Calm af­ter the storm

THE AG­GRES­SIVE DON VOELTE WAS A TOUGH ACT TO FOL­LOW, BUT WOOD­SIDE CHIEF PETER COLE­MAN’S MORE CAU­TIOUS STYLE MAY BE JUST WHAT THE RE­SOURCES GI­ANT NEEDS.

The Australian - The Deal - - Cover Story - BY AN­DREW BUR­RELL PHO­TO­GRAPH MARIE NIRME

Peter Cole­man likens run­ning Wood­side Pe­tro­leum to driv­ing a car through Jakarta’s no­to­ri­ously con­gested traf­fic. The chief ex­ec­u­tive had an ac­tion-packed post­ing to In­done­sia’s cap­i­tal with his for­mer em­ployer, US oil leviathan ExxonMo­bil, in the early 2000s, dur­ing which time a bru­tal sep­a­ratist war raged around the com­pany’s gas­fields in the prov­ince of Aceh.

Un­like most Western ex­pa­tri­ates, Cole­man, who grew up in re­gional Vic­to­ria, was brave enough to reg­u­larly drive him­self around Jakarta – and he views that nerve-rack­ing trial as anal­o­gous to cor­po­rate life.

“In Jakarta traf­fic, you have to just look ahead. Don’t look out the side or you’re gone,” he tells the deal in a lengthy in­ter­view at Wood­side head­quar­ters in Perth. “Don’t go too fast, don’t go too slow, don’t get con­fused and the traf­fic will move. [Sim­i­larly,] there are some things in busi­ness where you look at them and say: Be aware of what’s go­ing on; have that pe­riph­eral vi­sion, but don’t get con­fused by it; just continue to move for­ward at a pace that the or­gan­i­sa­tion can han­dle.”

The “pace” Cole­man is talk­ing about re­quires plenty of pa­tience and dis­ci­pline. It’s a vastly dif­fer­ent ap­proach to his pre­de­ces­sor, the hard-nosed and hur­ried Don Voelte, an Amer­i­can who set ag­gres­sive tar­gets and had no qualms about tak­ing on gov­ern­ments, cor­po­rate ri­vals or any­one else who got in his way.

In their man­age­ment styles, Cole­man and Voelte – now in Sydney run­ning Kerry Stokes’ Seven West Me­dia em­pire – are like chalk and cheese. The low-key Cole­man, 52, who spent 27 years at ExxonMo­bil, took longer than some expected to ad­just to the pub­lic spot­light that comes with run­ning a ma­jor listed com­pany in a rel­a­tively small mar­ket. By con­trast, the highly quotable Voelte, 59, rel­ished the op­por­tu­nity.

Voelte left Wood­side last year af­ter over­haul­ing its staid cul­ture and in­still­ing a greater sense of self-be­lief, en­trepreneuri­al­ism and in­de­pen­dence. That was a sig­nif­i­cant ac­com­plish­ment at a com­pany once con­sid­ered a de facto sub­sidiary of Royal Dutch Shell, its ma­jor share­holder and one-time takeover suitor.

Voelte can point to a list of im­pres­sive achieve­ments in his six years at the helm, most no­tably the rapid ap­proval and con­struc­tion of the $14.9 bil­lion Pluto liq­ue­fied nat­u­ral gas project on the Bur­rup Penin­sula in Western Aus­tralia’s Pil­bara re­gion. But even those at Wood­side who re­main loyal to him re­luc­tantly ad­mit that he had a ten­dency to over-prom­ise and un­der- de­liver.

In June last year, one of Cole­man’s first tasks was to an­nounce that the bud­get for the Pluto gas project – 90 per cent owned by Wood­side – had blown out by $ 900 mil­lion and that ini­tial pro­duc­tion would be de­layed by six months. It was the first time he had fronted the mar­ket since set­tling into the chief ex­ec­u­tive’s chair three weeks ear­lier.

Voelte had also promised in­vestors a huge ex­pan­sion of the Pluto project through dis­cov­er­ing plenty more gas and sign­ing up other ex­plor­ers to process their gas at Wood­side’s fa­cil­i­ties. That still has not hap­pened, forc­ing Cole­man in Au­gust this year to call a halt to the en­tire ex­plo­ration cam­paign.

Mean­while, two other large growth projects heav­ily spruiked by Voelte – the Browse LNG plant planned for WA’s Kim­ber­ley coast­line and the Greater Sun­rise float­ing LNG de­vel­op­ment in the Ti­mor Sea off Aus­tralia’s north coast – seem no closer to re­al­i­sa­tion.

Voelte ap­peared to rel­ish pick­ing fights with Wood­side’s part­ners in the Browse project, in­clud­ing BHP Bil­li­ton and Chevron, who were un­happy with the de­vel­op­ment time­line and the choice of lo­ca­tion at James Price Point, 60 kilo­me­tres north of the tourist town of Broome.

