Roc Oil CEO discusses the company's performance

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Australian Broadcasting Corporation

Broadcast: 11/07/2007

Reporter: Emma Alberici

Roc Oil CEO John Doran talks to Emma Alberici about the future of the oil producer in Australia, including its relationship with China and WA oil and gas field developments.


EMMA ALBERICI: The political heat being generated in Canberra over the Iraq war and just how big an influence oil is in the conflict, hasn't been missed by Australia's oil producers. Roc Oil is one of the fifth - the fifth force rather, among Australia's oil and gas companies. It's listed on the stock market with a value of around $1 billion. It's main operations are in Australia, China, Africa and the UK.

I caught up with Roc Oil's chief executive, John Doran, a little earlier this evening. John Doran, welcome to Lateline Business. One of the analysts covering Roc Oil rates you as a high-risk stock due to a largely unproven portfolio of assets. Is that a fair assessment?

JOHN DORAN, CEO, ROC OIL: That might have been a fair comment two, three years ago. We sit now as the fifth largest oil producer, and I don't want this to be an advertisement for Roc obviously, but since you raised the question, we have a very diversified portfolio, we have four or five fields to produce in. We produce 10,000 barrels of oil a day. In some parts of the world, that would be looked on as reasonable.

EMMA ALBERICI: Reasonable maybe, but not particularly impressive.

JOHN DORAN: No, in the real world, outside, no. But in Australia, or publicly-listed, dedicated oil companies, Woodside, Santos, Oil Search, are clearly ahead of us. And on a good day, Beach. But really, it's them, Beach and ourselves. Below us are most other companies.

EMMA ALBERICI: What can you tell us about your activities in China?

JOHN DORAN: Look, we're self-confessed China-philes. We may in the long-term be proven right or wrong. We like China, we busily produce in there, we are the third largest foreign operator production, oil production in China, offshore. And we have a discovery that we are trying to move towards development. We have a profile in China that probably is punching above our weight, if you know what I mean. But it's certainly a key part of our portfolio. We find the Chinese are tough, but they are good to deal with and we really believe that.

EMMA ALBERICI: You mention they're tough. What sorts of conditions are you forced to comply with in China? Are there government regulations around foreign firms operating there in your industry?

JOHN DORAN: Yeah, I mean the legislation is just like everywhere else. You've got to pay your taxes, the taxes sometimes change. We were in Britain in three or four years ago, and in the space of two or three years, the tax rate went from 30 per cent to 50 per cent, courtesy of Gordon Brown. China has just announced that an oil export levy, which is being introduced about six months ago, in fact would have a five year tax hold date. It will be coming into effect 2012, we don't find it draconian. But look, everywhere in the world today governments know that if they have oil, they're in the ascendancy. I wouldn't single out China. We don't have any interests in Venezuela or South America, generally. But when you look at what happens there, it is quite onerous. That's a part of doing business. I suspect when Shell tried to take over Woodside, they went away thinking that even in Australia, the rules can change.

EMMA ALBERICI: What about the sale of the oil? What sorts of demands are placed around you on that, given China's express desire for energy security?

JOHN DORAN: To our surprise, we have been allowed - and it was not a big deal, it was straightforward - we export our oil and we export it direct to North Korea, which intuitively you would not expect to be able to do, but there's not a problem.

EMMA ALBERICI: Extraordinary.

JOHN DORAN: Yes, I know that is a surprise part of the package, yep.

EMMA ALBERICI: Now, this might seem like a ridiculous question.

JOHN DORAN: Those are the worst.

EMMA ALBERICI: Given the political emphasis of late on securing the oil supply in Iraq, are there any prospects at all for companies like yours or others in Australia to access the Iraqi oil fields?

JOHN DORAN: Yes, we've talked to people in Kurdistan, we've talked to people in Iraq, we have been known to visit Iraqi embassies, but what I would say is this: not for Roc. There are one or two companies that would describe themselves as small, active in Iraq. The point is they are actually quite big compared to the likes of Roc. We were in a study group with other larger Australian companies a few years ago and we came to the conclusion: be ambitious, but don't be totally silly. So, I very much doubt that for a company like Roc, Iraq is a place that we should be, and that's why we're not there and we don't intend to be?


JOHN DORAN: Dangerous. I know Iraqis in Baghdad, I could tell you a lot of stories, and it's not a place where I would go easily and I would never expect anybody who works with me to go there if I wouldn't go there. Now, you can say that's a cowardly view, but hey, we've got a lot of activity going on in other parts of the world

EMMA ALBERICI: Now, you recently announced a new oil and gas field off Geraldton in WA, the Dunsborough field. At just 20 million to 40 billion barrels, it hardly seems to warrant the expense of exploration and drilling if you don't mind me saying so.

JOHN DORAN: No, I like that comment because I think it could prove to be true. We actually announced three new discoveries offshore Geraldton in three months. One of them is a dead duck. Perseverance, it's a gas field, but it's small and it's got carbon dioxide. The other two are not obviously commercial, they may become commercial, it depends on gas prices and with Dunsborough, it depends what we find around it. But I would be the first to advise everybody that exploration and success is just that. You can't build a company on exploration success unless you make it commercial. So, I agree with you Emma, if that's all we find, it wasn't worth doing, you're quite right.

EMMA ALBERICI: You're essentially gambling on a high-price of oil to be able to justify that expense, I imagine.

JOHN DORAN: Look, you're right. We pretend - and it's not a silly pretence - but we're trying to be conservative on the oil price, but the oil price has gone up 50 per cent, roughly, in the last - during the course of the year. We are very pleased about that, to be blunt. But costs have gone up, hard to get people in a general sense. So, it is - I will put a big flag up and say it is a risky business. You can manage it as we do, and we've been in the business long enough. We have ups and downs, but the idea of hitting a bonanza, that would be nice, but I don't think we've done that offshore Western Australia.

EMMA ALBERICI: And just quickly before we go, are you looking forward to an Australian market in carbon trading?

JOHN DORAN: No. I tell you what, not because I'm against it or for it, I just don't think about it. And if my 20,000 shareholders thought I was spending a lot of time - and this may be politically incorrect - but if my 20,000 shareholders thought I was spending a lot more time thinking about carbon trading, they would be wondering why I wasn't thinking about drilling in Angola. Carbon trading is with us, it's going to be a part of our lives, I'm certainly not an expert.

EMMA ALBERICI: Well, the Federal Government is drafting legislation to force companies to report their greenhouse gas emissions from July next year. Are you even measuring your emissions?

JOHN DORAN: As I sit here talking to you, no. And in fact again, it may not be politically correct, I will get on a plane, I will fly to wherever and I will think of taking off safely, landing safely and the carbon emissions are the carbon emissions.

EMMA ALBERICI: John Doran, thank for your time this evening.


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Roc Oil CEO discusses the company's performance

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