Building a pipeline career – a conversation with Jim McDonald

Jim says “I got into the oil business almost by accident. I didn’t really get into the oil business, rather the catering business. My first job in oil production was mopping floors on Marlin, the third platform in Bass Strait, back in about 1969.

I actually got run off by the catering contractor after about six months and I then went to work for a firm called Simon Carves who were constructing the crude oil stabilisation plant in the Longford gas plant. I worked as office manager of the construction site and we had a work force of about 180. I met a number of Esso people through my work, and said I wouldn’t mind getting a job with them. In particular I was attracted to the offshore production work. This soon led to a job interview and I wound up back offshore as a trainee production operator. Because there weren’t very many of us, and because all of a sudden it went from two to six platforms, there were great opportunities to learn in a vibrant and exciting environment.

From there I was posted on a training assignment to America where I had a couple of years in Louisiana, working in the Gulf of Mexico and attending training schools in drilling, production and associated functions. When I came back myself and a fellow called Darryl Archibald were the first two Australians to be put in charge of the Halibut oil production platform in Bass Strait, replacing the expatriate American platform managers. I moved to Mackerel platform when we first simultaneously drilled and produced from a platform. It is commonplace now, but was very innovative at the time. I really enjoyed the work, and learnt a great deal as Bass Strait was very much at the sharp end in new production and drilling technology. For example, when the Kingfish Platforms were installed they set a world record as the first platforms in over 300 feet of water. Also, two wells drilled from Mackerel set new records for both drill angle and length: from memory, they were about 70 degrees from horizontal, and the target depth was 1,700 metres from the drill floor – very interesting work.

By the early eighties I was managing three of those platforms. I was also the management representative looking after industrial relations for Esso in Bass Strait, dealing directly with the unions representing Esso offshore employees, and running the corporate argument in the industrial relations commission and other places. My scope for advancement beyond “˜block head’ was limited, as I did not have formal engineering qualifications. The post secondary study that I had undertaken was in training for the Priesthood at a Catholic Seminary, Corpus Christi College, in Werribee.

It was very clear that the next step in Production Management required engineering qualifications. It was suggested that I might consider a move to government affairs and public relations, but I didn’t want to do that. I had really enjoyed what I considered to be the hard end of the business, the production part.

Around this time someone rang me up and said there was a job going in the Northern Territory as the initial chief executive of a new small gas transmission business. They asked me to throw my hat in the ring – I did, and was appointed General Manager of NT Gas. This was the beginning of my career in gas pipelines.

I parted company with Esso after 15 very happy years spent on a tremendously steep learning curve in an industry, oil and gas production, that in a sense had become my life. At NT Gas, I started all over again in gas transmission.

I had some limited experience with pipelines, in pipelines which delivered oil and gas to the Longford Gas Plant as part of the Esso production system. However, I would have to say I didn’t know a lot about gas transmission. But I did know enough to set up a company with about thirty people, read and understand some contracts and to set about learning about pipelining gas. I moved to Darwin for the latter half of the construction project, and saw it to completion in late 1986. We hired the staff, set up office, commissioned the pipeline, got the business running, debugged a few things and got to know our customers and the contracts.

After this I began to think about other potential opportunities. We set about attempting to connect Gove and Mt Isa to the NT Gas Pipeline as early as 1988. I came to realise that there were not many private pipelines in the country and I came to the conclusion that privatisation would be a matter of when, not if, and I began to think about how to prepare myself and my organisation for that. Around this time, AGL had commenced their expansion into upstream, and had purchased the interests of CSR Petroleum and Moonie Oil. As a result, they became the practical owners of NT Gas, and I became an AGL employee.

AGL had formed AGL Petroleum, which held a variety of assets including the Roma-Brisbane Pipeline, the NT Gas Pipeline and interests in the Mereenie and Palm Valley oil and gas fields. These fields became part of my responsibility. The interest was relatively short-lived, as AGL decided they would move out of production while keeping the pipelines. Santos bought AGL’s production interests and at one time I thought I might go to Santos as well, but I remained with AGL and that kept me in pipelines.

I received a call from Bruce Beeren, who by then was my boss, saying that AGL were going to buy the Moomba to Sydney pipeline from the Commonwealth. Bruce asked if I would come down to Sydney to help put together the bid for the pipeline, adding that if we were successful I could move to Canberra or Sydney and run the pipeline.

We succeeded in our bid and from July 1994 we took over the Moomba to Sydney pipeline system, and formed East Australian Pipeline Limited, with Nova of Canada, and Petronas of Malaysia as our partners – so all of a sudden we were operating three major pipelines, and we were bidding to develop the Goldfields pipeline. We weren’t successful with Goldfields but we learnt from the bid process, and it was very clear that there was a momentum now towards privatisation. Of course the rest is history – all those pipelines that were then government owned have been sold into private ownership.

