WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c - WorldReginfo Annual Report 2008Annual Report

Woodside Petroleum Ltd. Annual Report 2008 ABN 55 004 898 962 10 Year Comparative Data Summary

Year Ended 31 December 2008 2007(12) 2006(12) 2005 2004(7) 2003 2002 2001 2000 1999

Contents Profit and Loss ($m) Sales Revenues Australia Pipeline Gas 378 271 242 LNG & LPG 1,389 847 915 Chairman’s overview 2 About this report NWS Gas (Pipeline, LNG & LPG) - - 1,052 789 763 725 765 692 595 NWS Oil/Condensate 1,428 1,119 1,106 1,005 772 696 694 644 683 303 Woodside’s strategy 3 This 2008 Annual Report is a summary of Woodside’s Australia - other 2,493 1,381 981 591 487 552 773 936 979 91 Gulf of Mexico 237 158 157 28 ------CEO report 4 operations, activities and financial position as at 31 Algeria 65 65 74 71 77 8 - - - - December 2008. Continuing Operations 5,990 3,841 3,475 2,747 2,125 2,019 2,192 2,345 2,354 989 CFO report 6 Mauritania (Discontinued Operations) - 163 335 ------Total 5,990 4,004 3,810 2,747 2,125 2,019 2,192 2,345 2,354 989 Woodside Petroleum Ltd (ABN 55 004 898 962) is the (1) LNG markets overview 10 EBITDAX Before Significant Items 4,581 3,167 3,179 2,141 1,606 1,386 1,382 1,779 1,937 605 parent company of the Woodside group of companies. EBITDA 4,182 2,592 2,781 1,904 1,923 1,090 404 1,683 1,908 587 Reserves statement 12 EBIT(2) 3,298 1,859 2,235 1,624 1,645 854 114 1,331 1,510 443 In this report, unless otherwise stated, references to Exploration & Evaluation 348 524 422 306 253 296 978 96 29 18 ‘Woodside’ and ‘the Group’, ‘we’, ‘us’ and ‘our’ refer to Depreciation & Amortisation 884 733 546 280 277 236 290 352 398 144 Business reviews 16 Finance Costs 23 10 26 9 1 26 46 70 102 59 Woodside Petroleum Ltd and its controlled entities, as a Tax Expense 1,489 819 782 508 498 301 160 351 441 53 whole. References to ‘the company’ refer to Woodside NPAT Before Significant Items(3) 1,832 1,182 1,396 1,038 672 527 658 818 877 327 North West Shelf 16 NPAT 1,786 1,030 1,427 1,107 1,146 527 (92) 910 967 331 Petroleum Ltd unless otherwise stated. The text does not EPS (cents) Before Significant Items(3)(8) 267 176 212 158 103 79 99 123 132 49 Greater Enfield 18 EPS (cents)(8) 261 153 217 169 175 79 (14) 137 145 50 distinguish between the activities of the parent company DPS (cents)(4) 135 104 126 93 59 46 62 70 82 26 Pluto LNG project 20 and those of its controlled entities. Payout ratio (%) Before Significant Items(3) 51.5 59.9 60.2 59.7 58.5 58.2 62.8 57.1 62.3 53.0 Sunrise 22 EBITDA/Op Cash Flow (%) 110.5 104.4 143.9 137.9 160.5 90.6 33.5 151.8 127.8 105.7 References in this report to a ‘year’ is to the calendar year Balance Sheet ($m) Browse 23 ended 31 December 2008 unless otherwise stated. All Total Assets 14,929 9,730 8,969 6,969 5,446 4,782 5,011 6,115 5,969 4,721 Debt 2,957 1,032 1,820 1,128 1,013 1,068 1,429 1,662 1,415 1,835 Other Australia 24 dollar figures are expressed in Australian currency unless Net Debt 2,816 894 1,507 895 216 891 1,274 1,502 1,140 1,691 otherwise stated. Shareholder Equity 6,932 5,094 4,202 3,501 2,771 2,434 2,320 2,554 2,111 1,691 United States 25 Cash Flow & Capital Expenditure ($m) Other International 26 Woodside is continuing efforts to reduce its environmental Cash Flow From footprint associated with production of the Annual Report. Operations 3,784 2,482 1,933 1,381 1,198 1,203 1,207 1,108 1,493 555 Investing (4,568) (2,026) (1,900) (1,511) (94) (741) (730) (811) (428) (717) Health and Safety 27 In line with changes to the Corporations Act 2001 during Financing 803 (622) 55 (462) (352) (419) (484) (418) (948) 212 Capital Expenditure Sustainable business principles 28 2007, printed copies of the Annual Report will only be Exploration 491 533 499 276 105 113 87 278 233 148 PP&E and E&D(9) 5,012 2,342 1,448 1,303 652 382 343 491 236 288 Environmental excellence 29 posted to shareholders who have elected to receive a printed copy of the report. Ratios (%) Social contribution 30 ROACE Before Significant Items(3) 22.4 19.4 26.8 26.5 19.7 15.0 16.5 22.4 26.8 11.0 The Annual Report is also printed on an environmentally ROACE 22.7 17.1 27.1 26.5 31.5 15.0 (1.5) 24.8 30.7 12.4 Our people 31 Return on Shareholders Funds Before Significant Items(3) 26.3 22.5 33.5 30.2 29.3 21.6 28.4 32.0 41.5 19.4 responsible paper manufactured under ISO 14001 Return on Shareholders Funds 25.8 20.2 34.0 31.6 41.4 21.6 (4.0) 35.6 45.8 19.6 Woodside’s Board of Directors 32 environmental management standards, using Elemental Gearing 28.9 14.9 26.4 20.4 7.2 26.8 35.5 37.0 35.1 50.0 Corporate governance statement 34 Chlorine Free pulps from sustainable, well managed forest. Volumes Sales (million boe) Directors’ report: 45 Australia 2008 Woodside Sustainable Development Report Pipeline Gas 18.9 16.4 15.5 Remuneration report 46 LNG & LPG 18.2 18.2 18.5 NWS Gas (Pipeline, LNG & LPG) - - 34.8 30.8 31.0 27.9 28.2 24.8 26.7 Woodside also publishes a Sustainable Development NWS Oil/Condensate 13.2 12.6 12.8 14.0 14.4 16.2 15.7 15.0 15.1 9.8 2008 Financial Report 59 Australia - other 24.5 15.6 11.7 8.0 9.1 13.3 19.1 23.2 24.8 2.6 Report that combines our Health, Safety, Environment and Gulf of Mexico 3.1 2.6 2.6 0.4 ------Community performance, available on request or from the Mauritania - 2.0 4.3 ------Shareholder information 122 Algeria 2.3 2.3 2.3 2.3 2.3 0.1 - - - - company’s website (www.woodside.com.au). Total (million boe)(6) 80.2 69.7 67.7 59.5 56.6 60.6 62.7 66.4 64.7 39.1 Production (million boe) Shareholder Registry: Enquiries 123 Australia Pipeline Gas 18.9 16.4 15.6 Investor Relations: Enquiries 123 LNG & LPG 18.6 18.6 18.6 NWS Gas (Pipeline, LNG & LPG) - - 35.0 31.5 31.1 28.3 28.5 25.2 26.7 Business Directory 123 NWS Oil/Condensate 13.5 12.7 12.8 13.8 14.3 16.4 16.0 14.8 14.9 10.4 Australia - other 24.9 15.8 11.6 8.2 9.3 13.1 19.9 23.0 24.9 2.6 Key Announcements 2008 124 Gulf of Mexico 3.1 2.6 2.6 0.4 ------Mauritania - 2.2 4.4 ------Events Calendar 2009 124 Algeria 2.3 2.3 2.3 2.3 2.3 0.1 - - - - Total (million boe)(6) 81.3 70.6 67.9 59.7 57.4 60.7 64.2 66.3 65.0 39.7 Glossary 124 Reserves (Proved plus probable) Gas (Tcf) 7. 9 7.8 6.9 4.7 5.1 4.7 4.8 4.5 4.6 4.7 Quick Reference Guide 124 Condensate (MMbbl) 151.4 152.1 144.6 129.7 138.0 145.7 154.9 154.6 149.4 159.2 Oil (MMbbl) 168.8 170.2 221.1 294.5 258.8 341.5 300.1 263.3 236.4 146.1 Conversion Factors 124 Other 10 Year Comparative Data Summary 125 Employees(10) 3,099 2,981 2,888 2,508 2,528 2,219 2,418 2,420 2,198 2,141

Annual Report 2008 Shares High ($) 70.51 56.66 49.80 39.39 21.48 15.10 15.05 16.42 15.25 12.25 Low ($) 26.81 34.81 34.81 19.87 14.11 10.00 11.50 12.29 9.30 7.10 About the cover Close ($) 36.70 50.39 38.11 39.19 20.10 14.80 12.38 13.39 14.75 11.25 Number (000’s) 698,553 688,331 666,667 666,667 666,667 666,667 666,667 666,667 666,667 666,667 The cover picture shows the final inspection inside the No. Shareholders 141,035 131,460 119,003 83,829 72,267 69,491 67,523 55,347 42,135 43,201 Market Capitalisation ($m) 25,637 34,685 25,407 26,127 13,400 9,867 8,253 8,927 9,833 7,500 membrane tank of an LNG carrier. The corrugations in the Finding Costs ($/boe) (3 year average)(5)(11) 4.11 4.59 3.29 5.50 2.22 2.06 1.37 1.23 0.61 0.52 aluminium tank, one of four in the vessel, allow for the Effective Income Tax Rate (%) 32.7 35.8 35.4 31.4 30.3 36.4 235.8 27.9 31.3 13.8 expansion and contraction associated with loading and Net Debt/Total Market Cap (%) 11. 0 2.6 5.9 3.4 1.6 9.0 15.4 16.8 11.6 22.6 (1) Includes Significant Items other than 2002 Successful Efforts and 2001 Gulf of Mexico write-off. off-loading LNG which has been chilled to -160º C. The (2) EBIT is calculated as a profit before income tax, PRRT and net finance costs. photograph was taken at the Samsung Shipyards in Korea, (3) Excludes Significant Items (2002 results restated to reflect effect of successful efforts policy from January 2002). (4) DPS for 2002 includes a 41.0 cents dividend that was declared after 31 December 2002. where Woodside’s new LNG carrier is under construction. (5) Finding cost for 2003 includes acquisitions of additional Scope for Recovery volumes. The 165,000 m³ vessel will be owned by A.P. Moller-Maersk (6) From 2003, Woodside reports oil and condensate on a volumetric basis. and chartered to Woodside on a long-term basis for our (7) From 1 January 2005, Woodside prepares its financial statements in accordance with Australian equivalents to IFRS (AIFRS). To highlight the impact on previously reported data the We have partnered with Green information provided for 2004 has been restated. Information pre 1 January 2004 has not been adjusted for the effects of AIFRS. Reports TM in an initiative that Pluto LNG Project. Woodside will name the 276 m vessel (8) Earnings per share (EPS) has been calculated using the following weighted average number of shares 2008: 685,179,496, 2007: 671,447,950, 2006: 657,178,947, 2005: 655,150,640, ensures our Annual Report in late 2009. Photograph copyright by Samsung Heavy 2004: 653,790,795, Pre 2004: 666,666,667. obligations are not impacting the (9) 2005 PP&E capital expenditure includes acquitions through business combinations of $415,063,000, relating to Gryphon Exploration Company. environment Industries. (10) From 2005 employee numbers do not include third party contractors. Previous years have included third party contractors. (11) Finding cost methodology has changed from 2004 to be in accordance with the FAS69/SEC industry standard. (12) 2006 and 2007 data is presented inclusive of Mauritania operating results. This differs from the Income Statement which presents the Mauritanian result in Discontinued Operations. Further information on the Discontinued Operation is presented in Note 2: Segment Reporting. WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c 125 Energy to deliver

About Woodside About the logo Woodside is Australia’s leading independent energy Early in 2009, Woodside unveiled a change to its logo. The company, with a 55-year history backed by operatorship change is intended to place greater emphasis on the future of one of the world’s premier resource developments, the of our liquefied natural gas business, while continuing to A$27 billion North West Shelf project. acknowledge our foundation oil and gas projects.

We produce natural gas, liquefied natural gas, liquid Our new logo is comprised of three ellipses which come petroleum gas, condensate and oil for customers around together to form a ‘W’. The three ellipses also symbolise a the world. We are a stable and reliable supplier with a focus flame. on delivering on our commitments. The centre ellipse, slightly enlarged, is coloured sandstone Our position in the global energy market is growing, with an and represents a hydrocarbon reservoir. impressive portfolio of oil and gas developments including The colour of the left ellipse is foundation grey and our Pluto liquefied natural gas project. With first gas represents Woodside base business, including our oil scheduled for the end of 2010, the A$12 billion Pluto project assets. This ellipse supports the logo in the same way will help triple our current equity production of liquefied these foundation businesses will support Woodside’s future natural gas, compared to early 2008. growth. With our large natural gas resource base, Woodside is a The colour of the right ellipse is Woodside red, and this sought-after provider of cleaner energy. We seek excellence represents our company’s gas business going forward. in environmental performance, and ensure that wherever we operate, the local community benefits from our This is the first substantial change to Woodside’s logo in 32 presence. years.

1WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Chairman’s overview

Michael Chaney, AO The second was the announcement by the Commonwealth Michael has been on of an emissions trading scheme to commence in 2010. Woodside’s Board since While the proposed scheme would provide some 2005 and Chairman since 31 concessions to LNG projects, its additional costs could July 2007. make the Australian LNG industry less competitive than its international peers, and result in some potential projects The last year has reminded all of us in business how quickly becoming uneconomic. economic conditions can change, and what an amplified In terms of new developments, 2008 was a good year for effect that change can have on the market place and on Woodside. We brought five projects on line and completed individual companies. the commissioning of a sixth. The 2008 year saw a volatility in commodity prices unlike The start-up of Train 5 and Angel on the North West Shelf, any experienced before within a 12-month period. Oil prices the Vincent oil project, the Neptune and Power Play commenced the year at around US$90 per barrel, rose to developments in the Gulf of Mexico and steady state a high point of US$145 per barrel in July and fell to around production from the Otway Gas Plant helped the company US$40 per barrel by December. to achieve record production in 2008. The spike in prices, and increased production, helped In addition, final investment decisions were made on Woodside report a record profit for the year of $1.786 other significant developments. We committed to the billion, a 73% rise on the amount earned in 2007. The redevelopment of North Rankin at the North West Shelf, directors declared a fully franked final dividend of 55 cents and the nearby North West Shelf oil assets. We now have per share, resulting in a full-year dividend of 135 cents per 33% equity in these oil assets after buying Shell’s share share, up 30% on last year. early in 2008. The Cossack Pioneer floating production The mark of a good business is that it is able to remain storage and offloading vessel is on track to be replaced by profitable in good times and bad. Woodside is such a the Okha in 2010. business. Our focus continues to be on developing new oil Meanwhile the Pluto LNG Project continues to make good and gas projects in a timely, cost effective manner and in progress with work 42% complete at the end of the year ensuring that costs are kept under control in our existing and first gas still expected by the end of 2010. Pluto will projects. This has been a real challenge in an environment increase Woodside’s equity share of LNG production to of rising labour and material shortages. 6.6 million tonnes per annum, and our annual operated As I said at the last Annual General Meeting, in evaluating production to in excess of 20 million tonnes. new projects we make conservative economic assumptions During the year Jakob Stausholm resigned from the to protect the profitability of projects when external Board and was replaced as a Shell-nominated director by conditions deteriorate. Ian Robertson. Jillian Broadbent retired in July after 10 The market for liquefied natural gas is forecast to continue to years service as a director. I thank Jakob and Jillian for grow at a rate of 7% per annum through to 2020; and while their significant contributions to the development of the this rate represents a slight reduction from previous forecasts, company. Melinda Cilento joined the Board in December suppliers will continue to have difficulty meeting demand. 2008. In addition to the cost increases arising from market forces, Woodside’s continued success in 2008 was a credit to Woodside was faced in 2008 with two additional, externally all our employees led by the Chief Executive Officer, Don imposed cost burdens – one immediate and one potential. Voelte. On behalf of the directors I thank them all for their excellent efforts for the company. The first was the removal by the Commonwealth Government of the exemption of the North West Shelf Project from excise on condensate production. This Budget decision, taken without any industry consultation and inconsistent with the negotiated fiscal arrangement between the venturers and the Commonwealth, has cost Woodside more than $100 million in 2008. Michael Chaney, AO

2 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Results at a glance 2008 2007 Change Production (MMboe) 81.3 70.6** Sales Revenue ($ million) 5,990 3,841 Cashflow from operating activities ($ million) 3,784 2,482

Net Profit after Tax ($ million) 1,786 1,030 Woodside Earnings per Share (cents) 261 153 Total Shareholder Return (TSR, %) 23* 52* Proved Reserves (MMboe) 1,328 1,227 Proved plus Probable Reserves (MMboe) 1,703 1,688 Contingent Resources (MMboe) 1,940*** 2,403

* Source: Bloomberg, 5 year average, annualised, USD Green = positive change ** Includes contribution from discontinued operations in Mauritania Red = negative change *** Reduction largely due to maturation of Browse evaluation plus transfers to reserves n.m. = not material

Industry trends Woodside’s strategy

Over the last few years in addition to natural decline of the ss world’s large oil fields, the industry has also experienced ine us b production disruptions, project delays and a reduction in the ry ta number and size of global exploration discoveries. en em pl LNG m When combined with growing energy demand, the resulting o growth C high commodity prices generated increased revenues but also triggered increased government intervention and fiscal Value risk across the globe. Unprecedented activity levels in the Foundation business oil and gas industry from both independent and national oil Time companies drove up competition for assets, acreage and resources, resulting in cost increases across the industry. Foundation business A number of companies dealt with these issues by diversifying their portfolio of opportunities either Woodside has an enviable portfolio of producing geographically or into new sources of supply, such as assets which provide strong and stable cash flow coal-bed methane and tar sands. Others adopted a more to our business. We look for ways to improve focused strategy, shedding peripheral assets to concentrate the efficiency and effectiveness of our technical, on those areas of the business with highest margins or commercial and corporate operations to increase competitive advantage. production and reduce overheads without compromising safety, the environment or our values. Recognising these trends and the fact that Woodside is differentiated from its peers by an enviable asset base, we LNG growth made the strategic decision to focus on our core business. Woodside is uniquely positioned with its world-class In the meantime, a number of these trends have continued gas assets, growing market demand and long-term to develop. LNG contract prices continuing to strengthen Increasing globalisation of the world’s financial markets around oil parity. We are focusing on delivering meant that when the US sub-prime market collapsed, it Pluto Train 1, and capturing growth opportunities sent shockwaves around the globe. Wavering confidence for Pluto Train 2 and beyond, as well as progressing and the global credit squeeze have generated significant new developments at Browse and Sunrise. We will volatility in stock markets. This, combined with high leverage our distinctive modular LNG experience, commodity prices, has led to falling demand and the growing talent base and robust cost and schedule commodity price decline seen in recent months. In a high management to meet the challenges and move cost environment, many companies have felt pressure on Woodside towards a position of global LNG margins and industry consolidation may continue. leadership.

