Giles Parkinson interviewed Barry Murphy, who has had a long involvement in the energy industry, to get his insights into a major challenge – helping develop an efficient national rail system.
Getting transport back on track
After 30 years in the energy industry, including several as chairman and CEO of Caltex Australia, it’s hard to imagine Barry Murphy wanting, let alone needing, to head off to undertake a post graduate diploma in energy studies at WA’s Murdoch University.
But that’s exactly what he did at the start of 2004, even as he juggled a busy schedule of key public and private business responsibilities. The course took him through the full gamut of the energy industry, including nuclear, oils and renewables–and how they impact on society, the environment, future demand and public policy.
“I knew about fossil fuels and oil, but not enough about renewables and how they are all connected,” Murphy says. “So I went back and studied that and I’m glad I did. The thing that really grabbed my attention the most was an elective called greenhouse science and policy. That utterly absorbed me. Even then, just a few years ago, it was a fairly exotic thing to be studying but now, of course, it’s a major topic of public discussion.”
Murphy has always had a fascination for what’s around the corner for the energy industry. Even as a rising executive at Caltex in the 1970s, Murphy enrolled himself in a post graduate course in environmental studies at Macquarie University in Sydney. It was a choice that raised eyebrows at his workplace and among his fellow students. “Why am I sitting out here with you,” he remembers being asked by a fellow student as they were camped on the banks of the Darling River one night. “You’re supposed to be my enemy. Why are you doing this?”
At the time Murphy was leading a proposal to build a petroleum products pipeline from Sydney to Newcastle. It was a controversial project but Murphy defended it because it would be more efficient and reduce risks to the environment. “We had a fleet of small coastal tank ships with their potential for spillage, high cost and industrial problems. Now, most people don’t even realise it’s there. It works well,” he says.
“I’ve always had a concern about how the industry can deliver the essential energy we need every day in a way that creates the minimum damage to the environment.” Now, of course, the energy issue has assumed global consequences and Murphy is intrigued about the course of the debate.
“This could be the first truly universal issue that the world has faced, and I find it extraordinary how quickly it has arisen in people’s awareness. I think it’s a good thing. It’s difficult to get an inherently complicated scientific issue like this well understood in the public mind, but I think a lot of people are getting the gist of it pretty well.”
Murphy is among the few who have served as chairman and CEO of a public company and as a head of a government owned entity. At Caltex, where he was chairman and CEO between 1991 and 1995, he initiated and drove the merger of Caltex and Ampol that created the country’s largest downstream oil company, and generated savings of $500 million. At the Federal Airports Corporation, he oversaw the privatisation of 17 of Australia’s biggest primary, regional and general aviation airports and the creation of Sydney Airport as a stand alone business.
Murphy was also the inaugural chairman of Delta Electricity and held that role from 1996 to 2000, and was executive chairman of Mincom Ltd, one of the country’s largest exporters of computer software. During this same period, he acted as an advisor in the financial rehabilitation of Thailand’s largest petrochemical plant and a major electricity business in the Philippines.
Government and private sector
Murphy continues to straddle the private and the government world, and moreover has maintained his fascination with energy and the environment. For the past seven years, he has been chairman of Australian Rail Track Corp (ARTC), charged with the seemingly invidious task of establishing a national rail track system across the country that operates under a single management.
Since 2005, he has also chaired Natural Fuels Australia, a company that has just opened the country’s largest bio-diesel plant in Darwin, and he is a director of Southern Oil Refining, Babcock & Brown Environmental Investments Ltd., and is a director of Telstra Sale Company, an entity acting as trustee for installment holders in the recent T3 sales process. These roles may appear diverse and unrelated, but Murphy sees a certain synergy, particularly as he believes the world must soon act decisively to address its transport energy needs.
Murphy describes ARTC as a rare beast in the business world. It was established by agreement with the states but has but a single shareholder – the Commonwealth Government – and otherwise embodies the quintessential elements of a privately owned company not that of a government owned enterprise.
“For that reason it is an interesting animal,” Murphy says. “It does real things – it runs itself as a commercial organisation, with normal commercial behaviour and rules, and makes a profit and so on. It sets its own access fees, it invests and it borrows, and at the same time it has an element of national interest.
