Andrew Botros

In the end, when you refine the matter to its purest form, gas pipelines brought down the Whitlam government. His minister wanted them all over the country, but Rex Connor couldn’t find the four billion dollars no matter how many nights he slept next to the telex machine. The loose ends evaded him and his department from start to finish.

45 years on and the Federal Government is about to intervene in gas again. Good luck to them. Whether it’s conduits for gas, conduits for oil or conduits for cars, pipelines have troubled governments for half a century and they’ll trouble the current lot too. Energy and roads: dangerous things and de riguer in the national conversation.

If only we understood how to do them better—a way of thinking that could give us command of the detail—there might be a better life for all of us. The price of error still overwhelms us, and we’ve learned little from the case studies of history.

Grahame Campbell sat at the table for much of that history. When Rex Connor wanted pipes, Grahame performed the first national grid studies in 1973. And when NSW built the M4 motorway as Sydney’s first private build-own-operate-transfer road, Grahame was Chair of the company that delivered it ahead of schedule in 1992.

But I had no idea about any of these things when I met him. Engineers are like that: situated viscerally, away from view, building the backbones of the nation. No, I met Grahame because I knew how clarinets worked and Grahame knew how to play them.
Of all the reed instruments a clarinet is uniquely cylindrical. A little like a miniature gas pipeline if you will, but with twenty or so holes in it, driven by a vibrating sliver of southern French cane.

Making them has been a challenge of infinitesimal detail for centuries. The combination of reed and cylinder gives the clarinet the widest tonal range of any woodwind, so there are compromises everywhere to keep each note close to tune. A careless half-millimetre increase in the bore size of the Boosey & Hawkes 1010 line of clarinets, for one example, virtually killed the English clarinet industry. To the ear of an expert on the matter, “they had such incredibly undersized middle twelfths that they could not have been played in any respectable symphony orchestra.” B&H soon stopped production and bought a French maker instead Clarinet playing is just as delicate. Blow the reed too soft and it won’t move; you’ll just get breathy noise in the bore. Blow it too hard and it will completely shut the mouthpiece. Blow at the right pressure and it might still go rogue, squeaking with its own high pitch, disconnected from the rest of the instrument.

Grahame knows there’s nowhere to hide a bum note in a jazz group. “If one person messes up, the whole thing’s messed up, and inconveniencing seventeen other people is pressure enough not to do it.” There’s no scope for shirking responsibility in a team arrangement like that.

In his early 20s, Grahame had to choose between a life in music and a life in engineering. Clarinettists couldn’t make a living without playing the saxophone too, so one night he approached Don Burrows, James Morrison’s mentor. Don wasn’t keen, but Australia’s best tenor player happened to be sitting next to him.

That’s how Grahame met Graeme Lyall, who later directed the jazz school that James Morrison founded in Mount Gambier. The lessons weren’t what Grahame was expecting, trying to perfect single notes played continuously for minutes on end. It wasn’t long before Grahame knew he couldn’t match Lyall’s pursuit of perfection, and engineering won.

People learn a lot from music, but so few make a living from it. So they stoically take their experiences to their day jobs, accrediting music for their creativity, or their brashness, or their work ethic.

Grahame learned a holistic discipline that would guide his whole career: that every detail mattered. Affinity with every note, empathy with every musician; it’s a framework that translates quite well to the big things we build.
Dundas Corbet Gore led the construction of the Sydney Opera House shells, the twentieth century’s icon of structural complexity. Throughout the placement of every rib and every tile along those 500-foot diameter spheres, suspended above Bennelong Point to within an inch, Corbet was indefatigable. When the NSW Government first insisted that Jørn Utzon’s interiors go to tender, Corbet was the sole exception. Having Corbet start early during the design phase was the only thing they could agree on.

Ten years later he told Grahame several times that the Opera House was easy compared to Gore’s work on the 1,300 kilometre Moomba to Sydney gas pipeline. Corbet worked on the middle section and Grahame the eastern section. It’s the same pipeline that brings natural gas from South Australia’s Cooper Basin to the eastern gas market today.

AGL started the project, but in 1973 Rex Connor nationalised most of it by shutting down AGL’s ability to borrow money from overseas (surely one of the greatest ironies in Australian history). In those days Australian banks had few ideas on how to fund an infrastructure project, so AGL had no choice but to hand over the project to Connor’s department.

Grahame was consulting for AGL and he soon got a phone call from the Treasurer’s office. How much did he think the pipeline would cost that financial year? Grahame was bemused: Connor hadn’t even decided how much of the pipeline he wanted to build, but he gave a speculative guess anyway.