Woodside’s early decision to focus on our core business Complementary business with significant leverage to LNG will continue to underpin reserve replacement and strong, long-term cash flows. Woodside will continue to build our future through exploration and value accretive acquisitions. We will maintain a limited portfolio of opportunities outside Australia and in the Gulf of Mexico to provide exposure to exploration upside.

3WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c CEO report

Don Voelte Woodside has delivered Managing Director and a strong performance in a Chief Executive Officer challenging year Don has been with Woodside since April 2004 and has more than 34 years of global experience in the oil and gas industry.

Total Shareholder Return (TSR) Performance Against Peers During 2008 Woodside has proved that it is a ‘can do’ company. We make things happen. Five new assets came 35 on production; two gas – the North West Shelf’s Angel platform and Train 5 and three oil – Vincent at Exmouth; and Power Play and Neptune in the Gulf of Mexico.

Our foundation business also delivered. The North West 5 Year 5 Shelf and Australian business assets performed particularly well. We made major investment decisions to extend the life of our NWS oil assets and to redevelop North Rankin.

Total Shareholder Return (%) Shareholder Return Total -15 This latter project, approved in Q1, was already approaching

Woodside returned almost 25% to shareholders over the last five years, 20% completion at year end. We also progressed our outperforming most of its peers*. Total Shareholder Return comprises ambitious Pluto LNG Project. It is more than 40% complete dividends plus share price performance. and on target to achieve first gas by the end of 2010 – a * Woodside’s peer group comprises the following companies: world record pace. Anadarko, Apache, BG, CNOOC, Marathon, Murphy, Petro-Canada, Pioneer, Repsol, Santos and Talisman. In 2008 we achieved our fourth consecutive year of record Source: Bloomberg, 5 year average, annualised, USD. production, our fifth consecutive year of record revenue and cash flow, and our fourth record reported profit in the past Continuing to pay attractive dividends five years. 140 135 126 We are in a strong financial position, which will help 104 us weather the storm of the world economic crisis. 93 Importantly, in addition to the depth and breadth of our

59 leadership team, we have great talent throughout our business. Our people are continuing to work hard, we are determined to move forward, and we will remain focused Dividends (cents) on our goals. 0 2004 2005 2006 2007 2008 Like many of my management team, I have seen downturns The directors declared a fully franked final dividend of 55 cents per share (55 before. Before the financial crisis, our plan was to enhance cents per share in 2007). The dividend will be paid on 6 April 2009 resulting our base business while delivering significant LNG in a full-year dividend of 135 cents per share (compared to 104 cents per opportunities. Today, our strategy still serves us well and share in 2007). The Dividend Reinvestment Plan (DRP) remains activated for the 2008 final dividend. will continue to underpin our short and long-term success. We are continuing to progress Pluto 2, Sunrise and Browse towards final investment decisions. Our vision to become a Share price performance in line with market trends global LNG leader is as clear as ever. 480 There is no doubt the economic climate brings challenges, Woodside not least of which is the need for astute cost management. Oil (WTI) But there are three special points on which we do not * All Ords compromise.

Firstly, we do not compromise on safety — we continue to strive for the perfect year in which no one gets hurt, and

Indexed growth there are no incidents. Secondly, we do not compromise staff development. Finally, we do not compromise on the environment. Respect and care for the environment in 100 which we work is not only part of our licence to operate but 1 Jan 04 31 Dec 08 a cornerstone of our values as a trusted organisation. Woodside’s share price has continued to outperform the WTI oil price and the Australian All Ordinaries for much of the past five years. The main The coming year will no doubt bring more challenges, but changes to the 2008 share price occurred in the second half of the year in Woodside will continue to build its reputation as a ‘can do’ line with the Australian and global equity markets. company. * Indexed growth is shown as a percentage from a 1 January 2004 base.

4 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c This modular approach means that we can use and Woodside’s differentiation re-use our proven designs, unitise costs and maximise Woodside has the energy effectiveness of skilled labour. Woodside stands apart from its peers with its large …and the attitude resource base and leverage to LNG Growth. Even At Woodside, we recognise that a talented and diverse

without new resource additions through exploration or workforce is a key competitive advantage and our Woodside acquisitions, at 2008 production rates, Woodside has success is a reflection of the quality and the skills of our a reserves to production ratio of around 22 years at people. We have increased the number of graduates the proved and probable level. If contingent resources and trainees, and have effective recruitment and are taken into account, Woodside could sustain these retention strategies in place. We continue to develop production rates for almost 45 years. our leaders and ensure that our staff continue to learn, …the experience stay motivated and are empowered to continue to make success happen. Our 2008 staff survey indicated our Woodside has 20 years of LNG operating experience, staff are proud to work for Woodside and are even more and when Pluto Train 1 is completed, will have built six committed to our success. of Australia’s seven LNG trains. Completed during 2008, Train 5 was the world’s first modular built LNG train. …the energy to deliver

Record profit and earnings performance(1) Strong operating cash flow(3) 3,784 2,100 1,832 300 4,000

261 1,396 1,182 2,482 1,038 1,933 672 1,381

Profit ($ million) Profit 1,198 Cash flow ($ million) Earnings Per Share (cents) Earnings Per 0 0 2004 2005 2006 2007 2008 500 (1) Before significant items 2004 2005 2006 2007 2008 The increased profit in 2008 was largely driven by stronger production (3) 2004 to 2008 restated after adoption of indirect method of calculations (Note 1(a) on page 65) and significantly higher commodity prices. These positives of Net cash from operating activities of $3,784 million was 52% higher production and price were partially offset by increased production than the previous year ($2,482 million), largely due to increased costs, increased Royalties and Excise as well as increased Petroleum sales volumes and commodity prices. Resource Rent Tax and depreciation charges. Before significant items, the underlying profit for 2008 was $1,832 million (up 55% compared Reserves growth outpaces record production to $1,182 million in 2007). In addition, during the last quarter of 2008, 1,700 1,688 1,703 profit was adversely impacted by weakening commodity prices and 350 the AUD:USD exchanges rate. Foreign exchange rate losses of $235 (4) 318 million were recognised, largely due to the revaluation of USD net 1,580 liabilities after taking into account the Hedge of Net Investment. 15% Production growth 82 81.3

Reserves (MMboe) Reserves 1,294 70.6 1,244

67.9 replacement ratio (%) Reserves 1,200 0 2004 2005 2006 2007 2008 (4) 3 year average organic reserves replacement ratio 59.7

Production (MMboe) Production 57.4 Woodside’s Proved Reserves grew by more than 100 MMboe to 1,328 MMboe while Proved plus Probable (2P) Reserves increased by 15 MMboe, largely as a result of new bookings and upwards field revisions 52 2004 2005 2006 2007 2008 for Pluto-Xena and NWS Oil. Taking production into account, this generated a 3 year average organic reserves replacement ratio of 318% at the 2P Record production of 81.3 MMboe was achieved this year with level. At 2008 production levels, the reserves-to production ratio is 17 years a full-year of production at Otway and Stybarrow, the start-up for Proved Reserves and 22 years for Proved plus Probable Reserves. of Angel, NWS Train 5, Vincent, Neptune and Power Play plus increased equity in the NWS oil assets. Focused on improving safety and environmental performance

56% Revenue growth 6 3 5,990 6,000 4.3

3,841(2) 3,475(2) (TRCF)

0.56 incidents (REI) 2,747 Frequency of incidents Frequency 2,125 Frequency of environmental of environmental Frequency Revenue ($ million) Revenue 0 0 2004 2005 2006 2007 2008 1,500 2004 2005 2006 2007 2008 During 2008, Woodside’s Total Recordable Case Frequency (TRCF) a measure of safety incident frequency increased from 4.1 to 4.3. Woodside (2) Revenue from discontinued operations (e.g. Mauritania) not included has introduced a number of initiatives to address this. Woodside’s Woodside achieved record revenue of almost $6 billion in 2008. The frequency of Reportable Environmental Incidents (REI) fell from 0.62 in 56% increase in sales revenue resulted from higher production and 2007 to 0.56 in 2008. commodity prices. WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c 5 CFO report

Prudent financial management Mark Chatterji Executive Vice President and underpins funding for future Chief Financial Officer growth Mark has held senior finance and commercial roles over the past 11 years. He has been with Woodside since 2004 and became CFO in 2007.

Capital management Investment in growth During 2008, Woodside’s capital expenditure grew to $5.5 7 billion, largely as a result of investment in the Pluto LNG Project.

Woodside has been able to underpin 2008 expenditure from continuing strong cash flows, in combination with the dividend re-investment plan which was activated for

A$ billion LNG Growth the half-year dividend and is expected to remain activated Exploration throughout the Pluto construction phase.

Foundation business In June, Woodside secured additional debt funding of $1.5 0 billion from JBIC(1) and a consortium of eight Australian 2004 2008 and international banks. With continued strong cash Woodside has invested more than $5.5 billion in 2008 of which flows during 2008, we were able to defer plans to secure over 60% was on LNG growth (Pluto, Sunrise, Browse and Pluto additional funding, and started 2009 with outstanding 2). debt of just over US$2 billion and having further access to undrawn debt facilities of just more than US$1 billion. Maintaining our investment grade credit rating Since year end, Woodside entered into agreements with a number of domestic and international banks for US$800 5,000 million additional debt facilities.

Woodside’s goal in managing capital and debt is to ensure Undrawn facilities we have the flexibility to fund our projects and continue to explore, while still paying dividends to our shareholders and 1,050 maintaining our investment grade credit rating.

2,050 The extent of funding required over the next few years 1,377 Debt (US$ million) will depend on the order and timing of final investment 872 decisions for our future projects. 0 2006 2007 2008 Woodside’s goal in managing capital and debt is to ensure we have the flexibility to fund our projects and continue to explore, while still paying dividends to our shareholders and maintaining our investment grade credit rating.

Gearing

50

28.9 Gearing (%)

0 2004 2005 2006 2007 2008 Gearing = (net debt) divided by (net debt + equity).

(1) Japan Bank for International Cooperation

6 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Drivers of Woodside’s 2008 profit Revenue 3,500 1,068 (236) (1) Petroleum and Resource Rent Tax (725) 3,000

17 (253) 2,500 1,317

(377) Woodside

2,000 (294) 239 1,786

1,500

1,030 1,000 $ million

500

0

(1)

PRRT Price and Income tax NPAT (2007) NPAT (2008) Cost of sales Hedge losses Other income

Other expensess

Sales volume impact exchange rate impact

Discontinued operations

Overview Other expenses — net increase of $253 million net Reported profit after tax for the Woodside Group for the This result was primarily influenced by: year ended 31 December 2008 increased 73% to $1,786 • Increased foreign exchange losses ($282 million) million, when compared to 2007. The results were boosted mainly arising from the unrealised translation loss on by higher production and commodity prices, partially offset USD loans, after taking into account the Hedge of Net by higher cost of sales, taxes, hedge losses and revaluation Investment(1). of US dollar denominated debt after taking into account Hedge of Net Investment(1). • Higher impairments ($75 million) mostly associated with suspension of the Oceanway development offset Revenue from sale of goods – increased by $2,149 by lower exploration and evaluation expense of $168 million million. Higher gas and liquids prices favourably impacted revenue Petroleum resource rent tax (PRRT) – increased by by $1,330 million, slightly offset by a stronger than average $377 million AUD against the USD ($13 million). Impacted by higher revenue from Stybarrow, as well as Higher sales volumes contributed $1,068 million to the the start-up of Vincent, was partially offset by increased increase in revenue, primarily as a result of a full-year of expenditure deductible from PRRT, as well as the effect of Stybarrow production, the addition of production from augmentation on future deductible expenditure. Otway, Vincent, Neptune and Power Play, as well as the Income tax costs – increased by $294 million acquisition of additional NWS oil equity. This was predominantly due to higher underlying profit, as During 2008, approximately 6.6 million barrels of Greater well as a reduction in deductible foreign exploration costs. Enfield area crude oil zero cost collars settled and resulted in a hedging loss of $220 million. In addition there was a Discontinued operations – variance of $239 million negative impact from embedded derivatives associated with the North West Shelf pipeline gas. Following the sale of Mauritania assets in 2007, Woodside recognised discontinued operations valued at $239 million. Cost of sales – increased by $725 million In 2008, no discontinued operations were recognised. Higher production and depreciation costs largely related to new production facilities and increased equity in NWS oil. Underlying NPAT versus Reported NPAT Royalties and excise increased $234 million in 2008 due to 2008 2007 the imposition of condensate excise tax ($116 million), and Net profit after tax (NPAT) $m $m higher realised prices. Underlying NPAT 1,832 1,182 Other income — increased by $17 million Significant items 57 The main driver of this was the increase in fair value of the Sale of Legendre assets Sale of PNG assets 8 Greater Enfield area zero cost collars which are yet to settle. Sale of Jahal assets 16 Sale of Mauritanian assets (233) Pluto equity sell-down 19 Sale of Vermillion and High Island (12) Sale of Geodynamics 13 Success fee on Kitan 12 Oceanway write-down (78) NPAT as reported 1,786 1,030

(1) Hedge of Net Investment (see page 68) WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c 7 CFO report (continued)

Lifting costs WTI oil price 8

7.77

5.87

3.93 2.93

Lifting Costs ($/boe) Lifting GEA hedges WTI oil price (USD) Enfield

Vincent 0 Stybarrow 2007 2008 Neptune Oil* Gas 2004 2008 *Excluding FPSO service contract costs

Lifting costs External factors Gas lifting costs increased to $186 million from $134 million The 2008 financial results were impacted by weakening in 2007. The gas lifting cost per barrel of oil equivalent was commodity price and exchange rate movements in the last $3.93/boe (excluding Ohanet). This was largely attributable six months of the calendar year. to higher maintenance costs associated with the Karratha Gas Plant, NWS offshore platforms, and achievement of 2008 2007 Change stable operations at Otway.

Oil lifting costs* increased to $245 million from $133 million Avg WTI oil price US$/bbl 99.9 72.5 in 2007. The unit cost/boe increased to $7.77/bbl (2007: Avg AUD/USD 0.84 0.84 - $5.87/bbl) largely as a result of costs associated with repair Avg one month LIBOR % 2.7 5.2 and replacement of equipment at Laminaria and Mutineer– Exeter, the successful intervention work at Enfield and the Avg derived oil price A$/bbl 118.9 86.6 start-up of Vincent and Neptune.

Woodside’s overall lifting cost was $5.41/boe in 2008. Realised price per boe 2008 2007 Change Exploration and evaluation costs USD USD 2008 2007 $m $m Pipeline gas 20.6 18.3 LNG 61.8 36.2 Unsuccessful wells written off 77 235 Condensate 73.1 66.2 General permit activity and seismic 192 167 LPG 65.1 54.6 Evaluation costs 8 19 Oil 91.6 74.0 Permit amortisation 71 95 Average realised price (USD) 64.0 48.1 Total exploration and evaluation expense 348 516 Average realised price (AUD) 76.3 57.5

*Includes impact of entitlement and Ohanet sales.

*Excluding FPSO service contract costs

8 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c 2008 summary charts

Product view Regional view

Investment Investment Woodside

Gas and condensate* 74% Australia 94% Oil* 19% United States 4% Exploration and Other 7% Rest of World <2%

* Indicative only as some assets produce oil and gas In 2008, the Pluto LNG Project accounted for The majority of Woodside’s 2008 capital expenditure approximately 60% of Woodside’s 2008 capital spend. was directed towards growing gas and condensate production, including the Pluto LNG Project and North West Shelf (NWS) LNG Train 5.

Production Production

Natural gas 50% Australia 93% Oil 38% United States 4% Condensate 12% Rest of World 3%

* Includes LNG, LPG and pipeline gas Australia accounted for 93% of Woodside’s production, Woodside produced 81.3 MMboe during 2008, of which with NWS contributing 58% and the Exmouth area almost 50% was natural gas. Oil production increased (Enfield, Stybarrow and Vincent) contributing 29%. to 38% due to a full-year of Stybarrow production and the start-up of Vincent, Neptune and Power Play.

Revenue Revenue

Natural gas 32% Australia 95% Oil 54% United States 4% Condensate 14% Rest of World 1%

High commodity prices as well as increased production NWS operations contributed 48% of Woodside’s of low naptha crudes at Enfield, Stybarrow and Vincent revenue, with Exmouth assets contributing 40% during accounted for the increased share of oil revenue relative 2008. to condensate.

Reserves Reserves

Natural gas 81% Australia 98% Oil 10% United States 2% Condensate 9% Rest of World <0.2%

At the end of December 2008 Woodside’s Proved plus During 2008, positive revisions have made Woodside’s Probable Reserves stood at almost 1.7 billion barrels share of Pluto-Xena reserves larger than its NWS of oil equivalent. Natural gas makes up 81% of these reserves for the first time. Pluto and Xena volumes reserves and 82% of contingent resources. account for 43% of Woodside’s reserves.

WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c 9 LNG markets overview

Reinhardt Matisons Tight market in long-term President Marketing Reinhardt has 27 years industry experience and has been with Woodside since 1996.

Long-term demand continues Global LNG demand* and supply The global economic downturn and increases in US gas supply will impact LNG demand growth in the short- term. However, Woodside expects, consistent with many Possible independent forecasts, long-term demand growth to be sustained by the attractiveness of LNG as a transitional Demand Probable fuel. Measured from 2007, our forecast has average Developing demand growing at around 7% per annum through to 2020. Mtpa Hence, the current market of about 180 million tonnes per annum is expected to grow to around 400 millon tonnes Existing production per annum by 2020. This growth in demand presents a huge challenge for the LNG industry, and we believe that supply will struggle to meet it. 2005 2010 2015 2020 * Source: WoodMackenzie Supply will struggle to meet demand Planned supply increases continue to be delayed and the Woodside is positioned to capture premium markets moratorium on new Qatari projects continues. Over the last three years, the LNG industry has seen only three greenfield new projects make final investment decisions – Woodside’s Pluto project and projects in Peru and Angola. On average 6 mtpa of new volumes have been announced. These volumes will become available over the next two to five years during which forecast growth in annual consumption is 15 to 20 mtpa. It seems unlikely that any new Russian projects will be online before 2017. Current long-term projections indicate that the world would need a new project the size of Browse to start up every year in order to meet demand. For Woodside, with its Foundation Markets: continue to dominate global LNG demand strong reputation as a reliable supplier of LNG, we expect Developing Markets: to be able to find quality buyers for our gas. India and China prepared to pay market price Market Entrants: Diversified market opportunities New niche buyers: Thailand, Singapore, Pakistan Woodside continues to see core foundation customers coming from the traditional markets of Japan, Korea and LNG prices are remaining firm Taiwan. Those markets have little if any domestic gas supplies North Asian and hence are heavily reliant on LNG. Foundation customers Spot Price have and will continue to underpin our LNG projects. Range 2008 China and India are both very important to the LNG Oil Parity industry. These growing markets may absorb any surplus 2H 2008 LNG that comes into the market and hence keep the 2H 2007 market tight for the foreseeable future. China has demonstrated that it can build LNG import facilities more quickly than the industry can build LNG export facilities, and 1H 2007 $/MMBtu we expect China to remain a key customer for Woodside’s 2005 gas into the future. 2002 There is also a growing number of new, potentially attractive niche markets such as Thailand and Singapore. Indicative industry pricing into North Asia These markets are looking to supplement their pipeline gas JCC - Japan Custom Cleared oil price supplies with LNG. Thailand’s first LNG import facility is Timing of agreement shown (not timing of deliveries) already under construction and a final investment decision for a new terminal in Singapore is expected in 2009. Both

10 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Woodside

In January 2009, Woodside signed a Memorandum of Cooperation with Malaysia LNG to progress discussions on possible areas of cooperation.

