BP Executive: High Costs Discourage Investment in Australia Resources

MELBOURNE - The high cost of operating in Australia is discouraging investment in the country's abundant natural resources, an executive at BP PLC said Tuesday, joining a growing chorus of executives from international energy companies.

"Australia is an expensive place to do business and it is getting more expensive," Paul Waterman, president of BP's Australasian operations, told a business luncheon in Melbourne. "It is not getting dealt with."

Steadily rising costs, compounded by a shortage of skilled workers, has forced the company to be more selective about which projects it pursues, he said.

Australia's abundant resources and proximity to Asia make it attractive to global energy companies, but those companies are increasingly citing its shortage of skilled workers and high costs as possible deterrents to investment. The Australian head of Royal Dutch Shell PLC, Ann Pickard, said in August, for example, that the cost of developing energy projects in Australia had become "very worrisome."

The shortage of skilled workers such as engineers hasn't eased despite layoffs and the postponement of capital-intensive projects as the mining industry struggles with slumping prices of industrial minerals, Mr. Waterman said.

Still, Australia is well-positioned to become one of the world's largest exporters of liquefied natural gas, Mr. Waterman said, noting that international companies are investing billions of dollars in LNG export projects on or near the country's coastline.

"Australia is on the verge of a generation-changing opportunity," he said. "It isn't just a cyclical upturn--it is a structural change created by the urbanization and industrialization of Asia, in particular China and India."

But the country faces international competition in the LNG trade and "to be successful we have to significantly improve our competitiveness, our productivity," he said.

BP is one of several partners in the multi-billion-dollar North West Shelf venture operated by Woodside Energy Ltd., which currently accounts for around 80% of Australia's LNG production, and is a partner in Woodside's Browse natural-gas exploration project.

It also is exploring for oil and gas offshore South Australia, where it has just completed a large survey and plans to seek approval to drill in late 2013, he said.

BP will continue to operate its two Australian refineries--one in Western Australia and the other in Queensland--even as competitors Caltex Australia Ltd. and Shell convert theirs into fuel-import terminals due to competition from lower-cost new facilities in Asia, Mr. Waterman said.


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