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Thursday, 14 June 1984
Page: 3014


Senator MACKLIN(1.33) —On 29 May a letter was sent to all honourable senators from a company called Red Ru Pipeline Construction Co. Pty Ltd attached to which was a brochure concerning the auction of a large amount of earthmoving equipment. The letter started:

This letter is not a whinge . . . it is a cry of Protest! I believe that an Australian company that does the right thing: does not lie, cheat nor bribe; displays technical and business competency, and builds a magnificent company as had Red Ru-deserves a fair go.

I believe that that letter is important. I shall outline the chronology leading up to the receipt of that letter by honourable senators so that they may have some understanding of what, in fact, has gone on. The story begins in 1981 when oil was discovered in south-western Queensland. Ron Nicholas, the Managing Director of Red Ru, had the idea that a pipeline ought to be built from the Jackson oil fields in south-western Queensland to Brisbane. The alternative, of course, was to pipe down through South Australia. He put the proposition to the Queensland Government, which was delighted and sought other proposals. At that stage, Red Ru was favoured to win the $100m job. In September 1982 Red Ru started discussions with Tubemakers-BHP regarding accelerated deliveries so that the pipeline could move on the proposed schedule. Red Ru then submitted its proposal for the project to the Queensland Government. It was accepted by that Government on 25 October 1982. Red Ru then applied for a licence to construct, own and operate the 700-kilometre pipeline from the Jackson oil fields to Brisbane. The licence was granted on 29 November 1982. At that stage, the Korean multinational ICC was approached and taken on to help finance and assure markets . ICC wanted to own and control the entire operation but Red Ru was unwilling to relinquish that to ICC. Tubemakers-BHP was also involved at that time, as were other companies. Interest was expressed by a number of other development companies in this area as this was seen as something which would get off the ground.

In January 1983 Red Ru approached Tubemakers-BHP regarding a partnership to operate and build part of the pipeline. Then comes a very important event. On 29 January 1983 an article appeared in the Courier-Mail, the information obviously being leaked from the Premier's Department, regarding rumours about Red Ru. On 3 February 1983 at a conference between Red Ru and ICC, the Korean multinational, ICC agreed to take 25 per cent equity. On 11 February that year a second article appeared, which talked about Government worries, possible deadlines being unable to be met, and a variety of other matters which would obviously have concerned people involved in this area.

On 13 February a meeting took place between Red Ru and Tubemakers-BHP, confirming their partnership for 50 per cent of the project equity. So we had the multinational, ICC, with 25 per cent and Tubemakers-BHP, controlled by the largest Australian company, linked in with Red Ru, taking 50 per cent. This agreement was the substance of a letter which was sent to the Premier on 14 February. It was not sent through the ordinary mail but was delivered personally , along with other documents. The Queensland Cabinet met on the following day and the Red Ru proposal was not tabled. This has been confirmed by two senior Cabinet Ministers present at the Cabinet meeting. In addition, a Treasury memo was tabled which said that Red Ru had applied unsuccessfully for a Department of Industrial Development loan. The Red Ru management has denied, and denied emphatically, that no loan guarantee had ever been applied for. At that Cabinet meeting, without the documents regarding the involvement of BHP and ICC and with a document saying that Red Ru had not got a loan, the Cabinet rescinded the 29 November 1982 invitation to Red Ru.

On 16 February 1983 a telex from the Premier of Queensland to Mr Nicholas, the Managing Director of Red Ru, stated that there would now be four partners, each with 25 per cent equity. Invitations had been sent to a number of other possible partners, and they were given 48 hours to accept. The following day, 17 February , Red Ru acknowledged the situation, since there were no other options to the 4 x 25 per cent corporate structure. A telex noted the assumption that the 25 October 1982 proposal by Red Ru, accepted by the Government, remained, except for the change in its tariff agreement. Three hours later the Premier's Department replied saying that that assumption was not correct. The proposal of 25 October, as accepted by the Queensland Government on 29 November, had been totally rescinded. It took a telex from Red Ru to find out 48 hours later what precisely had gone on.

On 18 February Red Ru wrote to the Premier accepting the conditions that were now laid down and reaffirming its willingness to take up the 100 per cent equity that it had originally been offered and granted. On 21 February the Queensland Premier telexed Red Ru and stated that after Cabinet reconsideration work on the Jackson pipeline would be shared in the following manner: Twenty-five per cent to ICC and Moonie Oil Co. Ltd and 50 per cent to Naccowlah Block Partners. Red Ru was mentioned indirectly as a possible participant in sub-contracts. There were no direct mentions to Red Ru as to the reasons or any negotiations.

On 1 March a protest was made to a senior Government Minister about the matter. That Minister was astonished to find that Tubemakers-BHP had formed a partnership with Red Ru of which the Minister said he knew nothing. He advised that a letter be sent to the Premier, the Minister for Mines and Energy, the Treasurer and the Co-ordinator General. No reply to that telex was ever received . On 6 March, no reply having been received, Red Ru sought an interview with another senior Minister, who was also astonished by the events that had taken place.

Of the other intervening movements, the important one occurred on 30 May when ICC, the Korean company, pulled out, leaving 25 per cent equity free. ICC was forced to pull out because the Federal Government had rejected the Korean firm's participation. So 25 per cent equity was now available. An offer was made to Red Ru of 8 1/3 per cent, to Bridge Oil Ltd of 8 1/3 per cent and to Westfield Oil of 8 1/3 per cent. Red Ru was encouraged to apply for a loan guarantee and did so on 30 August. On 2 November the Courier-Mail ran an article saying that Red Ru had been denied the loan guarantee. This was not confirmed to Red Ru until it received a letter on 8 November, six days later. Red Ru telexed the Premier and reinforced its claim to the 8 1/3 per cent equity and its desire to go to the marketplace. But this was ignored and the entire 25 per cent went to a shelf company comprising Bridge Oil and Westfield Oil.

So what had happened was that Red Ru had started out with an innovative and go- ahead idea and with 100 per cent equity. The Premier had then intervened and Red Ru got 25 per cent equity. After the next intervention Red Ru had no equity, but the possibility of some contract work. Then the entire contract work was given out to others. Questions which are important for Australian companies have to be asked. They are important for companies which wish to get on and work for the development of Australia and which find operations such as that which I have just chronicled taking place. Those questions are: Why did a Queensland-based pipeline construction company investing in a $150m project and employing over 600 people get squeezed out totally? Why are documents which were vital to its interests not tabled? Why was misleading information which was detrimental to the commercial interests of the company circulated by government departments?

These are matters of importance. They ultimately come down to a question which still has to be answered. The Queensland Government had accepted the idea on the development and had encouraged Red Ru to gear up, as every senator would have seen from that brochure which listed the equipment available to undertake that project. In two months it had gone from having a licence, the equipment and the commercial linkages to go ahead with that project, to having nothing. If that can happen to one company it can obviously happen to many more. I believe that we have not heard the last of this incident. I think it gives pause to many companies in Australia-companies such as the one to which I have referred, an Australian company which, as the Managing Director mentioned in the letter, has sought up and down the line to do the right thing and has found itself in a situation where everything is taken away from it. I think the question at the end of that letter to honourable senators is well worth repeating:

Is this the way Australia expects to make it in this competitive world?