Woodside LNG and Gas contracts pricing structure Thailand and Singapore are potential destinations for Woodside’s future LNG supplies. Short-term sales Strong prices holding close to oil parity contracts (0-4 years) Contracts expiring Industry deals through 2008 reinforced oil parity levels as within 4 years the long-term benchmark for LNG pricing in the region. The Long-term contracts Tonnes continuing tight market dynamics encourage us to expect with re-openers strong pricing in the Asia-Pacific region to continue well Long-term contracts without re-openers beyond 2015. 2008 2009 2010 2011 2012 Short-term and spot prices are more difficult to predict. Woodside’s contract prices will move with market demand. During 2008, Asian prices held up well, reaching levels in the range of $15 - $20 per MMBtu during the northern hemisphere autumn. This was very positive for sellers in the Potential Operated* LNG Capacity to 2018 Asia-Pacific region, since US and European prices declined (includes national oil companies) during that period. However, short-term issues are likely to 60 result in a decline in spot prices during 2009. 2008 2013 LNG and pipeline gas contract trends 2018 Over 90% of Woodside’s LNG is sold under long-term sales contracts with take-or-pay provisions. Our LNG customers mtpa include 13 Asian power and gas utilities. Foundation contracts relating to NWSV production expire in 2009, however all of the original Japanese customers have now 0 agreed to extend their LNG supply relationships with the NWSV for terms ranging from 6 to 12 years.

Woodside, as operator of the NWSV, supplies approximately Woodside is on its way to becoming the second most important 600 TJ/d or approximately 60 - 65 % of Western Australia’s operator behind Qatar in the LNG business. By 2018, Woodside annual gas requirements. During 2008 Woodside’s share could be operating close to 40 mtpa of LNG delivery capacity, well ahead of its major oil company competitors. of these volumes averaged approximately 40%. In Victoria, Source: Poten & Partners Australia Pty Ltd Woodside operates the Otway facility which supplies up to * LNG plant operatorship is allocated to the plant operator when it is clear which company 205 TJ/d. Australian pipeline gas sales are currently made is the operator and split along equity lines when it is not to eight key customers, comprising a government-owned power utility, gas wholesaler, private utilities and industrial Equity LNG: Market Capitalisation customers. Contracts range in term from 3 to 16 years, with 1,400 current contracts set to expire between 2010 and 2020. 2008 As contracts expire, both sellers and buyers have the 2013 opportunity to re-visit pricing terms. In addition, many 2018 contracts have periodic price review mechanisms which can facilitate price adjustments during the life of the contract. Hence Woodside’s realised gas prices are expected to capitalisation continue to reflect the long-term tight supply position, over the next few years. Tonnes per $ million market The NWSV has also signed long-term sales contracts in 0 relation to the additional production available from the recently commissioned NWS Train 5.

Woodside has agreements for the sale of up to 3.75 mtpa When our expected equity production is divided by our market of LNG from the Pluto project to Tokyo Gas and Kansai capilisation for 31 December 2008, Woodside is the most leveraged Electric from the end of 2010 for a period of 10 to 15 years. company to LNG of our peer group. Ratio of tonnes of LNG equity to 31 December 2008 Market Capitalisation (US$M) Equity Production Source: Poten & Partners Australia Pty Ltd Market Capitalisation Source: Bloomberg

WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c 11 Reserves statement 31 December 2008

Feisal Ahmed Executive Vice President Project Development Feisal has 33 years industry experience and has been with Woodside since February 2007.

Woodside’s Reserves(1) Overview Key reserve changes Comparison 2008 % Change to 2007 • Proved plus Probable Reserves(1) of 1,703.2 (2) MMboe increased by 15.1 MMboe, largely Proved (MMboe) 1,327.7 +100.6 +8.2% as a result of new bookings and upward field Proved + Probable(3) (MMboe) 1,703.2 +15.1 +0.9% revisions for Pluto-Xena (106 MMboe), NWS Contingent (4) 1,939.6 -463.4 -19.3% Oil acquisitions (18.5 MMboe) and NWS Oil Resources (MMboe) revisions (9.3 MMboe). This was offset by annual Proved Key metrics Proved production (78.9 MMboe(5)) and downward + Probable revisions of NWS Gas (-22.8 MMboe) and Otway 2008 RRR(6) % 227 119 (-16.6 MMboe). Organic 2008 RRR % 215 96 • Proved Reserves increased by 100.6 MMboe 3yr Organic RRR % 302 318 as a result of new bookings and field revisions 3yr RRR inc A&D* % 302 317 for Pluto–Xena (164.7 MMboe) and NWS Oil Reserves Life Years 17 22 acquisitions (10.1 MMboe), which were partly Production(5)** MMboe 78.9 78.9 offset by annual production (78.9 MMboe) and Net A&D* MMboe 9.9 18.3 revisions of Otway (-11.1 MMboe) resulting in a RRR: Reserves Replacement Ratio closing balance of 1,327.7 MMboe (8.2% increase). * Acquisitions and Divestments ** Proved plus Probable 2008 annual production

‘Proved Plus Probable’ Reserves annual reconciliation by product* (Woodside share) Dry Gas(8) Condensate(9) Oil Total Bcf(10) MMbbl(11) MMbbl MMboe(12) Reserves (as at 31 December 2007) 7,785 152.1 170.2 1,688.1 Revision of Previous Estimates(13) -8 3.0 11.7 13.2 Extensions and Discoveries(14) 331 4.3 0.0 62.4 Acquisitions and Divestments -1 - 0.1 18.5 18.3 Annual Production(5) -224 -8.0 -31.6 -78.9 Reserves (as at 31 December 2008) 7,883 151.4 168.8 1,703.2 * Small differences are due to rounding to first decimal place

‘Proved Plus Probable’ Reserves Summary by Project* (Woodside share, as at 31 December 2008) Dry Gas(8) Condensate(9) Oil Total Project Bcf MMbbl MMbbl MMboe(12) Pluto-Xena 4,040 52.0 0.0 760.8 North West Shelf 3,463 93.2 41.5 742.4 Otway 340 4.5 0.0 64.1 Vincent 0 0.0 41.8 41.8 Enfield 0 0.0 31.7 31.7 United States 33 0.2 19.5 25.6 Stybarrow and Eskdale 0 0.0 21.6 21.6 Laminaria and Corallina 0 0.0 11.5 11. 5 Ohanet (Algeria) 7 1.4 0.0 2.6 Exeter and Mutineer 0 0.0 1.1 1. 1 Reserves 7,883 151.4 168.8 1,703.2

* Small differences are due to rounding to first decimal place

12 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Review of assets Proved plus Probable Reserves

Proved North West Shelf Proved + Probable Developed 29.1% Dry Gas Bcf 3,204 3,463 Pluto (undeveloped) 44.7% Condensate MMbbl 70.5 93.2 Other (undeveloped) 26.2% Woodside Oil MMbbl 19.5 41.5

Dry Gas and Condensate Reserves decreased due to production and lower ultimate recovery(7) estimates for the Angel and Perseus fields based on multi-disciplinary field studies and field performance, partly offset by upward revision Proved Pluto Proved of Goodwyn at the Proved level. Net downwards revisions + Probable comprised 122 Bcf Dry Gas at the Proved level and 1.5 MMbbl Dry Gas Bcf 2983 4040 Condensate at the Proved plus Probable level. Net upward Condensate MMbbl 38.4 52.0 revisions comprised 5 Bcf Dry Gas at the Proved plus Probable level and 7.2 MMbbl Condensate at the Proved level. The Pluto LNG Project reserves have increased due to transfer of Xena Contingent Resource volumes to reserves Probabilistic aggregation of individual fields in the North West and higher ultimate recovery estimates for the Pluto field Shelf was first booked in 2007. At the end of 2008 it accounted following multi-disciplinary field studies. Proved reserves for 13% (414 Bcf) of Proved Dry Gas Reserves, an increase increased by 861 Bcf dry gas, 13.5 MMbbl condensate. of 8 Bcf on 2007. Since the NWS consists of a portfolio of Proved plus Probable Reserves increased by 542 Bcf dry 14 gas fields, probabilistic aggregation is more appropriate gas and 11.0 MMbbl condensate. than arithmetic summation as inter-field dependencies reflecting different reservoir characterstics between fields are incorporated. Proved United States Proved Proved plus Probable Oil Reserves increased by 112% due + Probable to the acquisition of Shell Development Australia’s interests Neptune Oil MMbbl 12.0 18.7 (18.5 MMbbl) and revisions of ultimate recovery estimates Neptune Gas Bcf 8 12 (9.3 MMbbl) for the fields based on field performance, multi-disciplinary studies and the final investment decision Other US Oil MMbbl 0.6 0.9 on re-development of the Cossack, Wanaea, Lambert and Other US Gas Bcf 15 21 Hermes Fields. The Neptune oil field started production in July 2008. Woodside share, net of royalty, of Neptune reserves was Proved Enfield Area Proved + Probable lower due to production. Enfield MMbbl 15.1 31.7 Woodside’s remaining petroleum assets in the United Stybarrow and Eskdale MMbbl 13.4 21.6 States comprise 10 predominantly gas fields. Vincent MMbbl 22.0 41.8

Ultimate recovery estimates for Enfield were increased by Proved Africa Proved 5.0 MMbbl at the Proved level based on field performance + Probable and multi-disciplinary field studies which partly offset 2008 Ohanet Dry Gas Bcf 7 7 production. Vincent and Stybarrow reserves decreased due to production. Ohanet Condensate MMbbl 1.4 1. 4 Woodside has a 15% interest in the Ohanet project in Proved Other Australian Proved + Probable Algeria (operated by BHP Billiton) which is governed by a risk services contract with Algeria’s national oil company, Laminaria–Corallina MMbbl 3.7 11. 5 Sonatrach. Woodside does not have any share in the sales MMbbl 0.3 1. 1 Mutineer–Exeter gas delivered from the development. Otway Dry Gas Bcf 212 340 Otway Condensate MMbbl 2.8 4.5 As with production sharing contracts, Reserves associated with Woodside’s interest in Ohanet are reported in Ultimate recovery estimates for Laminaria and Corallina accordance with the economic interest approach. Woodside were increased by 0.2 MMbbl at the Proved and 2.3 MMbbl has estimated equivalent Reserves volumes that reflect the at the Proved plus Probable level, partly offsetting 2008 value of this asset, using a five-year average Condensate production. price and an LPG price consistent with other Woodside Reserves estimations. Higher prices should not be applied Ultimate recovery estimates for Exeter and Mutineer were to these volumes to estimate their value, as the risk service increased by 0.1 MMbbl (Proved) and 0.2 MMbbl (Proved contract specifies a maximum return. plus Probable). The revision in Reserves at both levels reflects revised Woodside’s share of Dry Gas Reserves for Otway project costs, effective production entitlement and revisions decreased due to production and lower ultimate recovery to future production forecasts. estimates for the Thylacine Field, based on production performance and multi-disciplinary field studies. Downward revisions were 59 Bcf Dry Gas and 0.7 MMbbl Condensate (Proved) and by 88 Bcf Dry Gas and 1.2 MMbbl Condensate (Proved plus Probable).

WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c 13 Reserves statement (continued) 31 December 2008

Contingent Resource annual reconciliation by product* (Woodside share) Dry Gas(8) Condensate(9) Oil Bcf MMbbl MMbbl

Contingent Resources (as at 31 December 2007) 11,792 254.5 79.7

Transfers to Reserves Category -268 -3.7 -12.1

Revisions of Previous Estimates(13) -2,523 7.4 11.9

Extensions and Discoveries(14) 56 1.6 7.1

Acquisitions and Divestments -35 -0.4 10.8

Contingent Resources (as at 31 December 2008) 9,021 259.5 97.4 * Small differences are due to rounding to first decimal place

In accordance with the 2007 PRMS all Contingent At 31 December 2008, Woodside’s share of Contingent Resource volumes are now reported at the ‘Best Estimate’ Resources was based on estimated recoverable petroleum (P50) confidence level. ‘Best Estimate’ is the Contingent resources associated with the following key assets: Resources equivalent term for ‘Proved plus Probable’, • Browse (Torosa, Calliance and Brecknock): 6,284 Bcf where there is at least 50% probability that the quantities of Dry Gas and 160.7 MMbbl of condensate. Dry actually recovered will exceed the Best Estimate volumes Gas volumes have been adjusted downward and At 31 December 2008, Woodside’s share of Contingent condensate values have increased, to reflect the Resources was 1,939.6 MMboe, down from 2,403 MMboe current maturity of the field appraisal and development in 2007. This reduction was primarily due to Contingent study results. Field appraisal and development studies Resource transfer to Reserves for Pluto-Xena and NWS Oil are continuing in 2009. as well as the result of drilling and development studies in • Sunrise: 1,820 Bcf dry gas and 81.3 MMbbl the Browse Development. Condensate, remain unchanged at year end. The first booking of Contingent Resources for the Tocra field • Pluto-Xena: 557 Bcf dry gas and 7.2 MMbbl in Libya added 44 Bcf Dry Gas and 1.4 MMbbl condensate condensate, adjusted to reflect transfer of Xena at the Best Estimate level. Other new Dry Gas and volumes to Reserves and results of development Condensate bookings were made for Haycock,Pemberton studies. East and the 2008 Lambert West discovery on the North West Shelf. New oil bookings were made for field extensions at Stybarrow and Enfield.

Major Contingent Resource projects* (Woodside share, as at 31 December 2008) Dry Gas(8) Condensate(9) Oil Field(s) Bcf MMbbl MMbbl Browse (Torosa, Calliance and Brecknock) 6,284 160.7 0.0

Sunrise 1,820 81.3 0.0

Pluto-Xena 557 7.2 0.0

North West Shelf 196 6.3 26.9

Greater Enfield (Enfield, Laverda, Vincent, Stybarrow and Eskdale) 0 1.0 63.5

Other(15) 164 2.9 7.0

Total (by product) 9,021 259.5 97.4

Total (MMboe) 1,939.6 * Small differences are due to rounding to first decimal place

14 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to the Reserves statement include ‘C4 minus’ hydrocarbon components and non- 1 ‘Reserves’ are estimated quantities of petroleum that hydrocarbon volumes that are present in sales products. have been demonstrated to be producible from known 9 ‘Condensate’ is defined as ‘C5 plus’ petroleum accumulations in which the company has a material components for all fields except for the Ohanet project interest from a given date forward, at commercial and the Gulf of Mexico assets, where it is sales product. Woodside rates, under presently anticipated production methods, 10 ‘Bcf’ means Billions (109) of cubic feet of gas at standard operating conditions, prices and costs. Woodside reports oilfield conditions of 14.696 psi (101.325 kPa) and 60º F Reserves net of the upstream (offshore) gas required for (15.56º C). production, processing and transportation to a reference 11 ‘MMbbl’ means millions (106) of barrels of oil and point defined as the inlet to the downstream (onshore) condensate at standard oilfield conditions of 14.696 psi processing facility. Downstream fuel and flare represents (101.325 kPa) and 60º F (15.56º C). 10.5% of total Proved Reserves, and 10.2% of total 6 Proved plus Probable Reserves. 12 ‘MMboe’ means millions (10 ) of barrels of oil equivalent. In common with international practice, dry gas volumes 2 ‘Proved Reserves’ are those Reserves which analysis are converted to oil equivalent volumes via a constant of geological and engineering data suggests, to a high conversion factor, which for Woodside is 5.7 Bcf of dry degree of certainty (90% confidence), are recoverable. gas per 1 MMboe. Volumes of oil and condensate are There is relatively little risk associated with these converted from MMbbl to MMboe on a 1:1 ratio. Reserves. 13 Revisions representing changes in previous estimates of 3 ‘Probable Reserves’ are those Reserves which analysis Reserves or Contingent Resources, either up or down, of geological and engineering data suggests are more resulting from new information normally obtained from likely than not to be recoverable. There is at least a development drilling and production history or resulting 50% probability that the quantities actually recovered from a change in economic factors. will exceed the sum of estimated Proved plus Probable Reserves. 14 Additions to Reserves or Contingent Resources that result from a) increased areal extensions of previously discovered 4 Contingent Resources are those quantities of petroleum fields demonstrated to exist subsequent to the original estimated, as of a given date, to be potentially discovery, and b) discovery of Reserves in new fields or recoverable from known accumulations, but the applied new reservoirs in old fields. project(s) are not yet considered mature enough for commercial development due to one or more 15 Includes Laminaria–Corallina, Mutineer–Exeter, Thylacine– contingencies. Contingent Resources may include, for Geographe, Tocra and Neptune. example, projects for which there are currently no viable markets, or where commercial recovery is dependent Governance and Assurance on technology under development, or where evaluation Woodside, as an Australian company listed on the of the accumulation is insufficient to clearly assess Australian Securities Exchange, reports its petroleum commerciality. Woodside reports Contingent Resources resource estimates using definitions and guidelines net of the upstream (offshore) fuel and non-hydrocarbons consistent with the 2007 Society of Petroleum Engineers not present in sales products. Contingent Resource (SPE)/World Petroleum Council (WPC)/American estimates may not always mature to Reserves and do Association of Petroleum Geologists (AAPG)/Society not necessarily represent future Reserves bookings. of Petroleum Evaluation Engineers (SPEE) Petroleum Resources Management System (PRMS). 5 ‘Annual Production’ means the volumes of dry gas, condensate and oil (see Notes 8 and 9) produced during In accordance with the PRMS guidelines, Woodside the year and converted to ‘MMboe’ (see Note 12) for uses crude oil price forecasts and, where applicable, the specific purpose of Reserves reconciliation and the individual project production sales contract terms or other calculation of Annual Reserves Replacement Ratios. financial products for the purpose of Reserves estimation. The Reserves Statement Annual Production differs from Dry Gas Reserves are reported inclusive of LPG sales production volumes reported in the company’s annual products. Unless otherwise stated, all petroleum resource and quarterly reports due to differences in the sales estimates are quoted as net Woodside share at standard product definitions and the ‘MMboe’ conversion factors oilfield conditions of 14.696 (101.325 kPa) and 60 degrees applied. Fahrenheit (15.56 degrees Celsius). 6 The term ‘Reserves Replacement Ratio’ means Woodside has several processes to provide assurance for Reserves change during the year, before the deduction its Reserves reporting, including Woodside’s Petroleum of production, divided by production during the year. Reserves Policy and Management Process, staff The term ‘Three-Year Reserves Replacement Ratio’ competency standards and training, and external Reserves means Reserves change over the three years, before audits. The audit program is aimed at having all major the deduction of production for that period, divided Reserves bookings verified, as a minimum, at least once by production during the same period. The term every four years. More than 95% of Woodside’s Proved(2) ‘Organic Annual Reserves Replacement Ratio’ means Reserves have been externally verified by independent Reserves change during the year, before the deduction review within the past four years. of production and adjustment for acquisition and divestment, divided by production during the year. The Reserves Statement has been compiled by Mr Ian 7 The term ‘Ultimate Recovery’ means quantities of F. Sylvester, Woodside’s Chief Reservoir Engineer who petroleum which will ultimately be economically is a full-time employee of the company. Mr Sylvester’s produced and equals production to date plus Reserves qualifications include a Master of Engineering (Petroleum plus future own use offshore fuel and flare. Engineering) from Imperial College, University of London, 8 ‘Dry gas’ is defined as ‘C4 minus’ petroleum components England, and more than 20 years of relevant experience. including non-hydrocarbons. These volumes include Mr Sylvester has consented in writing to the inclusion of LPG (propane and butane) resources. Dry gas reserves this information in this report.

WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c 15 Business reviews North West Shelf

We have completed a major expansion phase and are now Eve Howell Executive Vice President underway with two redevelopment North West Shelf projects Eve has 35 years industry experience and joined Woodside in 2006. North West Shelf

increased to 33.33% from May 2008 due to acquisition of North West Shelf (NWS) Shell’s equity. Interest NWS Venture 16.67% The newly imposed Condensate Excise Tax, which was Domestic Gas Joint Venture 50.00%* applicable from May 2008, has added $116 million to Incremental Pipeline Joint 16.67% Venture production costs (Woodside share) this year. China LNG Joint Venture 12.50% During 2008, the Joint Venture made a final investment CWLH (crude oil) 33.33% decision to redevelop the oil infrastructure, extending Operator Woodside production beyond 2020. Facilities North Rankin A Platform (NRA) Goodwyn A Platform (GWA) Train 5: LNG expansion Angel Platform During 2008, construction of a fifth processing train was Cossack Pioneer FPSO completed, adding up to 4.4 million tonnes of annual LNG Karratha Gas Plant processing capacity and bringing total capacity at the Location ~130 km north-west of Karratha, WA Karratha gas plant to 16.3 million tonnes per year. Train 5 Water depth 80 ­- 130 metres had an exceptional startup, ramping up to approximately 75% capacity in 19 days. Currently the train is running Products LNG, domestic gas, condensate, smoothly at 80-90% of capacity. To achieve optimal crude oil and LPG production, some inefficiencies with two cryogenic heat First production 1984 (pipeline gas) exchangers will be examined and may be reconfigured *During 2008 Woodside’s average share of gas production was ~40%. during a planned maintenance shutdown in 2009. Woodside’s exact share of domestic gas production depends on the quantities and aggregate rate of production. Train 5 represents the first prefabricated modularised LNG Since first LNG production in 1989, Woodside has delivered train in the world. This approach reduced the site labour more than 2,500 LNG cargoes, primarily to customers in requirements by 20% and simplified site assembly, allowing South East Asia. Expansion of this significant project has first LNG production on 31 August 2008 ahead of the Q4 continued. target.

In 2008 Woodside, as operator of the NWS venture Angel facilities, completed Train 5 and the Angel project on time. The Angel Project, which supplies much of the additional During the year, Woodside loaded 204 cargoes of LNG, of gas needed for a five train operation, began production on which five were sold on the spot market. Woodside’s share 2 October 2008. Gas and condensate are exported through of 2008 LNG production was 1.95 million tonnes, similar to a 50 km subsea pipeline to the NWS second trunkline. The 2007 production levels. Angel platform is remotely operated from North Rankin and has accommodation for visiting maintenance personnel. As a result of strong customer demand, domestic gas production increased in 2008. However, Woodside’s equity The Angel field was developed via three big bore wells. One share of gross domestic gas sales fell this year, due to of these wells produces around 370 TJ of gas per day, which contractual agreements. Condensate and LPG production is enough to power more than two million homes. remained strong throughout the year. Development of the Angel field began in December 2005 and Woodside’s NWS oil production increased by more than was completed just under the budgeted project cost of $1.6 23% in 2008. Woodside’s share of NWS oil production billion.

16 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Perseus over Goodwyn NWS contribution to Woodside’s Development of the western part of the Perseus gas and total production (MMboe) condensate field via a four-well subsea tieback to the Goodwyn platform was completed during 2008 with the NWS Gas 51% final well brought into production in Q3 2008. NWS Oil 7% Woodside Other 42% Perseus 1C Two extended reach wells have been drilled from the North Rankin facility. One of these wells has been completed and is producing. The other is currently suspended following drilling difficulties. During 2008, NWS contributed 47.1 MMboe to Woodside’s 81.3 MMboe annual production. North Rankin 2

The North Rankin B platform will be linked by a bridge to the NWS key metrics (Woodside share) existing North Rankin A platform and will provide compression 2008 2007 to recover low pressure reserves in the North Rankin and Perseus fields. Sales revenue ($ million) 3,102 2,237

The project was sanctioned in March 2008. Fabrication of Net gas production (MMboe) 32.6 34.9 the jacket is underway in Indonesia, while the topsides will be constructed in Korea. The project is expected to cost Net liquids production (MMbbl) 13.5 12.8 approximately $5 billion ($840 million Woodside share) and is Proved + Probable (MMboe) 74 2 784 scheduled for completion in 2013. Reserves Business Review Gross Net 2 Cossack Wanaea Lambert Hermes (CWLH) Acreage (km ) 4,667 700 Redevelopment The operations and activities outlined on this page form part of Sanctioned in December 2008, this $1.8 billion project ($600 NWS Business Unit. Financial details can be found on page 76. million Woodside share) includes a replacement vessel for the Cossack Pioneer FPSO in 2010, and the replacement of Angel Topsides Float-over associated subsea infrastructure. The redevelopment project will support ongoing production from the CWLH fields beyond 2020.

Greater Western Flank We have commenced studies into development options for commercialisation of the Greater Western Flank gas area. This area to the west of the Goodwyn platform involves development of up to 14 fields and holds approximately 2.8 Tcf of gas. Appraisal wells are currently being drilled in this area.

Exploration / Reserves During 2008, the Lambert West exploration well intersected a 120 m gross gas column. The discovery is being evaluated and is expected to be commercialised along with an earlier discovery, Lambert Deep. Outlook Further appraisal is planned throughout the North West Shelf in 2009 as part of the Greater Western Flank opportunity with the completion of the Lady Nora 2 appraisal well increasing the potential for an integrated oil and gas development. Following the successful completion of the Hermes NW appraisal well, a second appraisal well is planned to determine the extent of the accumulation and the optimal location for a potential development well. In 2009, LNG production is expected to increase as Angel and Train 5 ramp up to full capacity. Condensate and LPG production are expected to remain relatively constant, as the net effect of a reduced share of pipeline gas is offset by increasing condensate content from the Angel field. Overall, Woodside’s share of NWS production is expected to be approximately the same as for 2008. Details of exploration wells and geophysical surveys are provided in Quarterly ASX reports.

17 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Greater Enfield

Woodside achieved first production from the Vincent field on 28 August Kevin Gallagher 2008, and successfully lifted Senior Vice President Australia Business Unit production from the Enfield oil field Kevin has more than 20 years during the year industry experience and has been with Woodside since 1998.

Enfield Stybarrow

Enfield Oil Field Stybarrow Oil Field

Interest WA-28-L, WA-271-P 60% Interest WA-32-L, WA-255-P 50% Operator Woodside Operator BHP Billiton Facilities Nganhurra FPSO Facilities Stybarrow Venture FPSO Location ~40 km off the North West Cape, WA Location ~50km off the North West Cape, WA Water depth 400 - 550 metres Water depth 825 metres Products Crude oil Products Crude oil First production July 2006 First production November 2007

Since start-up in 2006, Enfield has delivered more than The Stybarrow development has delivered 27.2 million 37 million barrels of oil and in 2008 produced 12.8 million barrels of oil since it began production in November 2007. barrels of oil. The field produced well during 2008, with production rates averaging 70,000 – 80,000 barrels of oil per day during the During 2008, Woodside carried out workovers on two first half of the year. major production wells. Both workovers were successfully completed and the wells were returned to full production During the second half of the year, natural field decline due by 19 July 2008. An additional 4D seismic survey to assist to increasing water cut reduced production rates to around in identifying future infill drilling opportunities was acquired 55,000 barrels of oil per day by year end. in December 2008. By the end of the year production from The Stybarrow oil field has been developed to date via five the field was approximately 43,000 barrels of oil per day. production, one gas injection and three water injection The Enfield development currently comprises five wells. A baseline 4D seismic survey was acquired during production, seven water injection and two gas injection December 2008, which will be used to identify infill drilling wells. opportunities for 2010 and beyond. During 2009, Woodside plans to drill two additional wells The Stybarrow development involves a sub-sea – a sixth production well and a paired water injection development of the main Stybarrow field and the satellite support well. Eskdale field via a double-hulled, disconnectable FPSO. Oil is produced on board Nganhurra, a double-hulled, disconnectable floating production storage and offloading vessel (FPSO).

Enfield 2008 production profile Stybarrow 2008 production profile

100 60

80

40 60

40 20

20 Oil production rate (‘000 bpd) Oil production rate (‘000 bpd)

0 0 Jan 08 Dec 08 Jan 08 Dec 08

18 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Enfield Map

Indian Ocean

9% Enfield 3% Laminaria–Corrallina Woodside 15% Stybarrow Eskdale Vincent other <1% Mutineer–Exeter Stybarrow Enfield 5% Otway Laverda 3% Vincent

During 2008, Australian non-NWS production contributed almost Exmouth 29 MMboe to Woodside’s annual production. Information on Otway, Mutineer–Exeter and Laminaria–Corallina is on page 24.

Vincent Australian (non-NWS) Business key metrics 2008 2007 Sales Revenue (A$M) 2,793 1,382 Vincent Oil Project Net gas production (MMboe) 3.8 0.03 Interest WA-28-L, WA-271-P 60% Business Review Net liquids production (MMbbl) 25.0 15.8 Operator Woodside Proved + Probable Reserves (MMboe) 170 215 Facilities Ngujima-Yin FPSO Gross Net Acreage (km2) Location 45 km off the North West Cape, WA 49,191 34,965

Water depth 350 - 400 metres These figures include all Woodside’s Australian assets outside the Productions Crude oil NWS, apart from Pluto, Browse and Sunrise. Financial details can be found on page 76, under Australia Busines Unit. First production August 2008

The Vincent field began production on 28 August 2008, meeting the originally promised schedule of Q3 2008. By Vincent field map year end, the Vincent field had produced more than 3.4 million barrels of oil. Vincent is a heavy oil development with natural aquifer support. Initial production was from six wells with very long (up to 2.5 km) horizontal reservoir intersections. A seventh well was drilled during November. The initial wells took longer than anticipated to clean up and hence, during December, we used coil tubing to clean the drilling mud from two of the wells. At year end, the field was producing around 35,000 barrels of oil per day. During 2009, Woodside plans to drill an eighth production well to achieve maximum exposure to the reservoir. Infill drilling opportunities will be assessed once sufficient production data has been obtained. The Vincent field is about 10 km to the north-east of Enfield, and has been developed through a stand-alone FPSO with a double hull for environmental integrity. Like Nganhurra, the Vincent 2008 production profile Vincent FPSO has a disconnectable turret to allow it to move away from bad weather. 50

Exploration 40 During 2008, Woodside completed the drilling of the Calthorpe exploration well, which was a dry hole. During 2009, Woodside 30 plans to mature further exploration opportunities in the Greater Enfield area. 20

10 Oil production rate (‘000 bpd)

0 Aug 08 Dec 08

19 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Pluto LNG Project

Woodside’s LNG expertise is keeping Pluto on track to be the Lucio Della Martina Executive Vice President fastest developed LNG project in Pluto the world Lucio has more than 20 years industry experience and has been with Woodside since 1991.

Pluto

Onshore construction moving ahead Pluto LNG Woodside used a modular construction method for the fifth Interest WA-34-L 90% LNG train at the North West Shelf. Building on the Train 5 WA-350-P, WA-347-P 90% success, the Pluto LNG train is also being built in modular WA-369-P, 50% form in Thailand. WA-370-P, WA-404-P, 50% The first 37 modules and supporting structures out of a total WA-348-P, WA-353-P 100%* of 261 for the LNG train were delivered in Q4 2008. WA-269-P, 40% Operator Woodside Construction of the two LNG storage tanks advanced during 2008, with each of the 600 tonne roofs air-lifted into Location Pluto field 190 km north-west of place ahead of schedule. Each tank will hold 120,000 cubic Karratha, WA metres of LNG, and further work will continue in 2009. The Water depth 400 - 1,000 metres three condensate storage tanks are also under construction. Proved + Probable 4,040 Bcf dry gas Shore crossing preparation work was completed during Q2 Reserves 52 MMbbl condensate 2008 and jetty construction work is ongoing. Gross Net Acreage (km2) 31,503 26,264 Offshore construction continues Planned start-up late December 2010 Fabrication of the offshore platform is underway. The steel * Tokyo Gas and Kansai Electric have options to each take 5% equity in supports are being fabricated in China and the processing these permits unit is taking shape in Malaysia with deck stacking Overview commencing in Q4 2008. The Pluto LNG Project is on track to be the fastest developed The primary offshore hook-up contract was awarded in LNG project in the world from discovery of the gas field in late 2008. Both the steel supports and processing unit are April 2005 to the production of first gas in late 2010. planned for delivery in the second half of 2009. Approved for development in July 2007, the $12 billion The pipeline is being manufactured in Japan and pipelay foundation project ($10.8 billion Woodside share) is operations are due to commence in Q1 2009. Australia’s second largest resource project. The drilling campaign for the five production wells The project will process gas from the Pluto and Xena gas commenced in September 2008 and is due for completion fields into LNG and condensate. It comprises an offshore in Q2 2009. platform and trunkline, along with a single LNG train with expected production of 4.3 mtpa and storage and export Subsurface progress and reserves booked facilities. During Q1 2008, Woodside drilled the Xena-2 and Xena-3 appraisal wells. These wells confirmed field reservoir quality The project is underpinned by 15 year sales contracts for up and the presence of gas saturated sands in a previously to 3.75 mtpa with Pluto foundation customers and partners, unpenetrated fault block. Tokyo Gas and Kansai Electric, who each hold a 5% equity interest in the foundation project. Additional LNG capacity is The subsurface resource of the Pluto and Xena gas fields available for either the spot market or further contracts. was reassessed in detail in 2008. As a result of this, the range of recoverable volumes in Pluto and Xena narrowed The Pluto LNG Project has generated thousands of jobs and Xena volumes have been booked as reserves for the and is making a significant contribution to the Western first time. Australian economy, as well as providing significant opportunities for local businesses.

20 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Pluto milestones Pluto map

Indian Ocean

Belicoso-1

Offshore Lxion-1 First development Award hook-up Commence pipe-lay Commence 2nd drilling Bellatrix-1 well contract operation campaign Commence desk Pluto stacking Q3 2008 Q4 2008 Q1 2009 Q2 2009 Commence site civils Ship first 10 modules Heat exchangers Compressor delivered from Thailand delivered Air-lift first LNG tank Commence site roof Complete accommodation mechanical engineering village Xena

Onshore Karratha

The Pluto gas field is adjacent to Woodside exploration acreage and a number of undeveloped gas discoveries

Pluto 2: Preparing for growth The infrastructure constructed as part of the Pluto LNG Project will allow for expansion for a second LNG train Business Review and in some cases a third LNG train at the site. With land agreements and key environmental approvals in place, this pre-investment will facilitate expansion of the Pluto site. During 2008, Woodside progressed feasibility and basis of design work for LNG Train 2. Woodside has progressed site preparations for Train 2 with initial earthworks for the Train 2 pad completed. Woodside operates eight exploration permits in this area which cover more than 34,000 sqm. The acreage lies adjacent to a number of existing gas discoveries and is very Pluto construction site in November 2008. The photograph is looking Deliveringtowards the Pluto site for LNG train 1 and shows two LNGInvestor storage briefingtanks lightly explored. Until recently, the northern blocks were near the coast covered only by a very sparse grid of 2D seismic data. In Phil Meier, Lucio Della Martina, Peter Moore Sydney 13 November 2008 late 2007, Woodside drilled the Belicoso-1 well in WA-347-P. While the well did not encounter hydrocarbons, it did find an abundance of good quality reservoir sands, providing encouragement for future exploration in the area. In 2008, Woodside drilled the Ixion-1 and Bellatrix-1 wells in WA-370-P, which were dry holes. During 2009, Woodside plans to drill six to nine wells in the area to the north-west of Pluto where it has multiple potential drilling targets of varying sizes and play types. The Martell exploration well is scheduled to be drilled in early 2009.

Strengthening Woodside’s LNG future Pluto module — pipe racks The Pluto LNG Project, together with its growth potential, will consolidate Woodside’s position as a global LNG leader.

Pluto LNG Plant site. The potential location for LNG Train 2 and 3 as well as a pipeline gas plant have been identified

21 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Sunrise

Evaluating detailed commercial Jon Ozturgut and technical aspects of two Vice President Sunrise development concepts Jon has almost 30 years of industry experience and joined Woodside in 2005.

Sunrise map Sunrise LNG

Interest JPDA 03-19, JPDA 03-20, 33.44% – Leste Timor NT/RL 2, NT/RL4 (unitised) FLNG or DLNG Operator Woodside Location Offshore 450 km north-west of Darwin, NT 450km 150 km south of Timor–Leste Water depth 75 - 750 metres Contingent 1,820 Bcf dry gas Darwin Resources 81 MMbbl condensate Northern Gross Net Territory Acreage (km2) 2,998 958

The Sunrise and Troubadour gas fields, collectively known as Greater Sunrise, form a contingent resource which could Floating LNG development option add significantly to Woodside’s reserves. The gas resource contains a relatively high proportion of condensate and a relatively low proportion of carbon dioxide. Greater Sunrise is partly located in a Joint Petroleum Development Area (JPDA), controlled by the Australian and Timor–Leste governments. Approximately 20% of the Greater Sunrise fields lie within the JPDA, with the remainder in Australian waters. Woodside established a Sunrise team and a representative office in Dili following the February 2007 ratification of the International Unitisation Agreement (IUA) and the Certain Maritime Arrangements in the Timor Sea Treaty (CMATS) by both governments. Under the IUA, Woodside and its Sunrise Joint Venture participants and the Australian and Timor–Leste governments Darwin LNG development option are required to progress the concept which develops the Greater Sunrise reservoir to the best commercial advantage consistent with good oilfield practice. During 2008, appraisal of the Sunrise field continued with the drilling of the Sunrise-3 well. In addition, 3D seismic data over the field is being reprocessed utilising the latest technology to improve understanding of potential field development requirements. Woodside is progressing a detailed commercial and technical evaluation of two development concepts for Greater Sunrise gas – a floating LNG option and a Darwin- based LNG option. Woodside expects a concept select decision to be made in the second half of 2009. Following selection of the preferred concept, Woodside will work with the Timor–Leste and Australian governments to Operated by Conoco-Phillips secure the timely approval of a field development plan to develop Sunrise.

22 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Browse

Focused on two potential Betsy Donaghey development options — onshore Senior Vice President Browse Kimberley or pipeline to Karratha Betsy has 25 years industry experience and has been with Woodside since 2000.