And when East Ti­mor op­posed his plan to site the Sun­rise plant in the Ti­mor Sea, rather than on the small na­tion’s home soil, Voelte ex­ac­er­bated the con­flict by ac­cus­ing the East Ti­morese gov­ern­ment of ig­nor­ing the best in­ter­ests of its im­pov­er­ished peo­ple.

Wood­side chair­man Michael Chaney, one of cor­po­rate Aus­tralia’s most ex­pe­ri­enced lead­ers, knew af­ter Voelte’s de­ci­sion to re­sign last year that the com­pany needed a leader with a more diplo­matic style.

A REAL KEY FOR US IS TO BE PRE­DICTABLE. SOME HAVE CON­FUSED THAT WITH BE­ING CON­SER­VA­TIVE AND I THINK THAT’S LAZY ANAL­Y­SIS.

Head­hunters gave the Wood­side board a list of 30 names, in­clud­ing sev­eral in­ter­nal can­di­dates, but Cole­man was the stand­out choice. It didn’t harm his ap­pli­ca­tion that he was an Aus­tralian who had spent his en­tire ca­reer at ExxonMo­bil, which has a rep­u­ta­tion for ex­e­cut­ing projects on time and on bud­get.

Cole­man’s cau­tious style is also more ap­pro­pri­ate at a time when the re­sources boom has been de­flat­ing – in stark con­trast to the huge oil price rises of the Voelte era – and when Wood­side’s ri­vals have been busy muscling in on its tra­di­tional Asian mar­kets.

“Peter has brought a mea­sured, dis­ci­plined, share­holder-fo­cused ap­proach to the com­pany’s growth ini­tia­tives,” Chaney says when asked about Cole­man’s strengths. “His fo­cus on tech­ni­cal ex­cel­lence, rather than on any self-im­posed dead­lines, was a big fac­tor in the smooth start-up and sub­se­quent op­er­a­tion of the Pluto plant.”

Cole­man bris­tles when asked about his rep­u­ta­tion for con­ser­vatism and the con­trast with his pre­de­ces­sor’s reign of ag­gres­sion. “A real key for us is to be pre­dictable,” he says. “Some have con­fused that with be­ing con­ser­va­tive and I think that’s lazy anal­y­sis. I think that is ac­tu­ally triv­i­al­is­ing the amount of work that we do, to sim­ply say that some­body’s con­ser­va­tive.

“We are not about un­der­per­form­ing and we are not about set­ting easy tar­gets. We are about be­ing pre­dictable, and we are about en­sur­ing that we meet the com­mit­ments we set. I think if you went around the or­gan­i­sa­tion to­day, they would tell you that they’re as busy as they’ve ever been and they’re work­ing on a diver­sity of things that is prob­a­bly far broader than they have in a long pe­riod of time.”

In what can only be in­ter­preted as a di­rect criticism of the Wood­side cul­ture al­lowed to de­velop un­der Voelte, Cole­man says: “There was a view that was per­va­sive in the or­gan­i­sa­tion that com­mit­ments were ne­go­tiable. They are not ne­go­tiable – pe­riod.”

Cole­man is dis­mis­sive when asked if his man­age­ment style has been de­fined by his long stretch at ExxonMo­bil. “ExxonMo­bil was what I call a great univer­sity to go to for learn­ing the oil and gas busi­ness, but I would be very cau­tious about putting la­bels on peo­ple and nat­u­rally as­sum­ing that that’s how peo­ple think and ap­proach things.”

Cole­man may have been fu­ri­ously backpedalling from much of the pol­icy di­rec­tion taken in the Voelte years, but he has hardly been twid­dling his thumbs. Ear­lier this year, he sur­prised the mar­ket by out­lin­ing plans to in­vest out­side Aus­tralia, in­clud­ing in Is­rael, Le­banon and Burma. Voelte had moved away from in­ter­na­tional ex­plo­ration to­wards LNG projects in Aus­tralia.

This shift, which was broadly wel­comed by the mar­ket, recog­nised Wood­side had be­come too reliant on long- dated, cap­i­tal-in­ten­sive projects such as Browse and Sun­rise and needed more medium-term de­vel­op­ment op­tions to de­liver value.

In May, Cole­man pulled off his first ma­jor deal at Wood­side by sell­ing a 14.7 per cent stake in the Browse project to Ja­pan’s Mit­sui and Mit­subishi for a higher than expected $US2 bil­lion.

That re­alised im­me­di­ate value for Wood­side’s share­hold­ers and in­volved a pro­posed gas sales agree­ment, pos­si­ble cheap fi­nanc­ing from Ja­panese banks and co-mar­ket­ing of the Browse gas.

UBS en­ergy an­a­lyst Gor­don Ram­say says the deal demon­strated that Cole­man – af­ter tak­ing a while to ar­tic­u­late his vi­sion – was fi­nally clear on his strat­egy for Wood­side.

