Woodside Petroleums Environmental Responsibility Record - Case Study Example

First Name: Last Name: Student ID: Email: Unit Name: Unit Code: Assignment Title: Date Submitted: Woodside Petroleum’s Environmental Responsibility Record Regardless of the size of the company, the dilemma between shareholder interest and social responsibility is one of the most common problems faced by business managers. Every day, companies have to decide whether to advance the profit-making agenda and increase shareholder value or do business in a manner that fulfills the needs of the society. Shareholder value is one of the most important aspects of business, and every company must be profitable to its owners to continue to survive. This is especially difficult in today’s competitive global business landscape. In order to toe the line, most of the time businesses are tempted to push the limits, disregarding their responsibility to society in the search for profits. Finding the right balance between profits and social responsibility is perhaps the most difficult aspect of management. An example of a company that has had to re-evaluate its priorities as a result of this is Woodside Petroleum. 2014 marked the 60th anniversary of Woodside Petroleum, an Australian oil company whose name came from the small southern town of Woodside. Over the 60 years, the company has had 30 years of domestic gas production, as well as 25 years of LNG exports. After Australia’s first oil discovery, Woodside was incorporated a year later in 1954, with the initial share issues being oversubscribed by more than half a million Australian dollars. Although the initial years were not particularly successful, after 10 years the company got exploration rights in 1963 and since then have had several years of success in the industry. Some of the company’s milestones include discoveries of gas and condensate at Scott reef and across the North West Shelf1. Case against Woodside Petroleum In order to understand the issues that have faced Woodside Petroleum, it is important to understand the context within which companies, especially in the mining sector, operate in the modern business environment. Although the mining sector is traditionally characterized by volatility and geopolitical turmoil, one of the consistent trends in the industry is the fact that the regulatory and compliance landscape is constantly changing. Companies now have to conduct business with tighter environmental and social regulations, both nationally and internationally2. Secondly, the past few years have seen companies go to excesses driven by the push to increase returns and maintain market leadership. These trends have resulted in crises that have had long and costly implications, to the company, the industry and the society. As a result of this, society has placed higher standards for companies in terms of ethics and social responsibility3. Stakeholders all around the globe have become increasingly vocal in their demands for industry players, not only in terms of the basic compliance with rules, but also in terms of responsibility to aspects like the environment and the society4. Perhaps the most controversial environmental issue that has faced Woodside Petroleum is 45 billion dollar browse project. The Browse project, initially planned to be an onshore LNG plant had to be cancelled by Woodside citing the project to be economically, socially, technically and environmentally risky5. At the time, major oil and gas companies had invested over a hundred billion dollars in plants on Australia, and Australia was on its way to becoming the largest gas exportation company in the world. However, investor interest in the sector began to cool down in the face of rising costs and competition6. Woodside’s Browse project, the biggest of the investments was however plagued by more than just a rise in costs and competition from North America. The proposed location of the project at James Price Point in Australia was faced with environmentalist and indigenous land owner pressure. The James Price Point project was a particularly unique case since the company seemingly followed all the legal steps required of it. Woodside petroleum even had its proposed LNG project approved by the environmental protection authority based 29 conditions, including those that were to minimize the effect of the project on the migration of humpback whales along the coast. Even though the authorities claimed to have had extra measures in place to minimize the effect of wildlife on the natural heritage, there still were widespread protests. In some instances, protesters blockaded the dirt road that led to the James Price Point site, with some going as far as chaining themselves to bulldozers7. Eventually, the onshore browse project was shelved, with Woodside Petroleum following the lead of other major industry players. BHP also pulled out of a similar project selling its stakes to Petro China, with Chevron also doing the same, selling its stakes to Shell. The Browse onshore project cancellation was put into perspective by a Western Australia Supreme Court ruling which declared the James Price Point gas exploration plant illegal. This was based on the fact that the Western Australian Minister and the Western Australia Environmental protection Authority had acted illegally during the assessment and approval of the gas project. There are suggestions that authorities were