Browse map Browse LNG

Interest TR/5, R/2, WA-30-R, 50% Indian Ocean

WA-31-R,WA-32-R Business Review WA-28-R, WA-29-R, WA-275-P 25% WA-378-P, WA-396-P, WA-397-P 70% Operator Woodside James Price Location Offshore 425 km north of Broome, WA Point Water depth 400 - 800 metres Contingent 6,284 Bcf dry gas Resources 161 MMbbl condensate Gross Net Karratha Acreage (km2) 16,904 10,207

Browse LNG Focus is on two potential development options The Browse fields represent a world class resource. Kimberley option This development will commercialise the significant Torosa, The Western Australian Government announced James Brecknock and Calliance gas fields. Currently booked Price Point on the Dampier Peninsula as the preferred as contingent resources, this development could add location for a LNG precinct. significantly to Woodside’s reserves. Woodside will conduct further technical, environment and During 2008, Woodside has continued to appraise the three social studies and stakeholder consultation with the Kimberley fields to reduce uncertainty on field characteristics and Land Council, Traditional Owners and other stakeholders to volumes. The Torosa-5, Torosa-6 and Calliance-3 wells were evaluate the precinct as a gas processing option. drilled during the year. In addition, Woodside has acquired additional 3D seismic data to further delineate the Torosa Karratha option and Calliance fields. The upstream environmental referral The Karratha option would see the utilisation of existing was lodged with the Australian Government this year. LNG facilities, with gas being transported via a pipeline Following extensive community consultation and studies and compression platform from the Browse gas fields to which included Darwin, Offshore and Floating LNG as Woodside’s operations in Karratha. processing options, Woodside and the joint venture participants will decide between two development options Portfolio management – onshore liquefaction in the Kimberley or piping the gas During the year, Woodside farmed down its interest in to existing LNG facilities at Karratha. Woodside and the exploration licences WA-378-P, WA-396-P and WA-397-P, Browse Joint Venture expect to choose between one of from 100% to 70%. these processing options in the first half of 2009. During 2008, Woodside completed drilling of the Snarf-1 prospect in WA-275-P which was a dry hole.

23 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Other Australia

Laminaria–Corallina

Mutineer–Exeter­

Vince Santostefano Executive Vice President Production Vince has 27 years industry experience and has been with Woodside since 1999. Otway

Otway Gas Laminaria–Corallina Oil

Interest T/L2, T/L3, VIC/L23, VIC/P43, 51.55% Interest Laminaria 59.90%* T/30P, T/34P Corallina 66.67% Operator Woodside AC/L5 Operator Woodside Facilities Thylacine Wellhead Platform, Otway Onshore Gas Plant, Facilities Northern Endeavour FPSO Subsea onshore gas and liquid pipelines. Location Timor Sea, 550 km north-west of Darwin Location Otway Basin, offshore Victoria, 70 km south of Port Campbell Water depth ~340 metres Water depth 85 - 100 metres Products Crude oil Products Gas, condensate, LPG First production 1999

First production September 2007 *Interests on a post-unitisation basis, i.e. after agreeing to pool Woodside’s interest with other field owners and to exploit the field as a single venture During 2008, the Otway development reached stable operating rates at both the offshore and onshore facilities. The Laminaria and Corallina fields have been producing oil Woodside completed the construction of the Otway Gas since 1999 and had produced almost 190 million barrels of oil Plant late in 2007, which processes gas from the offshore by the end of 2008. These fields are in natural decline. Thylacine field. The plant produces pipeline gas, LPG and Work undertaken on subsea infrastructure during 2008, will condensate which are sold to Australia’s east-coast markets. allow us to maximise production in 2009 and beyond. At the Woodside is considering further development opportunities, beginning of the year, production was limited to around 4,000 which include onshore compression facilities to enhance barrels of oil per day from the Laminaria field. A program recovery of low pressure gas, tie-in of the Geographe field, of repair and replacement of subsea flowlines and risers and tie-in of the Thylacine North field. began in March 2008. Following the initial work, production increased to around 10,000 barrels of oil per day and by June Mutineer–Exeter Oil had increased to around 11,000 barrels of oil per day. Further work to increase production will occur in 2009. At the end Interest WA-26-L,WA-27-L 8.20% of 2008, Laminaria and Corallina were together producing Operator Santos approximately 11,000 barrels of oil per day. Facilities Modec Venture 11 FPSO In August 2008, the Corallina-4 appraisal well was drilled. Location ~150 km north of Dampier, WA The well intersected a net oil column of seven metres, and indicated that there is unswept attic oil in the Corallina field. Water depth ~165 metres As a result of that, a production well is planned for Q3 2009. First production March 2005 Products Crude oil Laminaria–Corallina production profile 2008

14 Natural field decline and a shutdown for repairs impacted 12 production during the first half of the year. During the second half of the year, field production averaged around 10

10,000 barrels of oil per day. 8

One appraisal well was drilled in 2008 and a new 6 development well was brought online in Q4. 4

2 Oil production rate (‘000 bpd)

0 Jan 08 Dec 08

24 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c United States

Gulf of Mexico production 4% Jeff Soine President Woodside Energy (USA) Inc During 2008, our United States business contributed 3 million Woodside Jeff has 18 years industry barrels of oil equivalent to other experience and has been with Woodside’s production. Woodside since 2005. With the start up of Power Play and Neptune in mid 2008, we have more than doubled our net production volumes from the start of this year.

About 60% of our United States production now comes Gulf of Mexico key metrics (Woodside share) from the deep water and roughly 60% is oil. Woodside has 2008 2007 an extensive acreage position in the deep water which will help to grow our US business. Sales revenue (A$ million) 237 158 Business Review

Net production (MMboe) 3.1 2.6 Neptune Oil Proved + Probable Reserves (MMboe) 26 30 Interest AT 573-575, WI 20% 617, 618 NRI 17.5% Gross Net Acreage (km2) 3,045 1,548 Operator BHP Billiton Location Atwater Valley 220 km offshore Louisiana, USA Power Play Oil Water depth ~2,000 metres Interest GB 302 WI 20.0% NRI 16.3% First production 6 July 2008

WI Working Interest NRI Net Revenue Interest Operator Anadarko Location Garden Banks Neptune is a multi-well subsea development tied back 200 km offshore Louisiana, USA to a stand-alone tension leg platform (TLP). The Neptune Water depth 700 metres field produced first oil on 6 July 2008 and quickly reached capacity production of more than 50,000 barrels of oil and First production 21 June 2008 33,900 mcfg per day by 25 July 2008 (gross). Power Play began production in June 2008 and was During the second half of 2008, Neptune has experienced producing 6,000 barrels of oil per day and 15,000 mcfg natural decline from its peak rates, such that production (gross) at year end. rates averaged 34,000 barrels of oil and 20,300 mcfg per day (gross) during Q4. Woodside’s net share of Neptune At the end of the year, Power Play’s net production rate was production for Q4 averaged 5,950 barrels of oil and 3,550 970 barrels of oil per day and 2,400 mcfg a day. mcfg per day.

During September, a rich azimuth seismic survey was Gulf of Mexico Shelf Production acquired which will assist in identifying opportunities for Producing Fields 9 further appraisal and infill drilling on the Neptune field over the next two to three years. Operated Fields 4 Water Depth 5 – 100 metres Average interest: 39% (reserve basis)

At the end of the year, Woodside’s net shelf production was 290 barrels of oil and 22,700 mcfg a day.

Following hurricane damage, gas production was restored from most fields during the fourth quarter as pipelines and third party processing plants were put back in service.

At the end of the year only 2 MMcfg per day remained shut-in due to hurricane related damage at third party shore base facilities. Neptune Platform

25 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Other International

3%

During 2008 international activities Woodside Peter Moore contributed 2.3 MMboe to other Senior Vice President Woodside’s annual production. Exploration Peter has more than 29 years of industry experience and joined International key metrics (Woodside share) Woodside in 1999. 2008 2007

Sales revenue (A$ million) 65.7 228

Net production (MMboe) 2.3 4.5

Algeria Proved + Probable Reserves (MMboe) 2.6 4.9 Gross Net Ohanet Condensate and LPG Acreage (km2) 102,420 45,422

Interest Ohanet North 15% Liberia Woodside 17.5% (non-operator) Ohanet South Woodside has executed promoted equity deals with Repsol Askarene Guelta Exploration S.A. and Anadarko Liberia Company such that Dimeta West Woodside and Repsol now each hold 17.5% non-operator Operator BHP Billiton equity in PSCs L15, L16 and L17. Anadarko holds 65% Facilities Ohanet Gas Processing Plant and operatorship of each block. An extensive 3D seismic program (6,000 km2) was initiated in 2008. Location Onshore Illizi Basin, Southern Algeria

Products LPG and Condensate Canary Islands Woodside 30% (non-operator) First production October 2003 Woodside holds a 30% interest in the Canaries 1-9 blocks operated by Repsol. Activity in this acreage is suspended until such time as a Royal Decree will provide full rights to In 2008, the Ohanet Joint Venture received its full revenue permit activity. entitlement of US$65.7 million (Woodside share), which equals 1.4 million barrels of condensate and 111,924 tonnes of LPG (at Brazil Woodside 12.5% (non-operator) a 10 year average price at the time of initial production). Woodside holds a 12.5%* interest in nine offshore Woodside relinquished its interest in the Repsol-operated exploration blocks covering 2,095 km2 of the Santos Basin Block 401d and BHP Billiton-operated Ksar Hirane Blocks in south-eastern Brazil. The blocks are about 180 km south 408a and 409. east of Sao Paulo. The acreage lies in water depths ranging between 150 - 500 metres and is operated by Repsol YPF. Libya Woodside 45% (operator) Woodside continued its onshore exploration and appraisal During Q4 2008, Woodside participated in the drilling of program, drilling four exploration wells and three appraisal the Panoramix well in block S-M-674. The well intersected wells in the Sirte and Murzuq Basins during 2008. potentially commercial gas columns in two Cretaceous Oil and gas were discovered by one of the Murzuq wells Santorian reservoirs, and light oil in a third shallower zone. which was still testing at year end. Two other exploration Analysis is continuing in 2009. wells, which appear to have discovered oil and gas, have Korea Woodside 50% (operator) been suspended for possible future testing. Two of the Woodside holds a 50% operator interest in offshore Block appraisal wells were drilled on the Tocra gas discovery and 8/6-1 N, which covers 12,560 km2 (6,280 km2 net interest). field development planning is now in progress. During 2008, Woodside acquired 5,107 km of 2D seismc data over the block. Woodside 55% (operator) Woodside also holds a 55% interest in four frontier offshore Kenya exploration blocks. No seismic or drilling activity took place The Woodside operated leases for Blocks L-5 and L-7 in during 2008. Kenya expired in June 2008, completing Woodside’s exit from this country. Sierra Leone Woodside 25% (non-operator) Woodside, and partner Repsol, each farmed out half of their Oceanway — USA previous 50% equity in blocks SL-6 and SL-7 to Anadarko, In January 2009, Woodside announced that, in view of which has now become the operator. These blocks cover an current market conditions, it was suspending work and area of 10,567 km2 in water depths ranging from 50 to 3750 withdrawing applications associated with its proposed natural m. Preparations are underway to drill an exploration well gas import project for the Los Angeles region. during 2009. Details of exploration wells and geophysical surveys are provided in quarterly ASX reports. *Woodside equity in the Santos Basin is being farmed down from 25% to 12.5%

26 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Health and Safety

6 3

4.3 (TRCF)

Agu Kantsler 0.56 incidents (REI)

Executive Vice President of incidents Frequency

0 0 of environmental Frequency Health and Safety 2004 2005 2006 2007 2008

Agu has more than 30 years Focused on improving safety and environmental performance industry experience and has been with Woodside since 1995.

Health and Safety During 2008, 535 attendees participated in health and The health and safety of our people come first in all safety training. Of these, 450 were contractors and 85 were our decisions and actions. There is no job or journey so Woodside employees. important to Woodside that it cannot be carried out safely. In addition, Woodside has developed and introduced a Our goal is ‘no-one gets hurt, no incidents’. new Integrated Safe System of Work to assist site workers During 2008, Woodside’s frequency of safety incidents in assessing tasks and performing them in a safe and (Total Recordable Case Frequency or TRCF) increased from controlled manner. 4.1 to 4.3. The total number of safety incidents increased In February 2009, Woodside Chief Executive Officer, Don from 131 to 164, while the number of man-hours worked Voelte hosted a contractor safety forum involving senior increased by 17% from 32 million to almost 38 million. management from our major contracting companies aimed There were no fatalities in 2008. at refocusing and aligning our efforts on health and safety.

High potential incidents (i.e. those with the potential to Improving safety remains our most significant challenge – a cause serious injury) increased from 42 to 43 during 2008. challenge common throughout the Australian oil and gas In health, Woodside’s occupational illnesses decreased from

industry. Sustainability 24 to 23 over the same period. Other initiatives under health performance included: In an effort to improve our health and safety performance, Woodside has introduced the following six health and safety • Converting the four remaining offshore facilities initiatives: with designated smoking areas to smoke-free. All Woodside’s onshore and offshore facilities are now 1. Select principal contractors in line with Woodside smoke-free workplaces. values and a joint commitment to deliver outstanding performance in health and safety. • Noise management: improving monitoring, reducing exposure to noise and continuing to work towards 2. Deeply embed our safety culture. engineering solutions to reduce excessive noise during 3. Understand and control the major operational risks design. and major health hazards through the asset life cycle. • Chemical management: improved approval and risk 4. Understand and control occupational health risks. assessment processes.

5. Ensure health, safety and integrity processes, • Staff health assessments: 545 Woodside employees standards, procedures and rules are understood and attended health check sessions. applied as intended. Integrity 6. Improve learning and communicating lessons from Woodside recognises the importance of careful best practices, incidents and warning signs to avoid management of our assets to prevent accidents and repeat incidents. incidents. This includes a comprehensive corrosion During 2008, contractors accounted for 82% of workforce inspection and management program. exposure hours and 93% of recordable safety cases. A A revised Event Reporting and Investigating Standard and review of our contractor safety management practices was supporting procedure were introduced in 2008, helping to undertaken and led to the development of a comprehensive improve data collection and analysis of incidents. safety improvement plan. Implementation of the plan began in late 2008 and includes the launch of a new contract In addition, 208 people completed the newly introduced management standard and training of contract sponsors ‘Foundations of Integrity’ training program during 2008. in how to positively influence the health and safety performance of contract partners.

27 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Sustainable business principles

Woodside’s commitment to its values and business principles Rob Cole goes beyond sound governance…. Executive Vice President Corporate Centre, it underpins our approach to General Counsel sustainable development Rob has 20 years experience and has been with Woodside since 2006.

Our values Our Business Principles Woodside values include strong sustainable performance; Woodside’s Sustainable Development Business care and respect; integrity and trust; initiative and Framework was approved by the Board in 2007 accountability; creativity and enterprise; and working and embeds 10 principles of sustainability into the together. Woodside Management Framework. The business principles are outlined below. We recognise that our business must be profitable. We believe that our demonstration of these values makes us distinctive and is essential to our success.

Strong governance Economic Performance Woodside has a structured governance framework comprising two components – a framework which describes the way in which Woodside is organised and Shareholder governed and a management system which outlines Value policy and provides clear responsibility, accountability and Environmental Social authority. Excellence Contribution Woodside’s Internal Audit process provides independent Economic Performance assurance that the design and operation of internal control • Delivering economic benefits and risk management across the company is effective. • Being open and accountable In recognition of our growing focus on sustainable • Investing in innovation and enterprise principles and practices, during 2007 we established a Environmental Excellence Board Sustainability Committee. • Supplying energy for the future Woodside has adopted the revised Corporate Governance • Using resources efficiently Principles and Recommendations set by the Australian • Minimising our ecological footprint Securities Exchange Corporate Governance Council in 2007. Social Contribution Code of Conduct • Respecting people • Involving stakeholders Woodside is committed to appropriate and ethical corporate • Contributing to sustainable communities practices. Compliance with the Code of Conduct by Woodside’s directors and employees assists the company • Maintaining culture and heritage in effectively managing its operating risks and meeting its More details are provided in our Sustainable legal and compliance obligations as well as underpinning Development Report which will be available on our corporate reputation. the Woodside website by 23 February 2009 (www.woodside.com.au). The Code of Conduct summarises Woodside’s policies on confidentiality, conflicts of interest, sound employment Sustainable development in Woodside practices, compliance with laws and regulations and the For Woodside, sustainability is about delivery of shareholder protection and proper use of Woodside assets. value through operating our existing business and developing new business opportunities in an economically, As a condition of employment, all Woodside employees socially and environmentally responsible way. are required to comply with the Code of Conduct. Annual Code of Conduct training is compulsory for all Woodside To us, sustainable development is about the viability of our company. It is about being a company of choice employees. that delivers shareholder value while supporting thriving communities and protecting the environment and natural resources upon which our business and society depend.

28 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Environmental excellence

Environmental performance are continuing on the Karratha Gas Plant and North Rankin Woodside operates in diverse environments where our A platform. The Otway Gas Plant is expected to begin activities have the potential to impact on land, water, air assessment during 2009. and ecosystems. Woodside is committed to understanding and protecting the environment and reducing our per unit Environmental legal compliance environmental footprint. In 2008 Woodside had 21 significant environmental incidents (Category C and above). All incidents were reported to During 2008, Woodside’s environmental management and relevant regulators in line with licence obligations. None of performance focused on emissions reduction, resource these incidents were expected to have significant or long- efficiency, biodiversity conservation and environmental legal term environmental impacts. Woodside did not incur any compliance. environmental fines or penalties during 2008.

Emissions reduction Biodiversity conservation Woodside’s greenhouse emissions intensity increased from Surveys and research help us understand the environments 0.19 to 0.24 on a per unit basis (tonnes of CO2 equivalent in which we operate, the impacts our operations might have per barrel of oil equivalent production). and how to reduce or avoid those impacts. Woodside’s share of CO2 equivalent emissions increased During 2008, Woodside undertook a number of surveys from 1.6 million tonnes to 2.25 million tonnes following the including investigations into marine megafauna, seabed start-up of Neptune, Vincent, LNG Train 5, Angel and the habitat, oceanographic conditions, whale sharks, establishment of stable production at Otway. underwater noise, sea turtle habitats and terrestrial The majority of Woodside’s greenhouse emissions arise vegetation and flora. from the combustion of fuel for power generation and In 2008 Woodside, as operator of the Browse Joint Venture, liquefaction at the Karratha Gas Plant. Offshore facilities and initiated funding of a baseline environmental study of the reservoir emissions account for approximately 25% of total biodiversity, oceanography and ecosystems of Scott Reef. greenhouse emissions. The study will be carried out by the Australian Institute of Woodside also seeks to offset emissions through carbon Marine Sciences (AIMS) at a cost of $25 million. sequestration. In 2008, CO2 Australia planted almost Woodside undertook 10 marine seismic surveys in 2008 1,844 ha of trees in central New South Wales on behalf to define and better delineate potential and existing of Woodside. Further plantings in Western Australia over hydrocarbon accumulations. At all times, Woodside the next four years will aim to increase the number of complied with government licence conditions. trees planted to 20 million. Costing up to $100 million, this project aims to offset up to 1.8 million tonnes of reservoir Sustainability greenhouse gas emissions a year post 2010 from the Pluto Emissions Trading LNG Project. During 2008, the Australian Government released Resource efficiency Green and White Papers outlining their proposed Carbon Pollution Reduction Scheme. Woodside seeks to reduce its use of energy, water and chemicals on a per unit of production basis. During 2008, Woodside recognises that climate change is a global energy assessments were completed on the Cossack problem requiring a global solution. Liquefied natural Pioneer FPSO, Goodwyn A production platform, Northern gas (LNG), as the most emissions-efficient fossil fuel, Endeavour FPSO and Nganhurra FPSO. Results are detailed is able to contribute directly to the global reduction of in the 2008 Sustainable Development Report. Assessments greenhouse gas emissions. For every tonne of carbon dioxide emitted in the production of LNG in Australia, at least four tonnes of carbon dioxide emissions in LNG intensity and production customer countries are avoided when LNG is used Train 5 to displace coal-fired power generation. This is even start-up greater in China, where the impact of displacing coal Train 4 start-up with LNG for power generation ranges beween 5.5 and 9.5 tonnes.