“There’s a men­tal­ity you de­velop work­ing in these big oil com­pa­nies that you are bet­ter and big­ger and more able to do any­thing than any­body else,” says Ram­say, who has worked for a ma­jor oil com­pany. “One of the things that I was re­ally wor­ried about when he joined was that he would think: ‘I’m still at ExxonMo­bil.’ Clearly he doesn’t and he knows that Wood­side is a mid-cap oil com­pany on a global scale, but with ca­pa­bil­i­ties that are equiv­a­lent to some of the ma­jors.”

Cole­man won more ku­dos by over­see­ing the seam­less start-up of the Pluto gas plant in July, a project that de­spite its teething prob­lems will in­ject bil­lions of dol­lars into Wood­side’s cof­fers in com­ing years.

He also wasted lit­tle time putting in place his own man­age­ment team and has re­duced the num­ber of di­rect re­ports from 14 to eight. The two most se­nior ex­ec­u­tives with over­sight of the Pluto project, Lu­cio Della Martina and Phil Meier, left the com­pany ear­lier this year, along with the Sun­rise project head, Jon Oz­turgut. Wood­side’s in­ter­na­tional oil and gas chief Jeff Soine re­signed last Septem­ber.

To­day, Sun­rise is over­seen by Cole­man’s prized re­cruit, for­mer ExxonMo­bil and Wor­leyPar­sons ex­ec­u­tive Robert Ed­wardes. An­other Cole­man ap­point­ment, Greg Roder, who was poached from AMP to head Wood­side’s ac­qui­si­tions team, also worked at ExxonMo­bil.

For Cole­man, run­ning Wood­side is the cul­mi­na­tion of a glo­be­trot­ting ca­reer in the oil and gas in­dus­try that be­gan with a sum­mer job on an Esso con­struc­tion barge while he was study­ing engi­neer­ing in Mel­bourne in the 1980s. “The Esso per­son on board en­cour­aged me to ap­ply for a job and the rest is his­tory,” he re­calls.

He spent the next two years in his home town of Sale, be­fore mov­ing to Sydney with Esso in 1986 and then over­seas to New Orleans with ExxonMo­bil. Cole­man mar­ried at univer­sity and had three chil­dren un­der the age of five when he moved to the US.

He later re­turned to Aus­tralia and was in charge of Esso’s Long­ford gas plant in Vic­to­ria when it blew up in 1998. The ex­plo­sion killed two em­ploy­ees and shut down the state’s gas sup­ply for two weeks. Cole­man gave ev­i­dence at a 1999 royal com­mis­sion into the ac­ci­dent, which found that the com­pany’s poor safety stan­dards had been re­spon­si­ble for the dis­as­ter.

Re­flect­ing on that pe­riod, Cole­man notes that he never had day-

to- day su­per­vi­sion of the plant, but ad­mits the in­ci­dent taught him crit­i­cal lessons about safety. “It taught me to trust my in­tu­ition. Over time we be­come very pro­ce­du­ralised in what we do and in many ways get false com­fort out of things.

“Cer­tainly many of the lessons learnt out of some­thing like Long­ford [were about the fact that] the sys­tems and pro­cesses we re­lied on – the au­dits, weekly re­ports and so forth – gave false com­fort with re­spect to some un­der­ly­ing is­sues we just didn’t see.”

The in­ci­dent didn’t seem to dam­age Cole­man’s ca­reer prospects with ExxonMo­bil. By 2000, he had re­turned to the US for a global plan­ning role and was later posted to Nige­ria and In­done­sia, where the sep­a­ratist con­flict in Aceh and ef­fects of the 2004 tsunami in the prov­ince pre­sented unique chal­lenges. Cole­man was then pro­moted to run ExxonMo­bil’s pro­duc­tion busi­ness in the US and later be­came head of its Asia-Pa­cific de­vel­op­ment projects, based in Hous­ton.

When Wood­side came knock­ing last year, he felt the lure of be­ing closer to his adult chil­dren and other fam­ily mem­bers in Aus­tralia. “What I was re­ally faced with at Exxon was es­sen­tially an­other 10 to 15 years in the US. My ca­reer had got to a point where the only place I was go­ing to be work­ing within the Exxon fam­ily was in Hous­ton or Dal­las, and I was go­ing to spend a lot of time on a plane.”

Hav­ing spent 18 months at Wood­side, Cole­man has no re­grets about mov­ing to Perth to run the com­pany at such a crit­i­cal time in its his­tory. He stresses his goal is to cre­ate a strong cul­ture to re­flect the com­pany’s val­ues and, crit­i­cally, at­tract the best staff.

He and his se­nior ex­ec­u­tives have even es­tab­lished a Wood­side “bar­be­cue test” to de­ter­mine if they are on the right track. “It’s very sim­ple. If you are stand­ing around the bar­be­cue on the week­end and peo­ple are talk­ing about a com­pany, we want that to be Wood­side. There’s noth­ing bet­ter than to over­hear some­body ... talk­ing in a pos­i­tive way about the com­pany you’ve cho­sen to join and spend the ma­jor­ity of your life work­ing at. There is noth­ing more up­lift­ing.”

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