Then there it was in Frank Crean’s budget: exactly $107 million. It was lesson number one. Grahame never forgot how crude and disconnected the whole process could be. There was little commitment to understand gas markets back then, and there are echoes of the same mistakes today.

Government intervention wasn’t the only policy to overcome. Pipeline diameters were just as critical as clarinet diameters, but for completely different reasons. Australian mills made up to 30-inch pipe, but Japanese pipe was half the price and better quality. A 28-inch pipe was needed, but a 34-inch pipe for the main line—80% of the project—was designed to avoid the tariff. BHP and others complained bitterly, but the government wasn’t interested in the big end of town that time.

By 1976 Grahame was managing the eastern section of the pipeline, and it equated to seven days a week of abuse for an entire year. When he took over, The Pipeline Authority (the feds) were irate about coating issues on completed parts of the main line, risking tens of millions of dollars, and AGL wanted answers on the 190 kilometres of pipe sitting in a yard with defective UV coating. The loose ends had been untouched for months.

Then there were the regulations to deal with. “The fire and water authorities wanted trails maintained for access but fitted with gates to deter trail bike riders. The environmental authorities wanted them all eliminated and covered in slow growing native plants. The mines department wanted fast growing vegetation to reduce the danger of erosion.”

And then, just before launch, one single dent in the pipeline near southwest Sydney threatened the operation of the entire project. Things are precarious to the end in the energy sector. AGL phoned Grahame every two hours about it. The response was clarinet roulette if you will: increase the gas pressure to a point where the dent might blow out, but not so great as to burst the pipe and kill them all.

The blow was just enough, and Grahame’s team survived, and natural gas arrived in Sydney on New Year’s Eve, 1976, replacing the toxic stuff that used to be produced from coke and coal out of Mortlake. AGL lit a gas flame at the Opera House to celebrate. None of the engineers were invited.
Close all the holes of a clarinet and blow it right. You’ll get its deepest sound, an E below middle C; a column of air vibrating back and forth 165 times a second. Natural gas in the Moomba to Sydney pipeline just flows in one direction at four kilometres an hour. You could walk beside it. It’s hardly a large flow.

“In my view, there’s bookoo gas,” Grahame tells me. I had to look up the term: a southern USA corruption of beaucoup. He’s an oil and gas man after all. The meaning was clear enough: plenty of gas, and plenty of capacity in the pipeline.

I showed him Alan Finkel’s Independent Review into the Future Security of the National Electricity Market to get his opinion on the current gas crisis. He wasn’t impressed. In its place, he gave me a summation of the issue with a simplicity that only a direct and disciplined engagement with the full detail of the matter could enable.

We know that gas producers have ramped up exports since 2015 via liquefied natural gas (LNG) projects in Queensland, exposing the eastern market to exports for the first time. We know that the source is coal seam gas (CSG), the most expensive of any gas to produce. We know that two-thirds of our gas now goes overseas, a ratio the Turnbull government is looking to reduce by force.

But what is not common knowledge is that gas producers have committed to long term contracts of a fixed supply but a variable price. And the bulk of our gas exports go to Asia, where, unlike the domestic market, the gas price is linked to the oil price.

When the investments were made—based on expensive CSG production—the international oil price was US$100 a barrel. The price is now half that amount after sliding in 2014, so the cost of production is now greater than the sale price. That’s after $70 billion has been sunk in the infrastructure.

After my discussions with Grahame I went searching for confirmation beyond the many white papers, reviews and official statistics. Santos provided it to the ASX in August 2017: “Santos has lowered its Brent oil price forecasts to US$50 per barrel in 2017 … As a result of the changes in assumptions, Santos expects to recognise an impairment of Gladstone LNG (GLNG) of approximately US$870 million after tax, predominantly due to lower oil prices.” The GLNG Media Centre hasn’t put out a good news story since May 2016.

Gas companies don’t like making a loss, so who do you think is making up the shortfall? All of us, paying more for the conventional natural gas that’s been coming through the pipelines for decades The Labor Party’s 2012 Energy White Paper warned of “transitional pressures” but made no mention of export prices. Read carefully, however, and there’s a hint of how it all works when there’s a shock to the system: “Recent floods in Queensland slowed CSG production, and some LNG producers have begun to supplement contracted reserves in the ramp-up period from conventional supplies in the Cooper Basin.”

The Coalition’s 2015 Energy White Paper was even less useful. “Increasing supply and improving market function are key to easing these price pressures, but continued movement towards parity with higher international prices are nonetheless inevitable.” So much for the theory—the domestic price towers above the international price today.

But alarmingly the Finkel review makes the same mistake. “Domestic users in the east coast gas market now compete for additional gas supplies with prices set at a level that competes with the international market.”