“It’s interesting to see how private enterprise works and how government enterprise works. I think there are many similarities if the organisation is run well. Like any company you need to hire good people, and you need to create a good culture.”
Since Murphy took the role in 1999 – ARTC was first created in 1997 – the organisation has grown from 100 employees and revenue of $100 million, to one that hires 500 employees directly and a further 1,100 indirectly, and boasts revenues of more than $500 million and balance sheet assets of $1.6 billion.
National rail gauge
“What we are seeking to do is to develop a national standard gauge rail system between Brisbane and Perth that is of uniform and improved quality, and operating under one management so that investment can be directed to where it will produce the results and where we can oversee and control the efficiency of the whole operation. That is the end objective.
“So successful has it been that the ARTC has been asked by the NSW Government to manage its country regional network, in a spirit of national purpose, we agreed to do that. We run mainlines as a business, and manage the NSW on behalf of and for the NSW government. It is an arrangement that is working well.
“It’s anything but a government department, not to be disparaging about what they do. It might be owned by the Federal Government, but it is managed as a well run enterprise. We do a lot of consultation. We don’t just do things because someone gave us a budget, and we spend a lot of time on planning. We iterate it until we get it right. When we’ve got it right and we tell everyone what we are doing, then we go and do it.”
Murphy is currently into his third term at ARTC and his five year program may now take only three years. He hopes this will give rail operators the confidence to invest in more rolling stock, and thereby pull more freight transport off the nation’s roads. Among ARTC’s major infrastructure investments include a $387 million Hunter Valley Coal Network Enhancement Strategy, a bridge across the Murrumbidgee River at Wagga, and a new advanced train management system that is being developed in conjunction with US defence giant Lockheed Martin that will reduce the need for signals and wayside equipment and greatly improve the efficiency of the track.
“I like to think that the shareholders see what we are doing and they sense that maybe we are making a difference,” Murphy says. “In the last few budgets the Federal Treasurer has made a number of special grants – we did not ask for them, but he said here’s a grant, use it in the most effective way to improve Australia’s long distance rail network. The last one was $270 million and as a result we will now be able to install concrete sleepers between Melbourne and the Queensland border. That’s a huge step for the reliability of the mainline system.”
Murphy’s skills are also being used to establish a steering group that will bring together the rival associations that have grown out of the nascent renewable fuels industry. Confusion and rivalry between the two groups led to frustration and disenchantment at government level, just as they were lobbying for favourable tax rulings on bio-fuel products.
“I was asked to see if we could get the two groups together … and run one well respected organisation so the government could have a body to consult with that knew what it was talking about. If the government sees dissension, it has the luxury to take notice of neither of them. So we are trying to fix that.”
Meanwhile, Natural Fuel has recently opened a bio-diesel plant in Darwin. That was two weeks ago, and it went off very well.
“Nobody, least of all me after 30 years in the oil industry, thinks that bio-diesel will completely replace petroleum, but I think I can see a few things that need to happen. Australia has got to become more involved in developing these ideas and seeing what fits best in this country. Apart from its own energy security – most people wouldn’t know that Australia now imports more than 25 per cent of its diesel requirements – that is going to get more acute, we have the issue of climate change, so we need to get more energised about these issues.
“We need to do more research, and the oil companies need to be more pro-active. They are not evil, they do get a bad wrap, but they need to be more forthcoming and step forward and be more interested in seeing what would work best in Australia.
“Renewables are not a panacea, and I do know the limitations of these things. But there is a big issue with fossil fuels, and Australians need to be a bit more concerned and a bit more interested in trying to find something that works here, because our climatic conditions are not looking all that favourable at the moment. Nothing is simple, nothing is easy, but we have to figure out what is the least damaging thing we can do.”
Giles Parkinson is a freelance journalist specialising in business and corporate issues. He writes for a variety of Australian and international publications, including The Bulletin, AsiaMoney, and Institutional Investor. Giles is a former Investment Editor and Deputy Editor of The Australian Financial Review.
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