Australian LNG must compete for sales with LNG from countries like Qatar, Oman, the United Arab Emirates, Iran, Malaysia, Brunei and Indonesia. None of these

Intensity countries are currently proposing a carbon constraint. Production Unilateral emissions trading could threaten the (‘000 Tonnes LNG/month) Tonnes (‘000 (Tonne CO2 e/tonne LNG) (Tonne competitiveness of Australian LNG, and in so doing, squander Australia’s best opportunity to contribute 2004 2005 2006 2007 2008 to global emissions reduction. In February 2009, the government referred the Scheme to a House of Emissions intensity improved in 2004 with the start-up of Representatives Committee, which resulted in some energy efficient LNG Train 4, and is expected to improve speculation about the timing of the scheme. further with stable production from LNG Train 5.

29 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Social contribution

National Heritage listed areas close to Pluto.

02468

kilometres

Gidley Island

Rosemary Island Dolphin Island

Malus Island Angel Island

West Lewis Island Enderby Island

Burrup Peninsula

East Lewis Island

Nickol Bay DAMPIER

West Intercourse Island

We provide opportunities for 15 to 25 year old to gain important Dampier Archipelago National Heritage Listed Area Pluto Lease Boundary life skills though our support of the Leeuwin Foundation.

Community Rock art on the Burrup Woodside is committed to understanding the social impact of our operations and seeks to support strong and thriving The Pluto LNG Project and adjacent Karratha Gas Plant communities in areas where we operate. occupy about 800 hectares immediately adjacent to, but not included in, the 42,000 hectare National Woodside facilitates Community Reference Groups in Heritage Listed rock art area on the Burrup Peninsula communities in which we operate as a means for local of Western Australia. people to provide input to Woodside’s current or proposed activities. Since 2004, more than 225 stakeholder meetings During site preparation work for the Pluto LNG Project, have been held involving environment, conservation 170 boulders containing engravings were successfully and community groups, non-government organisations, relocated under the guidance of archaeologists and Indigenous organisations, local, state and Federal local Indigenous representatives. Relocation work was governments, tourism operators and fishing groups. completed in January 2008 without any damage to engravings. The remaining 92% of rock art in the Pluto In 2008, Woodside committed more than $10 million to lease area remains undisturbed. fund a range of community initiatives supporting the arts, environment, education, sports and Indigenous programs. In 2007, Woodside signed a $34 million conservation This funding was part of our community investment agreement with the Australian Government for the strategy which focuses on: recognition, protection and conservation of the National Heritage Values of the Dampier Archipelago. • Creating strong, thriving and attractive communities. This represents the largest ever single investment by • Marine and coastal research, protection and an Australian company in a National Heritage place. rehabilitation. As part of this agreement, Woodside, through its Rock • Maintaining and preserving cultural heritage. Art Foundation, is investing in: • Investing in innovations and science. • Identifying sites with National Heritage Values. • Educating and training our future workforce. • Presenting and transmitting information about the National Heritage Values. In addition, Woodside has continued to work with all levels of government to build the level of services and • Managing National Heritage Values to ensure the infrastructure in Karratha, including: values are conserved for future generations. • Researching and monitoring the National Heritage • K2020 – a strategic plan and vision for Karratha which Values. identifies a series of infrastructure projects. • Committing to spend $1 million a year for five years to improve health services. • Addressing child care shortages. • Building additional houses for construction workers.

Beyond direct and indirect employment, Woodside supports Indigenous communities through education. Six education programs were supported by Woodside in 2008 aimed at strengthening educational support for young Indigenous people. The company also supports local art and language programs, assists with art exhibitions, funds a rock art scholarship and is one of the largest non-government sponsors of rock art research in Australia.

30 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Our people

Age distribution of staff with under 40 trendline

3,500 60

Tina Thomas Staff

Vice President Percentage Human Resources Tina has 20 years industry experience and has been with 0 0 Woodside since 1989. 2004 2005 2006 2007 2008

<20 21-30 31-40 41-50 51-60 60+ % Aged 40 and under Unusually for the industry, almost 54% of our workforce is under 41 years of age and almost 85% is under the age of 51, due to our long-standing investment in training and developing graduates, trainees and apprentices.

Our staff for advancement and Woodside’s commitment to equal At the end of 2008, Woodside’s workforce had grown opportunity. Flexibility in working arrangements is seen as a to 3,124, representing a 5% increase from 2007. Our key contributor to the achievement of an 80% return rate from recruitment efforts throughout the year resulted in 589 new parental leave in 2008. hires. Our voluntary turnover rate decreased throughout the At the end of 2008, women represented 28.2% of our year to 9% by year end. workforce which is a 1.3% increase from 2007. The percentage of women in senior management positions was 10.3% at the Developing our people end of 2008, a 1.5% increase on 2007. Woodside currently has 139 graduates on a three-year In 2007, Woodside was deemed compliant with the Equal graduate program covering a range of disciplines. In addition, Opportunities for Women in the Workplace Act 1999, and was Woodside’s apprenticeship and traineeship programs currently granted a waiver from EOWA reporting for two years. involve more than 100 apprentices and trainees working towards their technician qualifications on onshore and offshore Indigenous diversity facilities. To date, more than 50 apprentices and trainees have gained full-time employment after gaining their technical In 2008, Woodside developed an Indigenous Employment Participation strategy which includes building pathways to

qualifications. Sustainability employment for Indigenous people and promoting a work We provide on-the-job learning complemented by formal environment that attracts, retains and motivates strong training and development to assist our staff in keeping performing Indigenous employees. their skills up to date and to enhance their long-term career opportunities and motivation. Woodside’s National Indigenous Cadetship Program supports people to take up professional positions within the company. We continue to develop our leadership capability within the At the end of 2008, eight cadets had successfully completed organisation. Since its inception in late 2006, a total of 550 the program and moved into Woodside employment, with an senior and mid-level managers have completed the Leadership additional eight cadets signed up to undertake the program in for High Performance program. At the end of 2008, a total of a range of disciplines. 204 people had participated in the New Leader program for staff members moving into leadership positions for the first time. LNG capability In 2008, we spent approximately $20 million on training Woodside’s LNG Capabilty Plan is designed to build through a variety of structured learning opportunities at all long-term capability for the organisation and ensure levels of the organisation, including business and technical we have the people required to match our LNG growth skills development, graduate, apprentice and trainee programs, aspirations. Progress on the plan in 2008 included: leadership and management capability development and compliance. • Organisational changes to provide greater focus and support for LNG capability.

Diversifying our demographics • Strategic workforce planning to identify talent Woodside recruits and manages people on the basis of needs and diagnose capability gaps. competence and performance, regardless of age, nationality, • A review of remuneration competitiveness. race, gender, religious beliefs, sexuality, physical ability or cultural background. • Attraction and retention strategies focused on the key resources. Our success in achieving a culture necessary to support a diverse workforce was measured through the 2008 Employee • Establishment of an integrated LNG skill pool Survey. With positive scores of 90% or better, the results to identify and manage staff development showed up to 7% improvement on the 2007 survey, including opportunities and succession plans. the areas of fair treatment, harassment, opportunities

31 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Woodside’s Board of Directors

Michael A Chaney, AO Donald R Voelte Chairman, BSc, MBA, Hon LLD (UWA), FAICD Managing Director and CEO, BSc (University of Nebraska) Term of office: Director since November 2005. Chairman Term of office: Director since April 2004. since July 2007. Independent: No. Independent: Yes. Age: 56. Age: 58. Experience: More than 34 years experience in the Experience: 22 years with Wesfarmers Limited, including global oil and gas business, including 22 years with Mobil Managing Director and CEO from 1992 to 2005. Three years Corporation, three years with Atlantic Richfield Company with investment bank Australian Industry Development and three years as Director, President and CEO of Chroma Corporation (1980 to 1983), and prior to that eight years as a Energy Inc, a private exploration and production company. petroleum geologist working on the North West Shelf and in the USA and Indonesia. Previously a non-executive director Committee membership: of BHP Billiton Limited (1995 to 2005) and BHP Billiton Plc Attends Board committee meetings. (2001 to 2005). Current directorships: Committee membership: Director: The University of Western Australia Business Chair of the Nominations Committee. Attends other Board School (since 2006) and West Australian Newspapers committee meetings. Holdings Limited (since 2008). Current directorships: Chair: National Australia Bank Limited (director since 2004) and Gresham Partners Holdings Limited (director since 1985). Director: The Centre for Independent Studies Ltd (since 2000). Chancellor: The University of Western Australia (since 2006).

Melinda Cilento Erich Fraunschiel Andrew Jamieson Pierre Jungels Din Megat David McEvoy Ian Robertson

32 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Melinda A Cilento Current directorships: BA, BEc (Hons), MEc Chair: Rockhopper Exploration plc (since 2005) and Oxford Term of office: Director since December 2008. Catalyst Ltd (since 2006). Director: Imperial Tobacco Group PLC (since 2002) and Independent: Yes. Baker Hughes Inc (since 2006). Age: 43. Directorships of other listed entities within the past Experience: Deputy Chief Executive (since 2006) and Chief three years: Economist (since 2002) of the Business Council of Australia. Director: Offshore Logistics Inc (2002 to 2006) and Offshore Significant public and private sector experience in economic Hydrocarbon Mapping plc (2004 to 2008). policy development and analysis. Previously worked with County Investment Management (now Invesco) as Head of David I McEvoy Economics, and with the Department of Treasury in various BSc (Physics), Grad Dip (Geophysics) roles, and spent two years at the International Monetary Fund. Term of office: Director since September 2005. Committee membership: Member of the Human Resources & Compensation, Independent: Yes. Sustainability and Nominations Committees. Age: 62. Experience: 34 year career with ExxonMobil involving Erich Fraunschiel extensive international exploration and development BCom (Hons) (UWA) experience. Term of office: Director since December 2002. Committee membership: Independent: Yes. Chair of the Sustainability Committee. Member of the Audit Age: 63. & Risk and Nominations Committees. Experience: More than 18 years experience in senior Current directorships: executive positions with Wesfarmers Limited, including 10 Director: Innamincka Petroleum Ltd (since 2002), Po years as CFO and Executive Director. Valley Energy Ltd (since 2004) and Australian Worldwide Committee membership: Exploration Limited (since 2006). Chair of the Audit & Risk Committee. Member of the Sustainability and Nominations Committees. Tan Sri Dato’ Megat Zaharuddin (Din Megat) Current directorships: BSc (Hons) (Mining Engineering) Chair: The West Australian Opera Inc (director since 1999) Term of office: Director since December 2007. and Wesfarmers Insurance Group comprising Lumley Independent: Yes. General Insurance Limited (since 2003), Lumley Corporation Age: 60. Pty Limited (since 2007) and Wesfarmers Federation Insurance Limited (since 2002). Experience: 31 year career with Shell including Regional Business CEO/Managing Director of Shell Exploration Director: WorleyParsons Limited (since 2003), Rabobank and Production BV with responsibilities for the Middle Australia Limited (since 2003), Rabobank New Zealand Limited

East, Central and South Asia and Russia region (1999 to Governance (since 2007) and The WCM Group Ltd (since 2005). Sustainability 2004) and Chairman and Chief Executive of Shell group Directorships of other listed entities within the past companies in Malaysia (1995 to 1999). Retired from Shell three years: in 2004. Director: West Australian Newspapers Holdings Limited Committee membership: (2002 to 2008). Chair of the Human Resources & Compensation Andrew Jamieson, OBE Committee. Member of Sustainability and Nominations Committees. F.R.Eng., C.Eng., F. Inst Chem E. Term of office: Director since February 2005. Current directorships: Chair: Malaysian Rubber Board (since 2009) Independent: No. Director: Capital Market Development Fund (since 2004) Age: 61. and International Centre for Leadership in Finance (since Experience: Executive Vice President Gas and Projects of 2004). Shell Gas and Power International BV. More than 30 years Directorships of other listed entities within the past experience with Shell in Europe, Australia and Africa. From three years: 1997 to 1999 Mr Jamieson was seconded to Woodside Chair: Maxis Communications Berhad (2004 to 2007). Energy Ltd as General Manager North West Shelf Venture. Director: Maybank Berhad (2004 to 2009) Committee membership: Member of the Sustainability and Nominations Committees. Ian Robertson BA (Business Management), FCMA (UK) Pierre JMH Jungels, CBE Term of office: Director since June 2008. PhD (Geophysics and Hydraulics) (Caltech) Independent: No. Term of office: Director since December 2002. Age: 50. Independent: Yes. Experience: Almost 30 years experience with Shell Age: 65. working in the downstream, upstream, transport and Experience: Former CEO of Enterprise Oil plc and trading elements of the business. Currently Executive Vice President of the Institute of Petroleum. More than 30 years President for Shell’s finance operations. experience in the international oil and gas industry. Committee membership: Committee membership: Member of the Audit & Risk and Nominations Committees. Member of the Human Resources & Compensation, Audit & Risk and Nominations Committees.

33 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Corporate governance statement Contents 1 Corporate Governance at Woodside 1. Corporate Governance at Woodside 34 Woodside is committed to a high level of corporate 2. Board of Directors 35 governance and fostering a culture that values ethical 2.1 Board Role and Responsibilities 35 behaviour, integrity and respect. 2.2 Board Composition 35 This statement reports on Woodside’s key governance 2.3 Chairman 35 principles and practices. These principles and practices 2.4 Director Independence 36 are reviewed regularly and revised as appropriate to 2.5 Conflicts of Interest 37 reflect changes in law and developments in corporate 2.6 Board Succession Planning 37 governance. 2.7 Directors’ Retirement and Re-election 37 The company, as a listed entity, must comply with the Corporations Act 2001 (Cwlth) (Corporations Act), the 2.8 Terms of Appointment, Induction Training Australian Securities Exchange (ASX) Listing Rules (ASX and Continuing Education 37 Listing Rules) and other Australian and international laws. 2.9 Board Performance Evaluation 37 The ASX Listing Rules require the company to report 2.10 Board Access to Information and on the extent to which it has followed the Corporate Independent Advice 38 Governance Recommendations contained in the ASX 2.11 Directors’ Remuneration 38 Corporate Governance Council’s (ASXCGC) second 2.12 Board Meetings 38 edition of its Corporate Governance Principles and 2.13 Company Secretaries 38 Recommendations (August 2007). Details of Woodside’s compliance with the ASXCGC Recommendations are 3. Committees of the Board 38 set out below. A checklist cross-referencing the ASXCGC 3.1 Board Committees, Membership and 38 Recommendations to the relevant sections of this Charters statement and the Remuneration Report is provided on 3.2 Audit & Risk Committee 39 page 46 of this report and is published in the corporate 3.3 Nominations Committee 39 governance section of Woodside’s website 3.4 Human Resources & Compensation 39 (www.woodside.com.au). Committee Woodside believes that, throughout the 2008 year and 3.5 Sustainability Committee 39 to the date of this report, it has complied with all the ASXCGC Recommendations. 4. Shareholders 40

4.1 Shareholder Communication 40 4.2 Continuous Disclosure and Market 41 Communications

5. Promoting Responsible and Ethical Behaviour 41 5.1 Code of Conduct and Whistleblower Policy 41 5.2 Securities Ownership and Dealing 41 5.3 Political Donations 42

6. Risk Management and Internal Control 42 6.1 Approach to Risk Management and 42 Internal Control 6.2 Risk Management Roles and Responsibilities 42

6.3 Internal Audit 42

6.4 CEO and CFO Assurance 43

7. External Auditor Relationship 43 8. ASX Corporate Governance Council Recommendations Checklist 44

34 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c 2 Board of Directors and the delegation of Board authority to the CEO are 2.1 Board Role and Responsibilities reviewed regularly. ASXCGC Recommendations 1.1, 1.3 A copy of the Board Charter is available in the corporate governance section of Woodside’s website. The Board has approved a formal Board Charter which details the Board’s role, powers, duties and functions. 2.2 Board Composition The central role of the Board is to set the Company’s ASXCGC Recommendations 2.1, 2.2, 2.3, 2.6 strategic direction, to select and appoint a CEO and to oversee the company’s management and business The Board is comprised of eight non-executive directors activities. and the CEO. Details of the directors, including their qualifications, experience, date of appointment and In addition to matters required by law to be approved independent status, are set out on pages 32 to 33. by the Board, the following powers are reserved to the Board for decision: The Board considers that collectively the directors have • the appointment and removal of the CEO and the the range of skills, knowledge and experience necessary Company Secretary and determination of their to direct the company. remuneration and conditions of service; In assessing the composition of the Board, the directors • approving the appointment and, where appropriate, have regard to the following principles: the removal of executives who report directly to the • the Chairman should be non-executive, independent CEO together with their remuneration and conditions and an Australian citizen or permanent resident; of service; • the role of the Chairman and the CEO should not be • approving Group remuneration issues, including filled by the same person; periodic adjustments and short and long term • the CEO should be a full-time employee of the incentive payments; company; • approving senior management succession plans and • the majority of the Board should comprise directors significant changes to organisational structure; who are both non-executive and independent; • authorising the issue of shares, options, equity • the Board should represent a broad range of instruments or other securities; qualifications, experience and expertise considered of • authorising borrowings, other than in the ordinary benefit to the company; and

• the number of Shell-nominated directors, as a Governance course of business, and the granting of security over Sustainability the undertaking of the company or any of its assets; proportion of the Board, should normally be in the proportion that Shell’s holding of fully paid ordinary • authorising expenditures which exceed the CEO’s shares in the company bears to all of the issued fully delegated authority levels; paid ordinary shares in the company. • approving strategic plans and budgets; For the time being the Board has determined that the • approving the acquisition, establishment, disposal or number of directors on the Board should be eight non- cessation of any significant business of the company; executive directors and the CEO. This number may be • approving annual and half year reports and disclosures increased (providing it does not exceed 15) where it is to the market that contain or relate to financial felt that additional expertise is required in specific areas, projections, statements as to future financial where an outstanding candidate is identified or to ensure performance or changes to the policy or strategy of a smooth transition between outgoing and incoming the company; non-executive directors.

• approving policies of company-wide or general 2.3 Chairman application; ASXCGC Recommendations 2.2, 2.3 • the appointment of directors who will come before shareholders for election at the next Annual General The Chairman of the Board, Mr Michael Chaney, is an Meeting (AGM); and independent, non-executive director and a resident Australian citizen. • establishing procedures which ensure that the Board is in a position to exercise its powers and to discharge The Chairman is responsible for leadership and effective its responsibilities as set out in the Board Charter. performance of the Board and for the maintenance of relations between directors and management that are Other than as specifically reserved to the Board in the open, cordial and conducive to productive cooperation. Board Charter, responsibility for the management of The Chairman’s responsibilities are set out in more detail Woodside’s business activities is delegated to the CEO in the Board Charter, which is available in the corporate who is accountable to the Board. The Board Charter governance section of Woodside’s website.

