THE world’s biggest resources company is Australia’s BHP Billiton. BHP is also, in a sense, Australia’s General Motors.
That’s the 21st-century Down Under equivalent of GM when it was the world’s biggest company; so that today, Down Under, what’s good for BHP is good for Australia. This means at its simplest that if BHP is doing well, so also will be the country more broadly.
BHP’s profit showed that the company was doing pretty well, if not quite so wonderfully as two years ago. That pretty much captured the broader economic state of play: a glass at least half-full. At a deeper level, the aphorism takes on a darker, more challenging message. That what BHP needs to do well is also precisely mirrored in what the nation overall needs to do well.
The darker emphasis comes in the clear message from BHP that it is not getting what it needs to do well; the logical inference is that the nation is therefore also not getting what it needs to do well.
There is one huge difference between BHP and the nation. If the company is not getting what it needs here, it can go somewhere else. It is doing exactly that. The one big greenfields project it has on its radar is potash. In Canada. BHP will also continue to spend $3 billion to $4bn a year on shale oil and gas. In the US.
In Australia? Once the current investments are completed? Essentially nothing. In contrast, the nation can’t “go somewhere else”. It is entirely in our gift to give “us” what we need to perform well. If we don’t, we won’t. It is as simple and as bleakly unforgiving as that.
Woodside Petroleum’s decision to abandon an onshore LNG (liquefied natural gas) processing plant at James Price Point in northwest Australia, and opt instead for floating platforms at the offshore site of its Browse Basin gas, sits in a very instructive way at the intersection of all this.
That gas is “here”. So Woodside can’t “go” somewhere else with it. But it can and is going to go “somewhere else” to develop it; by building the platforms and spending most of its construction money somewhere else.
The reason is brutally simple. The combination of red, green and black tape — and a generally onerous labour and construction cost burden — that we have imposed on resources projects prices an onshore plant out of business.
What was not well understood in the Woodside decision is that the “either-or” was not a floating project or James Price Point but a floating project or no project at all.
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