Costello blocks Shell's bid for Woodside

Costello: 'I did not find this an easy decision.'

In this story: Committed to $780m expansion Shell counter proposals could not be certain Wants Australia to maximise N.W. Shelf potential RELATED SITES

By CNN's Ian McMinn

SYDNEY, Australia (CNN) -- Australian Treasurer Peter Costello has blocked Shell's takeover bid for Woodside Petroleum, operator of the North West Shelf oil and gas project.

Costello said the $5 billion Shell bid, launched on November 24 last year, was not in the national interest.

"I did not find this an easy decision," Costello told a news conference in Canberra. "In fact it is one of the hardest decisions one could ever face in public life because it was so evenly poised."

"But in the end the decision was mine and I made it."

In London, shares in Shell Transport & Trading, the 40-percent owner of Royal Dutch/Shell, moved up 1.4 percent at 574 pence in afternoon trade.

But the Australian market did not like Costello's announcement. The Australian dollar dropped rapidly, losing more than 1.5 cents from a high of 52.03 US cents to 50.46 as investors digested the news.

Woodside shares lost more than 10 percent, closing A$1.47 down at A$12.49 from Friday's close of A$13.96.

Committed to $780m expansion

The North West Shelf is Australia's largest single export earner and recently committed to a $780 million expansion to meet additional liquefied natural gas (LNG) sales to Japanese customers.

Shell is already an equal partner in the project with Woodside, BHP, Japan Australia LNG (MiMi) and local units of Chevron and BP Amoco.

Costello said he had consulted widely with Woodside, Shell, parliamentarians, Prime Minister Howard, cabinet and the Foreign Investment Review Board (FIRB).

"The FIRB could not come to an agreed position and presented two alternatives," said Costello, "with one alternative prohibiting the offer and the other approving it but with conditions."

Costello repeatedly stressed that government policy was to welcome foreign investment, and praised Shell as a good corporate citizen which had always been honest and good-willed.

But according to the Treasurer it was not in the national interest for a major resource to be owned and marketed by foreign interests.

Shell counter proposals could not be certain

He said Shell had proposed separating the two functions, but given the make up of the joint venture Shell was powerless to guarantee that result, if at all, until the takeover was approved.

Shell's unsuccessful bid would have lifted its stake in Woodside to 56 percent. Woodside shareholders were to be offered A$14.80 cash and one call option for each Woodside share, subject to an asset transfer proposal.

The asset transfer would have been in exchange for 333.3 million Woodside shares and included a 16.67 percent interest in the North West Shelf project; a 25 percent interest in the Corallina oil field and the Northern Endeavour floating production facility; a 22.5 percent interest in the Laminaria oil field, in the offshore Timor Basin; other interests in West Australian gas fields and oil and gas fields in the Gulf of Mexico.

Shell Australia chairman Peter Duncan called the government's decision "deeply disappointing" and said there had been an intensive campaign to portray the bid as against Australia's interest. The company is left with a 34 percent stake in Woodside.

Wants Australia to maximise N.W. Shelf potential

Costello, while not ruling out future foreign proposals regarding the North West Shelf, said the essential difficulty was that there were a number of LNG suppliers.

"Increasing demand in East Asia can be met from Australian interests, the Middle East or projects being developed north of Japan," said Costello, "but I want it to come from the North West Shelf."

"It is in Australia's interests that we promote it in preference to other areas," said Costello.

Woodside Petroleum
Shell Offer
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