January

In tough times, minnows become shark food

These are trying times for small Australian oil and gas explorers – so trying that Slugcatcher reckons that they might also be just right for a dose of corporate activity as management tries to achieve growth through acquisition as well as exploration.

Widespread rationalisation among the flotilla of small central Australian explorers is possible, as is a clean-up of the 30 or 40 small Aussies wandering around the US oil patch.

Capital markets are more wary, discovery is proving elusive, and growth remains imperative for management.

Which boils down to companies with cash achieving growth by buying companies which have potential, but lack the cash.

In other words, we are entering a period of enhanced M&A activity, and all the fun that it brings to sideline observers as they try to identify the predators and their prey.

February

Hess won't just sit on the Shelf

US-based Hess Corporation had seriously outbid all rivals in acquiring rights to a freshly released and well-located exploration tenement on the North West Shelf. Hess won its tenement, WA-390-P, with a promise to spend around $500 million over the next three years. In total, it plans to drill 16 wells after gathering fresh seismic data.

Hess is actually smaller than Australia's own Woodside Petroleum. Using the latest share prices on their respective stock exchanges, Hess is capitalised around $A19.3 billion and Woodside at $25.4 billion.

The fact that it is not really a giant makes Hess an especially welcome addition, bringing fresh capital and perhaps new ideas to an area which has been the private backyard of a handful of explorers.

It is possible that Hess' arrival signals a change in the size of oil companies operating in remote Australian waters where an LNG project seems to be the best future development option.

March

Biofuels - an unsatisfying morsel that could leave millions hungry

Is the biofuels revolution over before it even starts?

On the Australian stock market, there is stark evidence that biofuels are no longer the flavour of the month, with the sector ranking as one of the worst performers over the past 12 months.

Among the political elite in third world countries, where crops are being diverted from food to fuel, there is audible rumbling that the people might go hungry – and that spells very serious trouble.

In Mexico, for example, there are rumblings over the price of corn for making food staples such as tortillas. In Brazil, there are equal concerns emerging over the diversion of materials which can be used to make food into biofuel production to power American cars. In Europe, there is an emerging "conscience" debate along similar lines about powering Porsches on German autobahns with fuel that could have fed starving Africans.

April

Voelte comes out punching

Woodside CEO Don Voelte, all on his own, has declared war on the Western Australian Government over a controversial domestic gas retention policy, telling the WA Government that it has a policy which is an "absolute joke".

Voelte has been desperately keen to grow Woodside. After all, it's what he's paid to do.

But as fate would have it, he's encountered a series of issues which have slowed, but not stopped, growth. Promised oil reserves in recent discoveries have shrunk, costs have blown out, exploration has become more expensive, and LNG development proposals have been hit by all sorts of objections ranging from Aboriginal rock art to environmental protests.

With so much pressure being felt in so many places, including problems in the executive suite, the last thing Voelte needed was a WA Government policy which effectively said, "You must sell at least 15% of your gas at a discount to local customers".

At some point Voelte decided enough was enough. He's on a contract, getting paid to do a job. He doesn't care if the contract is renewed and will do his job even if that means declaring war on the WA Government.

May

Nimby culture terminates California LNG

Californian Governor Arnold Schwarzenegger killing off of BHP Billiton's proposed Cabrillo LNG regasification plant offers a lesson for everyone in the petroleum business.

The most important message from Arnie, who made part of his fortune as a sci-fi creation known as the Terminator, is that doing business in the US remains damnably difficult.

What we have at Cabrillo is a classic case of Nimbyitis – a disease also known as Not In My Backyard.

Refusing Cabrillo on spurious grounds was a warning shot to anyone wanting to do business in a country which is (a) too far away, (b) too difficult to deal with, and (c) nothing but future trouble.

Asia, however, doesn't have the same hang-ups. It is a region of the world which has even adopted a slogan invented by a former US president, Calvin Coolidge, who once famously said: "The business of America is business."

Perhaps Coolidge was right, once upon a time. He's not right now. It's Asia which is picking up where the US left off to become bogged down in campaigns and crusades of dubious value.

June

Midas touch eludes Clough

John Cooper, the embattled chief executive of Perth-based engineer, Clough, probably does not see himself as a modern-day James Bond. But unless Slugcatcher is barking up the wrong tree, Cooper is two thirds of the way through a Bond experience.

The common Bond and Cooper happenings can be traced through the classic novel and film, Goldfinger, and the enduring quote from arch-villain, Auric Goldfinger, "the man with the Midas touch", that: "Once is happenstance. Twice coincidence. Three times is enemy action."

Cooper, after a surprise announcement on troubles at an Indian offshore gas construction project, finds himself at the second level of the Goldfinger warning – coincidence.

His first Bond experience, happenstance, can be assigned to the equally troubled BassGas project, which was the subject of a stock exchange report four days earlier.

Cooper will have his fingers crossed that there isn't a third, though it's a reasonable guess that he is starting to suspect enemy action given the run of bad news that has dogged Clough over the past few years.

Slugcatcher's 2007 concludes on New Year's Eve.