motivated by the fact that a project of such a magnitude would greatly spur the economic development of the town, much in the same way that some cities and countries in Asia have been spurred by the economics of oil and gas exploration8. The case for Woodside Petroleum Even though the onshore version of the Browse project was faced with considerable risks in terms of cost, it is safe to conclude that the risk it posed to the environment and the resultant uproar and resistance is one of the major reasons why Woodside Petroleum did not go through with it. The ruling by the WA Supreme Court rendering the assessments by the minister and the environmental protection agency (EPA) null and void essentially told the public that they had been lied to. It is unclear the circumstances in which the authorities came to that decision, but these revelations but Woodside Petroleum in a precarious position going into the future. Today, one of the most important attitudes regarding the relationship between organizations and the society is the fact that companies should be able to provide value for both the current and future generation9. Companies must be able to win the trust of the society with regards to the intentions. The James Price Point project damaged public trust in the company. Woodside petroleum has certainly learnt a valuable lesson. One of the biggest shifts that the company has made was the shift from onshore to offshore. At the time of the shift, there were four plants which were to become online in 2014, all of which had reported budget blowouts of between 15 and 40 per cent already10. The shift was motivated by the fact that this increased cost could no longer be transferred to the customer. Woodside chief executive at the time Peter Coleman clearly stated that the company was receiving a clear message from its consumers; they were not going to pay for its expensive decisions. Changes and delays in the Browse project that were significant came despite the fact that the project was the cornerstone of result reports to shareholders in the 2012 and 2013 financial year reports. Even though the changes and delays in the Browse project, involving the push to an offshore site and various financial considerations, risked shareholder value, the company still went through with them. According to Peter Coleman, even though the company continues to chase growth opportunities, it is no longer looking to grow just for the sake of growth. The company is incorporating rigor, discipline and quality in its processes11. The Pyxis and Brastaad drilling plan is an example of this new discipline and rigor in the company processes. The company now has an elaborate environmental risk management program that is helping them through the implementation of elements of the of the Browse project. Conclusion Businesses have passed through various phases in the past few decades. For a long time, it was believed that the main aim of business was profit maximization. However, the corporate world is now deep in an era where corporate social responsibility is a huge factor in the success of any business enterprise. Governments and regulatory bodies have constantly tightened the noose for companies especially those that operate in the mining, oil and gas sector. However, and especially in the case of Woodside Petroleum, stakeholders are becoming increasingly demanding and vocal about their desires and demands for companies whose operations directly affect them. Stakeholders have learned lessons from the past, and with the wealth of information available to them in the information era today, have the necessary tools to fight the big corporations and win, even when they have the support of the authorities. Woodside Petroleum today seems like a company that has learnt the lesson of the importance of social responsibility, and especially that of maintaining the trust of all stakeholders. Even though Woodside Petroleum is not out of the woods yet in terms of regaining the trust of all stakeholders even with its offshore drilling projects, there are signs that the company is learning the value of responsibility, both the fiduciary responsibility to shareholders, and the moral, social and environmental responsibility to other stakeholders. Bibliography ABC. Gas hub: Controversy in the Kimberley. April 12, 2013. http://www.abc.net.au/news/2013-04-12/browse-lng-timeline/4625232 (accessed November 30, 2015) Deloitte. Tracking the Trends 2015. Deloitte, 2015. Reuters. Woodside Petroleum Cancels Onshore L.N.G. Project in Australia. April 12, 2013. http://www.nytimes.com/2013/04/13/business/global/woodside-petroleum-cancels-onshore-lng-project-in-australia.html?_r=0 (accessed November 30, 2015). Seretny, Marek, and Aleksandra Seretny. "Sustainable Marketing -A New Era in the Responsible Marketing Development." Foundations of Management, 2012: 63-76. The Green Journal. "James Price Point Gas Dream is Dead." the Green Journal AU, August 20, 2013. Woodside Petroleum. "Company Insight- Explains the Delaying Browse LNG Project." Woodside Petroleum Project. December 4, 2014. http://www.woodside.com.au/Investors-Media/announcements/Documents/12.04.2013%20Company%20Insight%20-%20Explains%20Delaying%20Browse%20LNG%20Project.PDF (accessed November 30, 2015). Woodside Petroleum. History. 2015. http://www.woodside.com.au/About-Us/Profile/Pages/History.aspx#.VlwhINIrLcs (accessed November 30, 2015). Read More