Chevron: Mark Hatfield talks red tape, investment plans and the Browse mega project

Investor confidence in WA’s second biggest industry has taken a hit from a wave of tax and red tape changes, the local boss of gas giant Chevron has warned. But the country should avoid a crisis, Chevron Australia managing director Mark Hatfield said, amid hot debate about potential looming shortages of gas and power. “Australia has great resources, great people and a great economy here. Australia does not need to have an energy crisis,” Mr Hatfield told The West Australian. The gas export industry — worth about $36 billion to WA in 2023 — has been frustrated by shake-ups to tax and regulations that were only announced after their mega-projects were completed. US-based Chevron and partners were close to the all-time largest investors into the State, stumping up about $80 billion to build the Wheatstone and Gorgon LNG plants. The rules have been rewritten in plenty of ways since those Pilbara projects started production in the 2010s. Mr Hatfield said Australia’s investment climate was now “good, not great”. “We’ve been hit with a levy to decommission an asset we’ve never had any (financial) interest in, they’ve brought forward the Petroleum Resources Rent Tax quite a bit, (there’s) the Federal Safeguard Mechanism, and uncertainty in stakeholder engagement,” he said. “Any one of those probably wouldn’t be that big a deal. Collectively they would give any investor a bit of a pause.” The decommissioning levy followed the collapse of the business behind the Northern Endeavour offshore operation, while the Safeguard Mechanism to slash greenhouse gas pollution was sharpened in 2023. Moves by the Federal Government to squeeze cash out of the industry through strengthening the Petroleum Resources Rent Tax also sparked a war over potential side-effects. “Chevron was always going to pay PRRT, and we’re paying income tax. (PRRT) was geared to be more or less the equivalent of a super profits tax — to come into play after you’ve recovered your investment,” Mr Hatfield said. But new rules would accelerate those payments to this year, he said. Chevron was among the country’s top corporate taxpayers in recent Australian Taxation Office data, rebutting claims the sector contributes very little. The supermajor will on Wednesday reveal a further $3.5b was paid through calendar year 2023. Despite the rough regulatory environment, Mr Hatfield was optimistic. “We’re very happy with what we’ve got here,” he said. “We’ve got tremendous resources, we’ve got tremendous assets and some of the most clever people you’ll ever work around. We’ve got a great business model here and what we’d like to do is continue that.” Next investments There’s a decades-long program to feed the export plants at Gorgon, on Barrow Island; and Wheatstone, near Onslow; and Chevron has plenty of gas reserves to unlock. Drill bits should be spinning on the next development — at the Geryon and Eurytion fields — in 2026. Engineering and design work for that multibillion-dollar project is under way, as are regulatory reviews. It contrasts with LNG players on the east coast that have struggled to find gas sources amid a much colder reception for exploration and investment. But Chevron has been under pressure to accelerate WA production. A recent parliamentary inquiry into domestic gas called for the Commonwealth to crack down on retention leases through “use it or lose it” rules. That would force businesses to run down reserves rather than parking gas for the long term. Mr Hatfield said Chevron had always been clear that development of fields would be staged over many years. “You wouldn’t invest $80b without some sort of plan to keep those gas plants full for quite some time,” he said. “We are executing just as we said we would.” The American giant is WA’s top domestic gas supplier at about 45 per cent of the local market. That will help replace coal power and develop industry, Mr Hatfield said. Karratha’s future Not every LNG export operation has fuel locked in to keep running. Woodside Energy last week confirmed one of five LNG processing trains at the North West Shelf Venture’s Karratha Gas Plant had been permanently shut down. Chevron is a shareholder of the 40-year-old operation. Talks have been running for years about new supply sources for Karratha and the lead candidate is the $30bn-plus Browse project off Broome — led by Woodside. There had been speculation Chevron was holding out on a deal between the two groups, wanting to keep capacity available for its own huge reserves off the coast. But Mr Hatfield strongly backed in Browse, declaring his company was “absolutely supportive of developing it through the North West Shelf”. “There are different owners in Browse versus the North West Shelf Venture so both parties are working collaboratively, as we speak, to get a gas processing agreement,” he said. Both sides were studying investment needs. “I’m very confident there’s a winning recipe there.” Energy transition LNG accounts for 8 per cent of national carbon emissions and has copped heavy scrutiny for its climate impact. “I don’t think the energy transition is occurring as fast as a lot of people would hope,” Mr Hatfield acknowledged. “It’s very complicated, the energy system is very, very large, it’s going to take time.” He said gas was not competing with renewable power, however, because the fuel can flexibly back up generation. This was highlighted in the Federal Government’s Future Gas Strategy. Mr Hatfield said energy security also needed to be prioritised and should not be partisan. On the agenda will be further carbon capture and storage projects to follow the Gorgon facility, which had early technical problems but has since stored more than 10 million tonnes of emissions. “The International Energy Agency has issued a report that states it is virtually impossible to get to net zero without carbon capture and storage,” Mr Hatfield said “Some of the more difficult industries, difficult to technically abate, you’re going to need CCS, something we call negative emission technology. “(It) actually takes emissions out of the air and safely stores them underground.” The business is running the rule over four leases for carbon storage ground in the North West.