We set about connecting Victoria and NSW – the first interstate pipeline connection. We actually believed the Eastern Gas Pipeline was unnecessary with the Interconnect Pipeline in place. It connects the two systems and provides a route for Gippsland and/or Otway gas to come to NSW and vice versa. But this wasn’t sufficient to deter BHP from wanting the separate connection and the Eastern Gas Pipeline was built by Duke. So for the first time, we had the major states connected and gas pipelines competing for haulage, storage and contracts. The new world was upon us.

When Longford caught fire in 1998, the Interconnect was important in saving Victoria from voiding its pipeline system. If air had been drawn into that system it would have resulted in a dangerous air/gas mixture which would have taken quite some time to remove. The Interconnect provided the means to keep the system pressurised and supply essential services. The security benefit of the connection was immediate. Gas trading also commenced back and forth, and the Interconnect became an important part of the emerging pipeline network which is now destined to underscore the development of a genuine gas market throughout Eastern Australia.

In Queensland, we agreed terms for the expansion of the Roma-Brisbane Pipeline system, and to build a pipeline from Ballera to Mt Isa, and we set about both projects. At this point in time AGL had put me in charge of pipelines, so I had all these pipelines and 180 very good people working for me, gathered together as a pipeline group inside AGL and we were doing pretty well. In NSW, the Central West Pipeline was built, and in WA, the Mid-West Pipeline. We acquired an interest in the Goldfields Gas Transmission Pipeline as well. Altogether we assembled about 7,500 km of gas transmission pipelines under our control, and were Australia’s largest owner/operator of gas transmission assets.

AGL believed a different model for ownership of infrastructure such as pipelines was possible, and that considerable value could be realised by the creation of the Australian Pipeline Trust as an independent listed business. The decision was taken by the AGL Board to float the pipeline business in late 1999. Greg Martin asked me what I might do following the formation of the Trust. I told him I thought I could probably contribute for a couple more years, as the Trust was going to need someone who knew pipelines. I asked to be considered for a job with the Trust.

That was agreed to, so out the door I went with the pipelines and became the initial Chief Executive of a listed business which was capitalised at $A488 million at the Initial Public Offering, with AGL retaining 30 per cent and Petronas 10 per cent of the Units in the Trust. I have had the satisfaction of leading the people that run the Trust for five years, and to see the business blossom in that time. The Trust now has a market capitalisation of over a billion dollars, and we’d added significantly to the portfolio.

We lost a couple of battles. I really did want to acquire the Dampier to Bunbury pipeline when it changed hands in 2004. Our bid was essentially the same as the winning consortium, but we didn’t get it, which was a great disappointment. I believe we would have been good owners of that asset.

We did, however, improve our ownership of the Goldfields Pipeline to 89 per cent, and acquire the Parmelia Pipeline System in WA. We also acquired minority interests and reached 100 per cent full ownership of the Carpentaria and the Roma to Brisbane pipelines in Queensland. The Pipeline Trust is a strong and real business – unlike some other infrastructure trust schemes. This past financial year we made a profit after tax of about $A55 million.

I have been fortunate to have had the opportunity that gas transmission has provided me. From NT Gas in 1986 to a billion dollar pipeline business, including the privatisation and management of all the things that flow from that, it’s been a pretty interesting and satisfying career for me.

Credit for all this must go to others. I must pay tribute to all of the people that have worked with me over the 19 years since I went to Darwin. I will not name individuals; I owe a great deal to every person that worked with me over the years, in varying degrees it is true. To each goes my heartfelt thanks.

It hasn’t been bump-less along the way. Regulation has provided many challenges, and has become a serious financial and administrative burden on business. There will be considerable debate for quite some time yet to get a regulatory regime that suits transmission pipelines. The ten years we’ve been wrestling with this issue hasn’t been wasted. I often reflect upon the naivety with which I approached my first meeting on regulation in 1991, and the first contribution to the debate that I wrote on behalf of APIA. We have travelled a long regulatory road since, and the journey has certainly brought a different commercial focus to me and to those who have worked with me.

Since retiring in July I am enjoying being home with Di for the first time for a while. The work I was doing was fairly demanding, and involved a lot of travel and long hours. Early mornings, and late nights – it is easy to get preoccupied with your work and having that load removed has been rewarding in its own way.

We will be moving to Gippsland in Victoria where we own a place near Metung, on the Gippsland Lakes. I was born in Gippsland, and think of it as my home, although we have been gypsies for the past 20 years. Our families are in Victoria, with my brother and sisters, Di’s sister, our daughter and grandson and their families, and good friends from years gone by, so moving to Gippsland is like an old dog going back to its kennel. My son and his family are in Queensland, so we can always visit there in winter and we have two daughters in Canberra, that’s not terribly far away.

I don’t feel as though I particularly want to do any work. I’ve got a few things going on that people have asked me to be part of and I think that’s useful, and I have some private investments that need a bit of input. But I’ve done my job. I’m 65 years old and I think its time to move on. Being presented with the APIA Life Membership at Convention was a wonderful experience for me and I’ll continue to come to the Association conventions and dinners and be around the industry.”

