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Richard Tweedie: Walking far from the energy crowd
PATTRICK SMELLIE

29/12/2010

Straight-talking Richard Tweedie from Todd Energy. "If you're going to be successful you can't follow the crowd. You've got to be lateral and creative."Relevant offers

TRY to tweak Richard Tweedie, the retiring chief executive of Todd Energy, with a question about his notoriety as an aggressive litigant or the minor panic he has just created among his staff with a unilateral announcement of a new power station, and he looks boyishly quizzical.

"Really? In what way?" he will say. The trim, tightly wound 64-year-old steps down this month from the $4 billion oil, gas and electricity empire that he has built in the past 23 years from a handful of employees and a $200 million asset base.

The day we meet, he is, as ever, an intriguing mix of measured urbanity and a plain-speaking style that veers between entertainingly unguarded and downright savage.

To journalists trying to fathom the inner workings of the energy sector, he was a gift. Unconstrained by stock exchange listing rules and representing the interests of publicity-shy shareholders the billionaire Todd family Mr Tweedie had arguably a freer hand than most chief executives to run his own race.

He also performed. For seven straight years in the last decade, Todd Energy recorded returns on equity above 40 per cent and the company has cracked $1b in annual turnover. Last year's $334m net profit was still a most acceptable return, at around 20 per cent. Neither his board nor shareholders were likely to complain.

Meanwhile, the company's known oil and gas reserves sit at 113 million barrels of oil equivalent, consisting of 519 petajoules of natural gas and 27 million barrels of oil in so-called P2 reserves.

Mr Tweedie is sure there's plenty more where that came from, pointing particularly to the onshore Taranaki McKee/Mangahewa oil and gas fields, which he says market-watchers thought Todd was foolish to buy in the carve-up of Fletcher Energy more than a decade ago.

"We got it at an attractive price, although for a long time that probably didn't seem like a great buy," he says. "It was seen as being tired and having run its course."

Instead, the McKee and Mangahewa assets sit in the Todd balance sheet between $500m and $600m, "despite the production we've had from it". He's "absolutely confident" drilling programmes under way in these areas will turn up more reserve and "it's definitely going to be sizeable".

Hence his unscheduled announcement on leaving the company that Todd will invest in a 100-megawatt gas-fired power plant on the site.

The power station investment is just the latest part of a vision that has seen Todd concentrate deeply on New Zealand instead of the more common pattern for exploration companies to scour the globe for opportunities.

The result is arguably the most vertically integrated energy business in the country, owning assets right across the supply chain from major upstream oil and gas assets through to a retail gas and electricity business, Nova, a new LPG production station and an LPG network in central Dunedin.

However, for competitors, joint venture partners, and would-be customers, Mr Tweedie and his team in Todd Energy's Wellington waterfront eyrie were not only feared and respected, but also in some cases detested.

Among detractors, it had become fashionable to suggest that doing business with Todd Energy was simply too much trouble and that for all the growth he'd overseen, Mr Tweedie's "take-no-prisoners" style had blunted the potential for the business to grow even larger.

Mr Tweedie demurs. "There's been a bit of a personal issue in some of it, but it's been more of an issue in their own minds," he says of the fractious court wrangling that has marred Todd's 50 year-old relationship with Shell New Zealand in the past few years.

More than a decade ago, "the guy heading Shell was an Italian", says Mr Tweedie. "He used to come through here, we would sort out how we would work it through, and when he left the only non-Shell people at his farewell were me and my wife."

That's a far cry from the broken relationship portrayed in a High Court decision earlier this year which quoted a 2003 internal Shell memo saying: "Shell have a guarded respect for Todd, yet they do not respect Shell."

Todd was "extremely good at bullying multinationals, extracting value from them, and their general (guerrilla) tactics are: take and take, but never give; divide and conquer; attack until the 'weak' multinational gives in".

Mr Tweedie shrugs it off. Todd, Shell and OMV get on "quietly and successfully" in most parts of their relationship and other multinationals are happy to team up with one of perhaps just two serious local players.

The other, New Zealand Oil & Gas, has yet to prove itself as an oil explorer, he says, and is encumbered now by its 29 per cent shareholding and heavy debt exposure to the Pike River Coal mine disaster.

For proof that he is lovable, Mr Tweedie points to Todd's exploration foray with oil major Exxon Mobil in the Great South Basin south of Bluff earlier this year, at the same time as the company was at war in the courts with other multi-national partners. What killed that collaboration was not bad behaviour, but failure to find anything worth pursuing.

No, says Mr Tweedie, the real problem in the relationship with Shell was that "our business interests diverged. They began to see us as a competitor rather than a follower" and Todd's willingness to take its own course grated.

"We have often been seen as a bit different and some people don't like that," he says. "But if you're going to be successful you can't follow the crowd. You've got to be lateral and creative."

All Mr Tweedie will admit to is the typical dynamics of two intensely competitive and powerful organisations seeking the best deal they can get for themselves.

It's the same, he says, of the tortured relationship with one of the country's largest gas buyers, Contact Energy, which has struggled to buy more than a trickle of gas from Todd.

"We've all seen Contact as hard-arsed," he says. "Their criticisms of us would mirror our criticisms of them. They are tough and commercial, and so are we."

He is equally insouciant on Todd's fabled love of litigation, which prompted an exasperated Judge Robert Dobson to plead with Todd not to appeal against a decision he had made against it and to find a negotiated settlement over disputed off-take from the Pohokura oil and gas field.

He urged this "as a New Zealander concerned that the resource vested in these parties by virtue of the permit they have from the Crown deserves to be managed without the significant inefficiency caused by the distraction of this dispute".

It made no difference. Todd unapologetically appealed against the decision that Mr Tweedie says lets Shell and OMV restrict how much gas comes out of Pohokura.

"To have gas from that field constrained is definitely not pro-competitive when we should and could have taken more," he says.

"We've used the courts in the interests of getting justice. That's what they're there for and it is a competitive environment. We're all trying to beat each other, and oil majors unquestionably are only interested in themselves."

Now, as he leaves Todd Energy, Mr Tweedie will be more than keeping his hand in as chairman of dual-listed Cue Energy, while walking away with an undisclosed bonus package rumoured to be worth between $30m and $100m.

All Mr Tweedie will say is that "along the way, one benefits".

While the exact figures are not up for discussion, he's got no problem with success being rewarded, and fears New Zealanders' dislike of high fliers will only hasten the departure of the country's best and brightest.

With oil major partners Woodside, Apache, and the Brazilian giant Petrobras in its offshore Western Australian drilling programmes, Cue has the potential to dwarf any developments currently occurring in New Zealand, where Mr Tweedie has cautioned against recent industry boosterism.

His eyes twinkle at the potential for a big gas find on the North-West Shelf of Australia to keep him busy in his dotage.

"The nice thing about discoveries is that they make companies, and the more you have, the more you will succeed.