We’re left to ask: if none of these reviews can command the basic details of the issue, what chance then for leadership to make the right energy decisions?
It isn’t by chance that Grahame is attuned to export prices. It comes from an outward-looking life in international trade, leading projects in Indonesia, Iraq, Trinidad and the United States. He was CEO of CMPS&F when it was an Australian Exporter of the Year in 1995, but it wasn’t always so for the company. It was a chronic underperformer when Grahame’s tenure began in 1987.

Nick Greiner’s M4 changed the outlook and culture of Grahame’s company. When the NSW Premier wanted a privately built, owned and operated freeway running parallel to the oldest highway in Australia, Grahame wasn’t interested in just the design work. Unlike every other engineering firm, Grahame wanted to own and manage the M4 too.

That strategy challenged an ethical assumption as old as the profession itself: not to dabble in construction and engineering at the same time. “This man is a dentist, so we can’t show you his face on television,” so to speak.

The old principle made no sense. As Grahame put it, clients were starting to ask, “If your designs are competent why don’t you take the construction risk?” Clients wanted complete packages, seamless experiences.

Grahame’s company was one of the first to marry construction with finance in a way that exemplified 1980s deregulation. Australian banks weren’t afraid to take a risk on an infrastructure project by then, so the Commonwealth Bank provided 100% of the debt to the CMPS subsidiary, StateWide Roads, in return for only a 12.5% preference share. CMPS put in a mere one million dollars. They all made a killing. By the time Macquarie Bank bought up StateWide Roads, the $1 million had become $300 million. Macquarie had already copied the business model, so they bought the prototype too.

It wasn’t the numbers that left an impact on me, but the methods. Not for their sophistication, but for the exact opposite. For their directness, for their flatness.

For a structure that kept senior management close to the bitumen. Alan Livingstone ran StateWide roads, and he’d already led a company that built major infrastructure for the government, including highways. Alan and his team knew who to call and how to talk to them, so they had no need for a principal contractor. It had never been done before. Thirty subcontractors were studied carefully and managed directly. Disputes with residents were handled directly, with a company chequebook in hand. They met with a single banker once a month and otherwise got on with the job.

Who builds like that today? WestConnex includes the M4 widening and M4 East projects, so a brief comparison to the original M4 might be insightful. The current M4 financing arrangements have no less than six creditors: CBA, Crédit Agricole (a French bank with historical ties to farming), ING, NAB, Natixis (another French investment bank) and Westpac. The entire project has been separated from the NSW Government as the Sydney Motorway Corporation. The Treasurer and the portfolio ministers have been reduced to shareholders.

In July 2017 a leaked cabinet document suggested that legal claims by subcontractors had reached $1 billion and the first part of the project, the M4 widening, was behind schedule and over budget. “You just shudder to think what the status will be of the more complex stages of WestConnex,” the Labor Opposition Leader said.

Well it’s a Liberal-National government that’s behind the M4 widening and it was a Liberal-National government that did the original M4. And yet the original M4 was finished nine months early.

Every musician, every note. With an approach to management that directly connects the full team, you’ve got a fighting chance of taking care of the details.
“The great regret of my board roles was that I did not have much support for the project outcomes which was my passion. Directors largely were accountants and lawyers who concentrated on corporate governance and finance issues, their comfort zone. They felt project delivery was a management problem.”

To be fair, Grahame appointed his fair share of accountants and lawyers to his own board. He’s met a few, but then again, he’s also met any number of steam turbine engineers incapable of putting their minds to gas turbines. They all still frustrate him.

In 2004 Malcolm Turnbull tried the ‘corporate doctor’ line to explain why he wasn’t aware of the logging practices of the subsidiary of a company that he chaired. It didn’t go well for him. Too many degrees of separation. Too many details unseen. Lucy Turnbull has suffered the same: as chief of the Greater Sydney Commission in 2016, she was unaware that entire streets of heritage homes in Haberfield were being demolished to make way for WestConnex.

Musicians don’t think like that. “When you start losing detail, whether it’s in music or in life,” said the American clarinettist Benny Goodman, “you start to lose substance.”

Grahame was once asked by his marketing director at Huffco (while working in Trinidad for the Houston-based oil company): “What does playing clarinet for the Trinidad Symphony do for Huffco?” It was more of the same disconnected thinking.

“The president is the patron of the orchestra,” Grahame replied.

“The president of what?”

“The president of the f—ing country! The president knows I run Huffco here, and a word is always welcome on behalf of friends.”

In turn, not a bad way for a president or a prime minister to simply keep in touch with the finer details of a nation. We’ve long realised the importance of social connectedness in Australian life, but when it comes to managing connectedness in Australian workplaces, there’s still so much understanding and self-awareness yet to be grasped. For that omission, we all continue to pay the price.