The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Peter Costello

Peter Costello

Treasurer

11 March 1996 - 3 December 2007

Transcript of 24/04/01

Transcript No. 2001/040

Transcript
of
Hon Peter Costello MP
Treasurer

AM with Catherine Mcgrath, ABC
Tuesday, 24 April 2001

SUBJECTS:

McGRATH:

Treasurer, thanks for joining us. First of all looking at the comments from Shell this morning, obviously Chief Executive, Peter Duncan, is very disappointed, bitterly disappointed. He claims it was in Australias national interest and he wants us to ask you about the timing of the decision, the fact that it is an election year.

TREASURER:

Well, certainly Peter Duncan is a decent man. I know Peter and Peter does what he believes is in the interests of Shell as he is obliged to do. Charles Goode, I know, he is the Chairman of Woodside, he is a decent man and he is acting in the interests of Woodside. And I am the Treasurer and it is my duty to apply the national interest to this bid. This was not an easy decision, it is one of the hardest I have ever had to make. But, at the end of the day somebody had to make the decision about what the national interest is and I made it. And I made it on this basis, that our largest energy resource, the North West Shelf, should be developed to its full capacity, and the LNG exported to every single market in preference, from Australias point of view, to LNG from any other market. I want to make sure our exports are pushed in preference to the exports from any other area. And in the circumstances I thought the best way of ensuring that was to have an operator and a manager and a marketer, which had that duty and that consideration solely on its mind.

McGRATH:

So, would this decision have been the same if it had come last year or the year before, if it hadnt been so close to an election?

TREASURER:

Of course it would have been. This was a decision which was based on the national interest. Look, the North West Shelf project will go for 10, 20, 30 years. So, we are making a decision about what should happen to Australias largest energy resource for 20 or 30 years. That is what was playing on my mind, not what would happen today or tomorrow, but what would happen for 10 or 20 or 30 years. The decision I made was solely based on that and what would be in Australias best interests for decades. Not for 5 minutes or 50 minutes but for decades.

McGRATH:

But Shell had offered to set up an independent Shelf company, also to have an independent Chairman, independent management of that company. Do you think then they wouldnt have able to have operated this in a fair way and equitable way and to market it properly to world markets?

TREASURER:

One of the problems with this was that if the bid was approved, it went through and it was consummated, it was finished. And if you ask for various restructuring to be done after it has been finished, notwithstanding the fact that it could use its best endeavors, it needed the agreement of five other joint venturers. It would have needed to re-negotiate the whole arrangements. There would have been directors duties to major and minor shareholders, and I couldnt be sure that there was any guarantee, notwithstanding all of its best efforts, that it would bring that about. Now, once the deal had been finished if those conditions could not have been put in place, could not have been brought to fruition, what could you have done? The deal had been approved. It is very different if you say do something first and then approve it. This was a case of approve it and then do something subsequently and that was always a consideration that weighed on my mind.

McGRATH:

But looking already at the ownership of Woodside. Woodside is 34 per cent owned by Shell. BHP will almost be half foreign owned soon. There is not very much left of it that is Australian anyway?

TREASURER:

Well, whether or not, I dont think you are quite right to say BHP will be half foreign owned. I think BHP is looking at a dual listing but leaving all that aside, it is one of the reasons why I say that it is nonsense to argue that this is a rejection of foreign investment. Absolute nonsense. Yesterday I rejected Shells proposal in relation to Woodside. Today Shell, a foreign company, still owns one-sixth of the North West Shelf and BP, a foreign company, owns one-sixth and Chevron, a foreign company, owns one-sixth, and MIMI, a foreign company, owns one-sixth. This country operates an incredibly liberal foreign investment policy. I think by value we reject 0.1 per cent of applications. But every now and then we have a national interest test to be used to protect long-term national interests and yesterday was the day to use it and it was used. But Australia is still a welcoming country for foreign investment and investors know that.

McGRATH:

Now, there is no doubt about the amount of foreign investment in Australia that has been welcomed, but, isnt, doesnt this get to the very core of the argument your government makes about open markets, about globalisation, about the need for us to be part of the global economy. By stopping this takeover havent we effectively said, no, no, we are not going to be completely part of that global economy?

TREASURER:

Not in the slightest. We have still got four foreign companies that have four-sixths of the North West Shelf. The decision yesterday was this. Should you allow Shell to take a majority ownership of the operator? Now in all of the discussion I have not heard anyone yet explain, all of the people that have been arguing against my decision, how allowing Shell to take majority ownership of the operator would have improved the capacity to develop export and market that resource. Even today, if you are arguing that somehow this was something that Australia required you would have to establish that in some new way there would be a capacity to develop, market that resource which doesnt exist today. Today we have the capacity to do it with the current operator, and I took the view that changing the arrangements was not going to improve the exploitation or the marketing and ran the real risk of detracting from it. And that is why I did not think it was in the national interest.

McGRATH:

Well, Treasurer, looking at some of the criticisms from others this morning, David Hale you just heard, the market analyst, he said that it is interpreted internationally as a block when Australia needs big capital inflows. How do you respond to that?

TREASURER:

Well, I also heard David talk about Australias current account, our current account is improving. It is probably in the best shape that it has been in 20 years, and one of the reasons is our exports are booming. One of our biggest exports is LNG and the best thing you can do for Australias exports and Australias current account is to have a situation where you develop that resource and market it to its full and yesterdays decision was entirely consistent with that.

McGRATH:

Well, just quickly, negative editorials in both Sydney and Melbourne tabloids today, the Daily Telegraph and the Melbourne Sun. The Daily Telegraph calls this a form of isolationism and protectionism.

TREASURER:

Well, you know, you always get a bit of a chuckle from the Tele.

McGRATH:

Treasurer thanks very much for your time.

TREASURER:

Thank you.