Tag Archives: oil and gas

07.05.20
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The insidious effect of unconscious bias bars a community from realising a dream

An article I recently read on LinkedIn  prompted me to share another story about the unconscious bias of whose voice gets heard, who gets believed and who gets believed in. It is the story of an Aboriginal community in the Kimberley that is being blocked from taking their chance at a commercial opportunity to determine their own future.

It is the story of the Djarindjin Aboriginal Corporation (DAC) and its desire to redevelop their airport to become the primary heliport for the Browse Basin oil and gas fields for the next 40-50 years.

A heliport servicing the transfer of oil and gas rig workers to the installations, will be a steady income for decades. For Djarindjin, the Dampier Peninsula and the Shire of Broome, it could diversify and transform their economy. It is a step change in financial security for the community, and they are prepared to take the financial risk and borrow money to achieve it.

It is a highly competitive landscape for Browse aviation. It includes six potential heliport sites, three of the options are well within the helicopter range capability for the main production areas of the Browse Basin.

Only one of those is on the mainland, Djarindjin (Lombadina Airport YLBD). It is owned by the Djarindjin Aboriginal Corporation, a community organisation that reinvests its profits in its community, employs local people and is committed to supporting education and training capacity building to help its community members be job-ready for real identified jobs.

There are around 20 local people employed at Djarindjin Airport and they are a skilled team of ground crew, hot refuellers and passenger handlers. They refuel the helicopters that currently fly from Broome on their way to and from the Browse Basin. If the helicopters are full of passengers you are unable to reach the Browse from Broome directly without stopping for more fuel at Djarindjin.

The State Government won’t support a redeveloped Djarindjin Airport proposal because their stated policy position is to support the town of Broome, 170km away, and the privately-owned Broome Airport, even though  it is the furthest away from the Browse Basin of the six options available. The State Government is focused solely on fixed wing passenger flights to Broome and supporting the tourism industry there, it seems they are not interested in open competition.

That ignores the commercial reality that the oil and gas companies can leave the Shire completely for an airport closer to the field, saving them millions of dollars a year. Inpex’s recent decision to move to another airport, Truscott, for at least six months for the stated reason of biosecurity, shows the companies are capable of moving quickly out of the Shire, taking all the revenue that goes with it.

The Government has prioritised listening to the entrenched powerful and inter-linked voices of the town of Broome. DAC discovered under Freedom of Information  that in 2019, the Kimberley Development Commission CEO stated in a briefing note to the Minister of Regional Development that: “It is understood that BIA, the Broome Chamber of Commerce and Broome Shire have joined to co-operatively resist moves for any new airstrips, but particularly the Djarindjin proposal”.

The privately-owned Broome International Airport (BIA) has made claims about the amount of passenger traffic that would be diverted and these claims are not based on fact. One of the major airlines has confirmed what they are saying isn’t based on fact. DAC shared that with the State Government, to no effect.

The Shire President has made many public claims about Djarindjin’s business case – which he has never seen or read. It is commercial-in-confidence and was not submitted as part of a recent planning application because it was not relevant for a rezoning request. He was quoted in the media as saying the business case was poorly written and the economic figures “did not add up”. The statements imply that an Aboriginal Corporation such as DAC are incapable of running a business and preparing a comprehensive business case. Neither the Broome Advertiser nor The West Australian gave equal voice to Djarindjin when reporting the story.

The oil and gas companies, Shell and Inpex, have been publicly silent in the debate. They use Djarindjin to refuel and support the community’s desire for self-determination in general, they won’t commit to a long-term contract. Even though moving to Djarindjin makes commercial sense and would be a real manifestation of their corporate social responsibility policies, their logistics team don’t like being tied to one supplier, even if the supplier is very commercially competitive. These companies could make a lasting positive, inter-generational difference to one of their local communities and save millions in the process.

The community has no interest in ripping off the oil and gas companies, they want to work in partnership to secure their future. This is where they live, they don’t fly in and out of it for work. Djarindjin’s feasibility study has identified at least 25 full-time equivalent (FTE) jobs to operate the airport and 10 FTE jobs at the accommodation facility that could be filled with local employees. This would generate approximately $2.4 million in wages per year, four times what the current airport generates. Some 50-70 jobs would be generated during the construction phase throughout the Shire.

