Oil chiefs differ on outcome of crisis

The heads of the two biggest Australian-listed oil and gas units have revealed significantly different views.

The heads of the two biggest Australian-listed oil and gas units — Woodside Petroleum and BHP Billiton — have revealed significantly different views of an oil market awash with US shale oil at the industry’s annual conference in Melbourne yesterday.

Woodside chief Peter Coleman confronted the industry over its recent moves, accusing it of group think, clumsy cost-saving and in many cases a false belief that the oil crisis would play out the same as previous ones.

Mr Coleman’s searing off-the-cuff comments were made to a conference panel after BHP’s Houston-based oil and gas chief, Tim Cutt, said he believed prices were set to rebound following a period of low prices, like they did in the 1980s when OPEC similarly declined to cut production in the face of new supply.

“I expect to see a parallel outcome in today’s market, but with a much more rapid cycle time,” Mr Cutt said. But Mr Coleman, who like Mr Cutt is a former ExxonMobil executive, said things were different this time.

“The older ones among us want to go back to the earlier days so no one else in the room can challenge us on what occurred ... and say ‘well we saw this in the 80s’,” Mr Coleman said. “Well, we saw a pricing dynamic like this in the 80s but the dynamic was fundamentally different.”

Mr Coleman, who has previously said investors needed to prepare for a sustained period of low prices, said the market place was different from the 1980s, access to cash was easier and investors had different expectations.

“The only thing that is a common thread is that the price is about the same,” he said.

BHP has been more bullish than Woodside on prices.

“I don’t see how you can avoid heading back to that really steep part of the cost curve,” Mr Cutt said. “I probably disagree with Peter that it’s a structural shift that stays down forever.”

Mr Coleman also took aim at industry forecasters that did not expect new LNG sources to come on, saying US LNG plants were being built by people like Cheniere Energy and Freeport LNG with innovative business models and access to capital that did not require oil industry return levels.