35 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c 2 Board of Directors (continued) • a material customer is a customer of Woodside which accounts for more than 2% of Woodside’s Mr Chaney is also Chairman of National Australia Bank consolidated gross revenue; and Limited (NAB). The Board considers that neither his Chairmanship of NAB, nor any of his other commitments • a supplier is material if Woodside accounts for more (listed on page 32), interfere with the discharge of his than 2% of the supplier’s consolidated gross revenue. duties to the company. The Board is satisfied that Mr The Board reviews the independence of directors before Chaney commits the time necessary to discharge his they are appointed and on an annual basis. The Board role effectively. has reviewed the independence of each of the directors in office at the date of this report and has determined 2.4 Director Independence that six of the nine directors are independent. The three ASXCGC Recommendations 2.1, 2.6 directors that are not considered independent are: The independence of a Director is assessed in • Mr Don Voelte as he is an executive director and a accordance with Woodside’s Policy on Independence of member of management; Directors, a copy of which is available in the corporate • Dr Andrew Jamieson as he is a current executive governance section of Woodside’s website. of Shell, which is a substantial shareholder of the In accordance with the policy, the Board assesses company; and independence with reference to whether a Director • Mr Ian Robertson as he is a current executive of Shell, is non-executive, not a member of management and which is a substantial shareholder of the company. who is free of any business or other relationship that For the vast majority of decisions made by the Board, the could materially interfere with, or could reasonably be two Shell associated directors bring substantial global perceived to materially interfere with, the independent oil and gas industry expertise to the Board. The Board exercise of their judgement. considers that the value of this expertise outweighs In making this assessment, the Board considers all any issues associated with those directors not having relevant facts and circumstances. Relationships that ‘independent director’ status. the Board will take into consideration when assessing Mr Din Megat was nominated to the Woodside Board independence are whether a director: by Shell and was previously an executive of Shell. At • is a substantial shareholder of the company or an the time of his appointment to the Board in December officer of, or otherwise associated directly with, a 2007, over three years had elapsed since Mr Megat substantial shareholder of the company; retired as an executive of Shell. The Board is satisfied • is employed, or has previously been employed in an that Mr Megat has no continuing association with Shell executive capacity by the company or another group that would interfere with his independent exercise of member, and there has not been a period of at least judgement, and that he is an independent director. three years between ceasing such employment and Mr Erich Fraunschiel serves on the board of directors of serving on the Board; WorleyParsons Limited, a supplier of engineering services • has within the last three years been a principal of a to Woodside. The value of services provided by the material professional advisor or a material consultant WorleyParsons Limited group of companies to Woodside to the company or another group member, or an in 2008 exceeded the Board’s materiality threshold employee materially associated with the service relating to suppliers. The Board, having regard to the provided; nature and value of the commercial relationship between Woodside and WorleyParsons Limited is satisfied that • is a material supplier or customer of the company or Mr Fraunschiel remains independent. Where a matter other group member, or an officer of or otherwise involving WorleyParsons Limited comes before the Board, associated directly or indirectly with a material the Directors’ Conflict of Interest Guidelines apply. supplier or customer; or • has a material contractual relationship with the Certain non-executive directors hold directorships company or another group member other than as a or executive positions in companies with which director. Woodside has commercial relationships. Details of other directorships and executive positions held by non- The test of whether a relationship or business is material executive directors are set out on pages 32 to 33. is based on the nature of the relationship or business and on the circumstances and activities of the director. Two of the non-executive directors have been employed Materiality is considered from the perspective of the by Woodside in the past, however a significant period company and its group members, the persons or of time has lapsed since they ceased employment. organisations with which the director has an affiliation Dr Jamieson was seconded to Woodside as General and from the perspective of the director. To assist in Manager NWS Venture from 1997 to 1999 and Mr assessing the materiality of a supplier or customer the Chaney was employed by Woodside as a petroleum Board has adopted the following materiality thresholds: geologist in the 1970s.

36 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c The independence status of directors standing for and appointment of new directors and the re-election election or re-election is identified in the notice of AGM. of incumbent directors is available in the corporate If the Board’s assessment of a director’s independence governance section of Woodside’s website. changes, that change will be disclosed immediately to the market. 2.7 Directors’ Retirement and Re-election ASXCGC Recommendation 2.6 2.5 Conflicts of Interest Non-executive directors must retire at the third AGM The Board has approved directors’ Conflict of Interest following their election or most recent re-election. At Guidelines which apply if there is, or may be, a conflict least one non-executive director must stand for election between the personal interests of a director, or the at each AGM. Any director appointed to fill a casual duties a director owes to another company, and the vacancy since the date of the previous AGM must duties the director owes to Woodside. A director with submit themselves to shareholders for election at the an actual or potential conflict of interest in relation to next AGM. a matter before the Board does not receive the Board papers relating to that matter and when the matter Board support for a director’s re-election is not automatic comes before the Board for discussion, the director and is subject to satisfactory director performance (in withdraws from the meeting for the period the matter accordance with the evaluation process described in is considered and takes no part in the discussions or section 2.9 below). decision-making process. 2.8 Terms of Appointment, Induction Training and Minutes reporting on matters in which a director is Continuing Education considered to have a conflict of interest are not provided to that director. However, the director is given notice All new directors are required to sign and return a of the broad nature of the matter for discussion and is letter of appointment which sets out the key terms and updated in general terms on the progress of the matter. conditions of their appointment, including duties, rights and responsibilities, the time commitment envisaged 2.6 Board Succession Planning and the Board’s expectations regarding their involvement with committee work. ASXCGC Recommendation 2.6 Induction training is provided to all new directors. It The Board manages its succession planning with includes a comprehensive induction manual, meetings the assistance of the Nominations Committee. The with the CEO and senior executives, information on the committee reviews annually the size and composition strategic plan and key corporate and Board policies and of the Board and the mix of existing and desired the option to visit Woodside’s principle operations either

competencies across members and reports its Governance upon appointment or with the Board during its next Sustainability conclusions to the Board. Where the committee inspection tour. identifies existing or projected competency gaps, it recommends a succession plan to the Board that All directors are expected to maintain the skills required addresses those gaps. Recognising the importance of to discharge their obligations to the company. Directors Board renewal, the committee takes each director’s are encouraged to undertake continuing professional tenure into consideration in its succession planning. As education including industry seminars and approved a general rule directors are not expected to serve on the education courses. These are paid for by the company Board beyond ten years. where appropriate. In addition, the company provides the Board with regular educational information papers The Nominations Committee is responsible for and presentations on industry-related matters and new evaluating Board candidates and recommending developments with the potential to affect Woodside. individuals for appointment to the Board. The committee evaluates prospective candidates against a range of 2.9 Board Performance Evaluation criteria including skills, experience and expertise that will best complement Board effectiveness at the time. ASXCGC Recommendation 1.3, 2.5, 2.6 The Board may engage an independent recruitment firm The Nominations Committee is responsible for to undertake a search for suitable candidates. Directors determining the process for evaluating Board appointed by the Board are subject to shareholder performance. Evaluations are conducted every year and election at the next AGM. have produced improvements in Board processes and Prior to appointment, preferred candidates must disclose overall efficiency. to the Chairman the nature and extent of their other The Board performance evaluation process is conducted appointments and activities. Candidates must also by way of questionnaires appropriate in scope and demonstrate that they understand what is expected content to effectively review: of them and confirm that they are willing to make the • the performance of the Board and each of its necessary commitments, and will have available the time committees against the requirements of their required, to discharge their responsibilities as a director. respective charters; and A copy of the Nominations Committee charter and a • the individual performance of the Chairman and each description of Woodside’s procedure for the selection director.

37 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c 2 Board of Directors (continued) 2.12 Board Meetings The questionnaires are completed by each director During the year ended 31 December 2008, the Board and the responses compiled by an external consultant. held six Board meetings. In addition a strategic planning The reports on Board and committee performance are session was held in conjunction with the June Board provided to all directors and discussed by the Board. meeting. Details of directors’ attendance at Board and The report on the Chairman’s performance is provided committee meetings are set out in Table 1 on page 40. to the Chairman and to two Committee Chairmen for The Chairman, in conjunction with the CEO and the discussion. The report on each individual director is Company Secretary, sets the agenda for each meeting. provided to the individual and copied to the Chairman. Any director may request matters be included on The Chairman meets individually with each director to the agenda. Members of senior management attend discuss the findings of their report. meetings of the Board by invitation. At each scheduled The performance of each director retiring at the next Board meeting there is a session for non-executive AGM is taken into account by the Board in determining directors to meet without management present. This whether or not the Board should support the re-election session is presided over by the Chairman. of the director. Copies of Board papers are circulated in advance of The Human Resources & Compensation Committee the meetings in either electronic or hard copy form. reviews and makes recommendations to the Board on Directors are entitled to request additional information the criteria for, and the evaluation of, the performance of where they consider further information is necessary to the CEO. support informed decision-making.

A description of the company’s process for evaluation The Board works to an annual agenda encompassing of the Board, its committees and individual directors periodic reviews of Woodside’s operating business units, is available in the corporate governance section of statutory obligations, business approvals and other Woodside’s website. The Remuneration Report on responsibilities identified in the Board Charter. pages 46 to 57 discloses the process for evaluating the performance of senior executives, including the CEO. 2.13 Company Secretaries

In 2008, performance evaluations for the Board, its Details of the Company Secretaries are set out on committees, directors and senior executives took place page 45 in the Directors’ Report. The appointment and in accordance with the process disclosed above and in removal of a Company Secretary is a matter for decision the Remuneration Report. by the Board. The Company Secretaries are responsible for ensuring that Board procedures are complied with 2.10 Board Access to Information and and that governance matters are addressed. Independent Advice ASXCGC Recommendation 2.6 3 Committees of the Board

Subject to the Directors’ Conflict of Interest Guidelines 3.1 Board Committees, Membership and Charters referred to in section 2.5, directors have direct access ASXCGC Recommendations 2.4, 2.6, 4.1, 4.2, 4.3, 4.4, to members of company management and to company 8.1, 8.3 information in the possession of management. The Board has four standing committees to assist in the The Board has agreed a procedure under which directors discharge of its responsibilities. These are the: are entitled to obtain independent legal, accounting or • Audit & Risk Committee; other professional advice at the company’s expense. • Nominations Committee; Directors are entitled to reimbursement of all reasonable costs where a request for such advice is approved by • Human Resources & Compensation Committee; and the Chairman. In the case of a request made by the • Sustainability Committee. Chairman, approval is required by a majority of the non- Each committee’s charter, detailing its role, duties and executive directors. membership requirements, is available in the corporate governance section of Woodside’s website. The 2.11 Directors’ Remuneration committee charters are reviewed regularly and updated Details of remuneration paid to directors (executive as required. and non-executive) are set out in the Remuneration Report on pages 46 to 57. The Remuneration Report The composition of each committee and the attendance also contains information on the company’s policy for of members at meetings held during the year, is set out determining the nature and amount of remuneration in Table 1 on page 40 of this report. for directors and senior executives and the relationship All directors are entitled to attend meetings of the between the policy and company performance. standing committees. Papers considered by the standing committees are available on request to directors who

38 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c are not on that committee. Minutes of all standing • review of the size and composition of the Board and committee meetings are provided to all directors and the Board succession plans; proceedings of each meeting are reported by the Chair of • approval of the process for the annual Board the committee at the next Board meeting. performance evaluation; and Each committee is entitled to seek information from any • evaluation and recommendation of Ms Cilento and Mr employee of the company and to obtain any professional Robertson for appointment to the Board. advice it requires in order to perform its duties. 3.4 Human Resources & Compensation Committee Ad hoc committees are convened to consider matters of ASXCGC Recommendations 8.1, 8.3 special importance or to exercise the delegated authority of the Board. The role of the Human Resources & Compensation Committee is to assist the Board in establishing human 3.2 Audit & Risk Committee resources and compensation policies and practices which: ASXCGC Recommendations 4.1, 4.2, 4.3, 4.4 • enable the company to attract, retain and motivate employees who achieve operational excellence and The role of the Audit & Risk Committee is to assist the create value for shareholders; and Board to meet its oversight responsibilities in relation to • reward employees fairly and responsibly, having the company’s financial reporting, compliance with legal regard to the results of the group, individual and regulatory requirements, internal control structure, performance and general remuneration conditions. risk management procedures and the internal and external audit functions. Key activities undertaken by the Human Resources & Compensation Committee during the year included the Key activities undertaken by the Audit & Risk Committee approval of the appointment and remuneration packages during the year included: of executives reporting directly to the CEO and reviewing • approval of the scope, plan and fees for the 2008 and making recommendations to the Board on: external audit; • Woodside’s Remuneration Policy including introducing • review of the independence and performance of the a guideline for a minimum shareholding for non- external auditor; executive directors; • review of significant accounting policies and • the criteria for, and the evaluation of, the performance practices; of the CEO; • review of Internal Audit reports and approval of the • the remuneration of the CEO; 2009 Internal Audit program; • incentives payable to the CEO and senior executives; • review of the Group’s key risks and risk management Governance

framework as developed by management; • the remuneration of non-executive directors; and Sustainability • review of reports from management on the • the annual Remuneration Report. effectiveness of the Group’s management of its The Chairman, the CEO and the head of the Human material business risks; and Resources department attend Human Resources & • review and recommendation to the Board for the Compensation Committee meetings by invitation. adoption of the Group’s half year and annual financial statements. 3.5 Sustainability Committee Members of the Audit & Risk Committee are identified The role of the Sustainability Committee is to assist the in Table 1 on page 40. Their qualifications are listed on Board to meet its oversight responsibilities in relation to pages 32 and 33. the company’s sustainability policies and practices.

The external auditors, the Chairman, the CEO, the CFO, Key activities undertaken by the Sustainability Committee the Group Financial Controller and the head of Internal during the year included: Audit and Enterprise Risk attend Audit & Risk Committee • reviewing and recommending to the Board meetings by invitation. At each committee meeting, time adoption of a Sustainable Communities Policy and is scheduled for the committee to meet with the external amendments to the group’s Indigenous Communities auditors without management present. Policy; • reviewing the group’s environmental, health, safety 3.3 Nominations Committee and technical integrity performance and incidents; ASXCGC Recommendations 2.4, 2.6 • reviewing developments in relation to Australian The role of the Nominations Committee is to assist climate change policy; and the Board to review Board composition, performance • reviewing the Sustainable Development Report. and succession planning. This includes the identifying, The Chairman, the CEO, the head of the Sustainability evaluating and recommending of candidates for the Board. department and the head of the Health and Safety Key activities undertaken by the Nominations Committee department attend Sustainability Committee meetings by during the year included: invitation.

39 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Table 1 - Directors in office, committee membership and directors’ attendance at meetings during 2008.

Director Board Audit & Risk Human Sustainability Nominations Committee Resources & Committee Committee Compensation Committee (1) (2) Held Attended Held Attended Held Attended Held Attended Held Attended

Executive Director

DR Voelte (CEO) 6 6 6 6 7 6 4 4 6 4

Non-Executive Directors

MA Chaney 6 6 6 5 7 7 4 4 6 6

MA Cilento(3) 0 0 0 0 0 0 0 0

E Fraunschiel 6 6 6 6 4 3 6 6

A Jamieson 6 6 4 4 6 6

PJMH Jungels 6 5 3 3 7 6 6 5

DI McEvoy 6 6 6 6 4 4 6 6

D Megat 6 6 7 7 4 4 6 6

I Robertson(4) 3 3 3 3 3 3

JR Broadbent (5) 3 3 3 3 4 4 3 3

J Stausholm (6) 3 3 3 3 3 3

Legend: Notes: Current Chairman (1) ‘Held’ indicates the number of meetings held during the (3) Ms Cilento was appointed on 11 December 2008. period of each director’s tenure. (4) Mr Robertson was appointed on 30 June 2008. Current member (2) ‘Attended’ indicates the number of meetings attended by (5) Ms Broadbent retired on 4 July 2008. the director. (6) Mr Stausholm resigned on 30 June 2008. Prior Chairman Prior member

4 Shareholders Briefings on the financial results, and other significant briefings with major institutional investors and analysts, 4.1 Shareholder Communication are webcast live and made available on Woodside’s ASXCGC Recommendations 6.1, 6.2 website. Presentation material from significant briefings or management speeches is also posted to the website. Directors recognise that shareholders, as the ultimate owners of the company, are entitled to receive timely The company produces a short form annual and and relevant high quality information about their half year shareholder review. These reviews and the investment. Similarly, prospective new investors are Annual Report are available on the company’s website entitled to be able to make informed investment or shareholders can elect to receive hard copies. decisions when considering the purchase of shares. Shareholders can elect to receive email notification when these reports are posted to the website. Woodside’s Continuous Disclosure and Market Communications Policy encourages effective Any person wishing to receive email alerts of significant communication with its shareholders by requiring: market announcements can subscribe through • the disclosure of full and timely information about Woodside’s website. Woodside’s activities in accordance with the The company recognises the importance of shareholder disclosure requirements contained in the ASX Listing participation in general meetings and supports and Rules and the Corporations Act; encourages that participation. The company’s AGM is • all information released to the market to be placed on webcast live and is archived for viewing on Woodside’s Woodside’s website promptly following release; website. The company also makes available podcasts • the company’s market announcements to be of the AGM. Copies of the addresses by the Chairman maintained on Woodside’s website for at least three and CEO are disclosed to the market and posted to the years; and company’s website. • that all disclosures, including notices of meetings and The company’s external auditor attends the company’s other shareholder communications, are drafted clearly AGM to answer shareholder questions about the and concisely. conduct of the audit, the preparation and content of

40 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c the audit report, the accounting policies adopted by the Woodside also has a Whistleblower Policy which company and the independence of the auditor in relation documents Woodside’s commitment to maintaining to the conduct of the audit. an open working environment in which employees and contractors are able to report instances of unethical, A copy of the Continuous Disclosure and Market unlawful or undesirable conduct without fear of Communications Policy is available in the corporate intimidation or reprisal. governance section of Woodside’s website. The purpose of the Whistleblower Policy is to: 4.2 Continuous Disclosure and Market Communications • help detect and address unacceptable conduct; ASXCGC Recommendations 5.1, 5.2 • help provide employees and contractors with a Woodside is committed to ensuring that shareholders supportive working environment in which they feel and the market are provided with full and timely able to raise issues of legitimate concern to them and information and that all stakeholders have equal to Woodside; opportunities to receive externally available information • provide an external helpline which can be used for issued by Woodside. reporting unacceptable conduct; and

Woodside’s Continuous Disclosure and Market • help protect people who report unacceptable conduct Communications Policy, referred to in section 4.1, and in good faith. associated guidelines reinforce Woodside’s commitment to continuous disclosure and outline management’s 5.2 Securities Ownership and Dealing accountabilities and the processes to be followed for ASXCGC Recommendations 3.2, 3.3, 8.3 ensuring compliance. The policy also describes Woodside’s Woodside’s Securities Dealing Policy applies to all guiding principles for market communications. directors, employees, contractors, consultants and A copy of the Continuous Disclosure and Market advisers. This policy provides a brief summary of the law Communications Policy is available in the corporate on insider trading and other relevant laws, sets out the governance section of Woodside’s website. restrictions on dealing in securities by people who work for, or are associated with, Woodside and is intended to 5 Promoting Responsible and Ethical Behaviour assist in maintaining market confidence in the integrity of dealings in the company’s securities. 5.1 Code of Conduct and Whistleblower Policy The policy stipulates that the only appropriate time for a ASXCGC Recommendations 3.1, 3.3 director or employee to deal in the company’s securities Woodside has a Code of Conduct which outlines is when they are not in possession of price sensitive

Woodside’s commitment to appropriate and ethical Governance

information that is not generally available to the market. Sustainability corporate practices. A director wishing to deal in the company’s securities The Code of Conduct describes Woodside’s mission, may only do so after first having advised the Chairman vision and values together with the business principles of his or her intention. A key executive wishing to deal approved by the Board. It sets out the principles, must first notify the CEO. practices and standards of personal and corporate Non-executive directors are encouraged to have a behaviour Woodside expects from people working minimum holding of shares in Woodside equivalent in for or with Woodside to adopt in their daily business value to one year of the base fees for non-executive activities. The Code of Conduct covers matters such as directors and which should be acquired within four years compliance with laws and regulations, responsibilities of appointment or significant remuneration change. This to shareholders and the community, sound employment requirement does not apply to non-executive directors practices, confidentiality, privacy, conflicts of interest, that do not receive their directors’ fees directly. giving and accepting business courtesies and the Non-executive directors, other than Shell-nominated protection and proper use of Woodside’s assets. directors employed by Shell, may elect to participate All directors, officers and employees are required to in the non-executive directors’ Share Plan approved by comply with the Code of Conduct. Senior managers shareholders at the 2000 AGM. On-market purchases are expected to ensure that employees, contractors, as a result of such elections are made at predetermined consultants, agents and partners under their supervision intervals, but only after a determination has been made are aware of the company’s expectations as set out that the directors are not in possession of price-sensitive in the Code of Conduct. Employees are required information that has not been released to the market. to complete online Code of Conduct training upon Any dealing in Woodside securities by directors is notified appointment and thereafter annually. to the ASX within five business days of the dealing. A summary of the main provisions of the Code of Conduct is available in the corporate governance section of Woodside’s website.

