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.
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.”