There are also significant associated business opportunities for community members, such as laundry services, catering services, bus transport services, fleet servicing, the range of trades such as electrical, plumbing and refrigeration and white goods repair.

DAC would also make more profit, which they have committed through their Strategic Plan to plough back into their community, improving living standards and creating long-term sustainable change. That profit will stay in the community and develop that community, they even have a Strategic Plan to show how they want to spend it.

That is what self-determination looks like, but they don’t get a chance to have it because everyone else believes they know what is best for this community, and other people’s businesses are more important.

05.14.14
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Expanding how we ‘profit’ from oil and gas extraction

Western Australian Premier Colin Barnett sent a shot across the bow of the oil and gas companies that operate off the Western Australian coast at a recent industry conference in Perth by challenging their notion of social licence.

Financial journalists and politicians looking for a hook to hang him on immediately started to quibble about some of the factual detail around ownership of leases and completely missed the opportunity to debate the broader point, on which Mr Barnett was right. That is, companies do need to seriously look beyond their own bottom line at how they treat the Governments and communities in which they operate and provide more of a legacy than local libraries and playgrounds.

The fraught issue of who profits from oil and gas extraction and how they profit must be seen from a multilayered perspective and how we see it is clouded by an increasingly outdated notion of stakeholder theory.

Stakeholder theory is the basis of how many businesses engage with various ‘stakeholders’ and their interests. For example, groups get divided into ‘shareholders’, ‘customers’, ‘government’, ‘activist groups’ and ‘local community’. Then they are usually separated and ranked according the importance to the senior management. For large listed entities, the very top of the tree is usually shareholders (to which I mean large institutional investment groups who manage money on behalf of others), and meeting the demands of this prioritized group(s) can be the greatest influence on decision-making.

What stakeholder theory overlooks is that most stakeholders belong to more than one group, who may ‘profit’ or lose in more than one way, and who the stakeholder really is may be obscured at first glance. For example, oil and gas resources in Australia, including coal seam gas, are owned by the relevant State or Territory government or Federal Government (depending on whether it is onshore or offshore) on behalf of their citizens. The relevant government then grants licences to companies to explore and extract these resources and ‘profit’ on behalf of their citizens through the collection of royalties.

So the owners of the assets are the citizens of the relevant State, Territory of Australia or Australia itself and they profit through: the collection of royalties; the access to the resource they own (domestic gas supply); and community economic development through job creation. This same group may also ‘lose’ if the extraction of resources unnecessarily damages their environment or the opportunity cost of losing other industries, such as agriculture, fishing or tourism is seen as too great.

While the oil and gas extraction companies will say their fiduciary duty to place shareholders first, they may not recognise that the capital provided to institutional shareholders to whom the oil and gas companies are trying to deliver a profit are some of the very same citizens who own the resources they extract. The capital flow comes through savings such as superannuation funds and other retirement savings.

For example, the coal seam gas enterprise Arrow Energy is a joint venture owned by Royal Dutch Shell plc and PetroChina Company Ltd. As a 14 February this year, Shell stated in its 2013 Annual Report that major investment houses such as Blackrock and The Capital Group owned more than 6% and 3% respectively. In turn, Blackrock on its website states in runs $US4.3 trillion in investments around the globe on behalf of ‘governments, companies, foundations, and millions of individuals saving for retirement, their children’s’ educations and a better life’, including Australian citizens. In this scenario the citizens ‘profit’ through the increase in share price and payment of dividends.

The offshore oil and gas activities in the north west of Western Australia are dominated by majors such as Shell, Chevron and Woodside all of whom are large listed companies with institutional shareholders, who would manage the millions of dollars of individual savers. These are the companies at which Mr Barnett was taking aim, particularly after the decision to develop an offshore floating processing plant, rather than base it onshore in Western Australia and create opportunity for the local communities.

Oil and gas companies need to consider how to balance all of these streams of ‘profit’ more evenly and consider opinions beyond the institutional shareholders who manage citizens’ money, often without reference to their views. They may also need to learn to find value in the competing view that their citizen stakeholders’ don’t necessarily wish to ‘profit’ from the extraction of resources but would rather use the land and sea for other means, such as agriculture, or even to leave the environment untouched.