Jim’s Life Membership honour follows an award for Outstanding Contribution to the industry several years ago. It is a great recognition of a long and successful career and these awards are clearly very well deserved. The Australian Pipeliner would like to take this opportunity to formally thank Jim for sharing his experiences as a pipeliner over the years with us and our readers, and we look forward to catching up with Jim at various APIA functions over the years to come.

Jim on APIA

The first time I went to an APIA conference must have been in 1987 when I first joined the Association. By the next year, Keith O’Malley, who was then APIA President, suggested that I join the Committee. I thought “It’s a bit early for me to be on the Committee” – to which Keith said “How would you like to be President?” I said “Don’t be silly”. Keith persisted, and, upon reflection, I started to think about the Association and its relationship with gas transmission in quite a different way. I think it was that point in time that I started to talk to some people about developing the Association to enable it to have a political and national profile of real substance.

In those days, we did not have much money. The Pipeliner was “˜in house’, and in monochrome. We did not have an office. We did not have the Year Book (and what a great business tool it has become). The Convention was a good conference, but had no display facility, and was a financial risk each and every year. The world in which pipelines were built and operated was about to change, and change was inevitable for APIA.

The Association began to move, to broaden, and I was elected President. I believe that APIA did begin to think differently through the 90s as other people were elected to the Committee and continued to change the way the Association functioned. A number of very good Presidents who followed me accelerated the change process, whilst maintaining the core ideals of the Association. Membership continued to grow, and our Convention went from strength to strength. In a major initiative, Garry O’Meally was appointed to a temporary role as Executive Chairman and we moved the office to Canberra. In less than ten years we moved from pretty difficult financial circumstances with a limited Secretariat, to a very powerful Association with a strong political voice and a well-staffed presence in Canberra. I am proud to have been around as that change took place.

The APIA Annual Convention remains an exceptionally good conference. We insist on a mix of high quality technical and general interest papers, the format of the Convention and the displays that we have from our suppliers are excellent, and financially, it is very good for the Association. A feature of APIA and, in particular, of our Convention and Meetings is the opportunity to talk about things that we have in common and put aside for a few hours or days the commercial differences which must exist in the membership of an Association such as APIA.

We are also doing well with research, which members now have the opportunity to fund should they choose, providing leverage and access to international research. We also have a fee structure that recognises the size of all organisations while maintaining the great egalitarianism which characterises the Association and our conferences.

APIA is in a sound financial position and is very well run. The Australian Pipeliner is independent and a great advertisement for our industry. It has been a good ten years or so. We did not get it all right, and we have benefited from some “˜robust discussion’ from time to time. On balance, however, it has been a serious transformation. Everyone who has contributed should take a bow – we owe them a lot. APIA has been an important part of my business life, and I am grateful to the membership for their encouragement, friendship and support over the years. It has been a privilege for me to serve the industry through APIA.

Jim’s life outside of pipelines
Jim’s love of horse racing is almost as well-known as he himself is in the industry. Jim had horses as a child and his family has always been involved in the industry, so as Jim said, “I knew enough about them to get myself into a bit of trouble.”
The first horse Jim was involved with, Line Pack, was owned in a syndicate. “Line Pack won a few races and cost a bit of money but provided a lot of fun,” said Jim.
Jim then bought a two year old filly, Verdict Declared, which won ten races and almost $A250,000 in prize money. Partnership in a stud, Meringo, followed and Jim moved into the equine breeding business. The stud produced a skinny little filly which failed to sell, so Jim and his partners decided to race the horse in a small consortium. She was named Victory Vein.
Victory Vein won her first start by about five lengths and went on to win 12 starts and just under $A2 million in prize money. She gave the owners all the joy that comes from having a Group 1 winner, winning the Sires Produce Stakes, the Champagne Stakes and she was beaten by a half head in the Golden Slipper and a short half head in the Flight Stakes. She was the Australian Two Year Old of the Year in 2002.
Jim said “She was just a joy to be around, an absolute joy. We have all these pictures on the wall that I treasure from my time with her. There are ups and downs in racing but I still love my horses and having a couple of good horses gives you the courage to go on. Someone said to me “˜When Victory Vein retires Jim, give them away because you’ll spend the rest of your life trying to find one as good as her and you won’t.’ That’s quite probably true but I think I’ll probably still spend the rest of my life looking for one.”
A few pipeliners joined Jim in the Pipeline Racing Syndicate which raced Hot Tap Dancer and Meter Run. “Both of them were low on speed and high on injury rate, and a bit embarrassing,” said Jim.
Jim and Di no longer have an interest in the Stud, but do own in partnership a yearling full brother to Victory Vein, four progeny of Verdict Declared including a three year old filly – A Country Girl (which Jim declares “˜Will win a good race for us!’), a “useful three year old gelding named Mexican Wind (“will be a city horse!”), and a couple of brood mares and their foals (“˜would like to get out of them but maybe next year’). Di owns in partnership a mare named Azzamethyst (“˜will win a 2,400 metre race soon’).
Jim’s final word. “I still enjoy good health, and expect to do so for some time. You cannot die with an unraced two year old in the stable!”

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