BHP Billiton chief executive Marius Kloppers made quite an impression on Australia’s business commentators at the miner’s AGM last month, at least when it comes to the Browse LNG joint venture. Three leading columnists have looked beyond the divestment of a non-core asset to focus on major projects with big capex commitments.

Fairfax’s Peter Kerr begins the discussion with an acknowledgement that the official line from BHP, that an 8.3 per cent stake in the East Browse joint venture and 20 per cent stake in the West Browse joint venture don’t match it’s broad company strategy is, at face value, correct.

"Unofficially, the ruckus over the selection of James Price Point has not garnered any love for the project within BHP. Chief executive Marius Kloppers made that clear at last month's AGM when he stressed that being forced to consider just one site for a project – as was the case with Browse thanks to the firm hand of state and federal governments – was far from ideal. In comments that were about as blunt as Mr Kloppers ever gets, he indicated he would have been happier to have more options to study at Browse. ‘As an industrial company, more options is always more valuable,’ he said. Then there is the sensitive matter of public perceptions: the Browse project hits just about every controversy button, from the dinosaur footprints, to indigenous rights issues, to whales to the industrialisation of a region strongly reliant on tourism.”

The Australian’s Barry Fitzgerald is pretty adamant that BHP’s decision is not a concession to the environmental movement, but an acknowledgement that BHP was only faintly committed to the Browse project to begin with when it’s obligations in the US are becoming substantial.

"First it has to be said that BHP's stake was uniquely small for the company. And it was almost unique in that it was a non-operated interest. As its chief executive Marius Kloppers might have put it, continuing with the Browse exposure would not conform to his focus on simplicity and portfolio optimisation. Maybe so. But it has to be said that the exit – and the funds raised – come as last year's $US20 billion push in to the US shale business creates huge new capital demands from the group's petroleum division. All up, the division will soak up $US6.5 billion in development capital in the 2013 financial year, of which roughly $US4 billion is earmarked for the shale push.”

Fairfax’s Elizabeth Knight similarly says the asset sales announced by BHP Billiton and rival Rio Tinto yesterday probably amount to little more than "portfolio spring cleaning”. But it is indicative of the need for the big miners to trim assets that aren’t crucial in order to maintain dividend payments – which are in the scheme of things slight – with capex programs – which are in the scheme of things enormous.

Business Spectator’s Stephen Bartholomeusz also points out that Browse simply didn’t fit the BHP picture and Kloppers didn’t like the rigidity of the proposal either. But Bartholomeusz adds that the Browse development debate is occurring as the cost of doing the LNG business in Australia is increasing at a rate of knots.

"The national interest would appear to dictate that these projects should be built as efficiently as possible, with that goal determining the best approach to developing them. Issues like the level of domestic investment or whether royalties will flow to the federal or state governments are secondary and could be sorted out by the governments concerned. To the extent that green and red tape add to costs and the time it takes to bring the projects into the market, they also require focus from governments and significant and urgent change. Unless the environment for Australian offshore LNG projects is made significantly more efficient and attractive there is a risk that the escalating costs and lengthening development phases will truncate the pipeline of new projects and the opportunity to rival and even displace Qatar as the world’s largest LNG exporter will be lost, along with massive levels of export income.”

In other company news, The Australian’s John Durie is on the appointment of Echo chief executive John Redmond, having had the inside line on the story yesterday. Durie adds that Echo chairman John O’Neill doesn’t believe billionaire James Packer is particularly interested in his company anymore, having secured the support of both sides of NSW politics.

The Australian Financial Review’s Chanticleer columnist Tony Boyd writes on the rescue job that Leighton Holdings is doing on Macmahon Holdings, which is so fed up with its construction business that it’s throwing the thing to it’s largest shareholder.

Fairfax’s Malcolm Maiden reports on the nervous period for retailers – Christmas. Not only is it where many players do an enormous amount of their business, but it’s where the companies become wary of continuous disclosure obligations. In short, if they feel that they’re not going to take in enough coin, they have to tell the market about it.

The Australian Financial Review’s David Bassanese reads into some of the hints from Canberra that Treasurer Wayne Swan could back away from the promise of a budget surplus in 2013. Labor hasn’t conceded the point yet, not by a long shot. But Bassanese adds that there remains the possibility of the economy performing to the budget’s expectations and a surplus still not forthcoming.

Fairfax’s Michael Pascoe examines pushes in NSW and Victoria to break government-created monopolies. In the case of NSW it’s the prospect of a second airport, while in Victoria it’s the terrible taxi system.

Meanwhile, The Australian’s Robin Bromby highlights the impracticality of a proposal by a London think tank to assemble a G20-style body for the world’s major resource economies as a mean of coping with major fluctuations in commodity prices.

And finally, The Australian’s Asia Pacific editor Rowan Callick continues to unpack the Australia in the Asian Century White Paper, this time adding a staggering fact: Nine of the world’s top 10 Porsche dealers are in China.

"One Shanghai Porsche fan recently bought two Boxsters – costing about $150,000 each – when he was building a new home, placing them inside his "boys' room" with its pool table and bar, as part of the decor. He then built the house around them, so they couldn't be moved.”

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