41 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c It is a condition of the Securities Dealing Policy that 6.2 Risk Management Roles and Responsibilities directors, and executives participating in an equity ASXCGC Recommendations 7.2, 7.4 based incentive plan, are prohibited from entering into any transaction which would have the effect of hedging The Board is responsible for reviewing and approving or otherwise transferring to any person the risk of any Woodside’s risk management strategy, policy and key fluctuation in the value of any unvested entitlement in risk parameters, including determining the Group’s Woodside securities. This prohibition is also contained in appetite for country risk and major investment decisions. the terms of the Executive Incentive Plan. The Board is also responsible for satisfying itself that A copy of the Securities Dealing Policy is available in the management has developed and implemented a sound corporate governance section of Woodside’s website. system of risk management and internal control. The Board has delegated oversight of the Enterprise Risk 5.3 Political Donations and Internal Control Policy, including review of the effectiveness of Woodside’s internal control framework The Board’s policy is not to donate funds to any political and risk management process, to the Audit & Risk party, politician or candidate for public office in any Committee. country. However, in certain circumstances Woodside representatives may attend a party-political function which Management is responsible for designing, implementing, charges an attendance fee. Attendance at these functions reviewing and providing assurance as to the must be approved by the relevant business unit manager effectiveness of the Policy. This responsibility includes and a register of attendances and the cost of attending developing business and functional risk identification, each function is maintained by Woodside at a corporate specific risk treatment, controls, monitoring and level. reporting capability. Within each major business and functional area there is a designated operational risk and 6 Risk Management and Internal Control assurance person, with specific responsibilities designed 6.1 Approach to Risk Management and Internal Control to guide compliance and reporting. ASXCGC Recommendations 7.1, 7.4 Every organisational unit has a risk management section within its annual business plan, and these plans are The Board recognises that risk management and internal discussed at regular performance reviews. In addition compliance and control are key elements of good each business unit reports annually to the Board on its corporate governance. business plan, risk profile and management of risk. Woodside’s Enterprise Risk and Internal Control Policy Internal Audit is responsible for providing an independent describes the manner in which Woodside: appraisal of the adequacy and effectiveness of the • identifies, assesses, monitors and manages business Group’s risk management and internal control system. risk; In 2008, both the Audit & Risk Committee and the • identifies material changes to the company’s risk Board reviewed the overall risk profile for the Group and profile; and received reports from management on the effectiveness • designs, implements and monitors the effectiveness of the Group’s management of its material business risks. of the internal compliance and control framework.

A summary of Woodside’s Enterprise Risk and Internal 6.3 Internal Audit Control Policy is available in the corporate governance Internal Audit provides independent assurance that the section of Woodside’s website. design and operation of the group’s risk management and internal control system is effective. A risk-based Woodside considers that effective risk management is audit approach is used to ensure that the higher risk about achieving a balanced approach to risk and reward. activities in each business unit are targeted by the audit Risk management enables the company to capitalise on program. All audits are conducted in a manner that potential opportunities while mitigating potential adverse conforms to international auditing standards. Internal effects. Both mitigation and optimisation strategies are Audit is primarily staffed by a combination of Chartered considered equally important in risk management. Accountants and engineers. The Woodside Group operates a standardised enterprise- The Audit & Risk Committee oversees the scope of wide risk management process that provides an over- Internal Audit and approves the annual audit program. It arching and consistent framework for the identification, approves the appointment of the head of Internal Audit assessment, monitoring and management of material and has access to Internal Audit without the presence of business risks. This process is based on the Australian/ other management. New Zealand Standard for Risk Management (AS/ NZS 4360 Risk Management) and the Committee Internal Audit has a direct reporting relationship with the of Sponsoring Organisations of the US Treadway Audit & Risk Committee and provides written reports to Commission (COSO) control framework for enterprise the committee on the effectiveness of the management risk management. Risks are identified and ranked using of internal control and risk management a common methodology. Where a risk is assessed In Woodside, Internal Audit provides recommendations as material it is reported to and reviewed by senior for improvements to senior management and has all executives.

42 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c necessary access to management and information. The services considered not acceptable for provision by Internal Audit and External Audit are separate and the external auditor include: independent of each other. • internal audit; • acquisition accounting due diligence where the 6.4 CEO and CFO Assurance external auditor is also the auditor of the other party; ASXCGC Recommendations 7.3, 7.4 • transactional support for acquisitions or divestments The Board receives regular reports on the Group’s where the external auditor is also the auditor of the financial and operational results. other party; • book-keeping and financial reporting activities to the Before the adoption by the Board of the 2008 half- extent such activities require decision-making ability year and full-year financial statements, the Board and/or posting entries to the ledger; received written declarations from the CEO and CFO • the design, implementation, operation or supervision that the financial records of the company have been of information systems and provision of systems properly maintained in accordance with section 286 integration services; of the Corporations Act and the Company’s financial • independent expert reports; statements and notes comply with accounting standards and give a true and fair view of the consolidated entity’s • financial risk management; and financial position and performance for the financial • taxation planning and taxation transaction advice. period. The External Auditor Guidelines require rotation of the The CEO and CFO have also stated in writing to the audit partner and audit review partner at least every Board that the statement relating to the integrity of five years and prohibit the reinvolvement of a previous audit partner in the audit service for two years following Woodside’s financial statements is founded on a sound rotation. In addition to incorporating safeguards to system of risk management and internal control and ensure compliance with sections 324CI and 324CK of that the system is operating effectively in all material the Corporations Act in respect of employment of a respects in relation to financial reporting risks. former partner of the audit firm or member of the audit In addition all executives and key finance managers team as a director or senior employee of Woodside, the complete and sign a questionnaire from the directors on Guidelines also require assessment of the significance of a half yearly basis. The questions relate to the financial a potential threat to the external auditor’s independence position of the company, disclosure, the application before any employment of a former partner or audit team member. Any employment of a member of the of company policies and procedures (including the audit team or a partner of the audit firm also requires the Enterprise Risk and Internal Control Policy), compliance approval of the Audit & Risk Committee. with external obligations and other governance matters. Governance This process assists the CEO and CFO in making the Information on the procedures for the selection and Sustainability declarations to the Board referred to above. appointment of the external auditor and for the rotation of external audit engagement partners is available in the 7 External Auditor Relationship corporate governance section of Woodside’s website. ASXCGC Recommendation 4.4 In accordance with Woodside’s External Auditor Policy, the Audit & Risk Committee oversees detailed External Auditor Guidelines covering the terms of engagement of Woodside’s external auditor. The guidelines include provisions directed to maintaining the independence of the external auditor and in assessing whether the provision of any non-audit services by the external auditor that may be proposed is appropriate. Such provisions are referenced to the Code of Ethics published by the International Federation of Accountants (IFAC). The External Auditor Guidelines contain a set of controls which address threats to the independence of the external auditor including, in particular, any threat which may arise by reason of self-interest, self-review, advocacy, familiarity or intimidation. The External Auditor Guidelines classify a range of non- audit services which could potentially be provided by the external auditor as: • acceptable within limits; • requiring the approval of the CFO; • requiring the approval of the Audit & Risk Committee; or • not acceptable.

43 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c 8 ASX Corporate Governance Council Recommendations Checklist This table cross-references the ASXCGC Recommendations to the relevant sections of the Corporate Governance Statement and the Remuneration Report.

ASX Corporate Governance Council Recommendations Reference Comply Principle 1: Lay solid foundations for management and oversight 1.1 Companies should establish the functions reserved to the board and those delegated to senior 2.1  executives and disclose those functions. 1.2 Companies should disclose the process for evaluating the performance of senior executives. Remuneration Report  1.3 Companies should provide the information indicated in Guide to Reporting on Principle 1. 2.1, 2.9, Remuneration  Report Principle 2: Structure the board to add value 2.1 A majority of the board should be independent directors. 2.2, 2.4  2.2 The chair should be an independent director. 2.2, 2.3  2.3 The roles of chair and chief executive officer should not be exercised by the same individual. 2.2, 2.3  2.4 The board should establish a nomination committee. 3.1, 3.3  2.5 Companies should disclose the process for evaluating the performance of the board, its 2.9  committees and individual directors. 2.6 Companies should provide the information indicated in Guide to Reporting on Principle 2. 2.2, 2.4, 2.6, 2.7, 2.9, 2.10,  3.1, 3.3 Principle 3: Promote ethical and responsible decision-making 3.1 Companies should establish a code of conduct and disclose the code or summary of the code as 5.1  to: • the practices necessary to maintain confidence in the company’s integrity • the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders • the responsibility and accountability of individuals for reporting and investigating reports of unethical practices. 3.2 Companies should establish a policy concerning trading in company securities by directors, senior 5.2  executives and employees, and disclose the policy or a summary of that policy. 3.3 Companies should provide the information indicated in Guide to Reporting on Principle 3. 5.1,5.2  Principle 4: Safeguard integrity in financial reporting 4.1 The board should establish an audit committee. 3.1, 3.2  4.2 The audit committee should be structured so that it: • consists only of non-executive directors • consists of a majority of independent directors • is chaired by an independent chair, who is not chair of the Board • has at least three members. 3.1, 3.2  4.3 The audit committee should have a formal charter. 3.1, 3.2  4.4 Companies should provide the information indicated in Guide to Reporting on Principle 4. 3.1, 3.2, 7  Principle 5: Make timely and balanced disclosure 5.1 Companies should establish written policies designed to ensure compliance with ASX Listing 4.2  Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies. 5.2 Companies should provide the information indicated in Guide to Reporting on Principle 5. 4.2  Principle 6: Respect the rights of shareholders 6.1 Companies should design a communications policy for promoting effective communication with 4.1  shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy. 6.2 Companies should provide the information indicated in Guide to Reporting on Principle 6. 4.1  Principle 7: Recognise and manage risk 7.1 Companies should establish policies for the oversight and management of material business risks 6.1  and disclose a summary of those policies. 7.2 The board should require management to design and implement the risk management and 6.2  internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks. 7.3 The board should disclose whether it has received assurance from the chief executive officer (or 6.4  equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. 7.4 Companies should provide the information indicated in Guide to Reporting on Principle 7. 6.1, 6.2, 6.4  Principle 8: Remunerate fairly and responsibly 8.1 The board should establish a remuneration committee. 3.1, 3.4  8.2 Companies should clearly distinguish the structure of non-executive directors’ remuneration from Remuneration Report  that of executive directors and senior executives. 8.3 Companies should provide the information indicated in Guide to Reporting on Principle 8. 3.1, 3.4, 5.2 

44 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Directors’ report

The Directors of Woodside Petroleum Ltd present their (c) Oceanway report (including the Remuneration Report) together with In January 2009, Woodside Natural Gas Inc, a wholly the Financial Report of the consolidated entity, being owned subsidiary of Woodside Energy Ltd, announced the Woodside Petroleum Ltd and its controlled entities, for the suspension of its Oceanway natural gas project for the Los year ended 31 December 2008. Angeles region.

Directors Likely Developments and Expected Results The directors of Woodside Petroleum Ltd in office at any In general terms, the review of operations of the Group time during or since the end of the 2008 financial year gives an indication of likely developments and the expected are set out in Table 1 on page 40. Additional information results of the operations. (including qualifications and experience) on the directors is set out on pages 32 to 33. Environmental Compliance

The number of directors’ meetings held (including meetings Woodside is subject to a range of environmental legislation of committees of the Board) and the number of meetings in Australia and other countries in which it operates. Details attended by each of the directors of Woodside Petroleum Ltd of Woodside’s environmental performance is provided on during the financial year are shown in Table 1 on page 40. page 29 of this Annual Report.

Details of director and senior executive remuneration is set Through its Environment Policy, Woodside plans and out in the Remuneration Report on pages 46 to 57. performs activities so that adverse effects on the environment are avoided or kept as low as reasonably The particulars of directors’ interests in shares of the practicable. company as at the date of this report are set out in Table 14 The Board is not aware of any breaches to environmental on page 58. legislation in Australia and other countries during the period covered in this report. Principal Activities The principal activities and operations of the Group during Dividends the financial year were hydrocarbon exploration, evaluation, The directors have declared a final dividend out of profits development, production and marketing. of the company in respect of the year ended 31 December Other than as previously referred to in the Annual Report, 2008 of 55 cents per ordinary share (fully franked) payable there were no other significant changes in the nature of the on 6 April 2009. activities of the consolidated entity during the year. A fully franked final dividend of 55 cents per ordinary share was paid to shareholders on 31 March 2008 in respect Consolidated Results of the year ended 31 December 2007. Together with the Governance The consolidated operating profit attributable to the fully franked interim dividend of 80 cents per share paid to Sustainability company’s shareholders after provision for income tax and shareholders on 1 October 2008, the total dividend paid individually significant items was $1,786 million ($1,030 during the 2008 year was $1.35 per share fully franked. million in 2007). Woodside’s Dividend Reinvestment Plan was activated for the dividend paid on 1 October 2008. Review of Operations

A review of the operations of the Woodside Group during Company Secretaries the financial year and the results of those operations are set The following individuals have acted as company secretary out on pages 1 to 31. during 2008: Significant Changes in State of Affairs Robert J Cole The review of operations (pages 1 to 31) sets out a number BSc, LLB (Hons) (ANU) of matters which have had a significant effect on the state Mr Cole holds Bachelor of Science and Bachelor of Laws of affairs of the consolidated entity. Other than those degrees and is the company’s Executive Vice President matters, there were no significant changes in the state of Corporate Centre and General Counsel. He was appointed a affairs of the consolidated entity during the financial year. secretary of the company on 11 April 2006. Mr Cole joined Woodside after 14 years as a partner of international law Events Subsequent to End of Financial Year firm, Mallesons Stephen Jaques, the last three years as (a) Dividends partner in charge of the Perth office. Since the reporting date, the directors have declared a fully franked dividend of 55 cents (2007: 55 cents), payable on 6 Frances M Kernot April 2009. The amount of this dividend will be $384 million BCom (Hons) (UWA), Grad. Dip. CSP, CA, ACIS (2007: $378 million). No provision has been made for this Ms Kernot holds a Bachelor of Commerce degree and is a dividend in the financial report as the dividend was not Chartered Accountant and Chartered Secretary. declared or determined by the directors on or before the end of the financial year. Ms Kernot has more than 15 years experience in company secretarial, compliance and financial accounting roles. She (b) Debt Facilities has been employed by Woodside since September 2003 and Since year end, Woodside reached agreements with a was appointed a secretary of the company on 16 April 2004. number of domestic and international banks to enter into additional debt facilities for US$800 million.

45 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Remuneration report

This audited Remuneration Report forms part of the Directors’ • the size and complexity of Woodside’s operations; and Report for 2008 and outlines the remuneration arrangements • the responsibilities and work requirements of Board for Woodside’s directors and senior executives in accordance members. with the requirements of the Corporations Act and the Corporations Regulations. Fees paid to non-executive directors are recommended by The specific remuneration disclosures in this report cover the the committee based on advice from external remuneration following Woodside personnel: consultants and determined by the Board, subject to an aggregate limit of $3 million per financial year, approved by • the non-executive directors; shareholders at the 2007 Annual General Meeting (AGM). • the Managing Director and Chief Executive Officer (who is the only executive director) (CEO); In December 2008 the Board approved the introduction of • the senior managers of the Woodside Group who have a minimum Woodside Petroleum Ltd (WPL) shareholding the authority and responsibility for planning, directing guideline for non-executive directors. The guideline and controlling the activities of the Woodside Group. encourages non-executive directors to have a minimum holding of Woodside shares equivalent in value to one The above mentioned form the Woodside Key Management year of the non-executive director’s base Board fee, which Personnel (KMP). should be acquired within four years of appointment or The five most highly remunerated executives of the significant remuneration change. The Woodside shares Woodside Group in 2008 (other than the CEO), comprise can be acquired via the non-executive directors Share Plan Messrs Chatterji, Cole and Dr Kantsler (who are also part of (NEDSP) or independently. This requirement does not apply the KMP for 2008) and Messrs Ahmed and Moore (Senior to non-executive directors that do not receive their Board Executives). fees directly.

References to ‘executives’ in this report mean the CEO, Key Remuneration structure Management Personnel (excluding non-executive directors) and the senior executives. Non-executive director remuneration consists of base fees, committee fees, other payments for additional services The Human Resources & Compensation Committee outside the scope of Board and committee duties, and (committee) is responsible for assisting the Board to statutory superannuation contributions or payments in lieu determine appropriate remuneration policies and structures (currently 9%). Non-executive directors are not entitled to any for non-executive directors and executives. The role of form of performance-linked remuneration. the committee is described in the Corporate Governance Statement set out in this Annual Report. Table 1 below shows the annual base Board and committee fees for non-executive directors. Non-executive directors In addition to these fees, non-executive directors are entitled Woodside’s non-executive directors during 2008 were: to reimbursement of reasonable travel, accommodation and • MA Chaney (Chairman) other expenses incurred attending meetings of the Board, • MA Cilento (appointed 11 December 2008) committees or shareholders, or while engaged on Woodside • JR Broadbent (retired 4 July 2008) business. Non-executive directors are not entitled to • E Fraunschiel compensation on termination of their directorships. • A Jamieson Under the terms of the NEDSP, non-executive directors • PJMH Jungels (other than directors who are both nominated and employed • DI McEvoy by the Shell Group) may elect to sacrifice a percentage of • D Megat their remuneration to be applied to the purchase of shares in • I Robertson (appointed 30 June 2008) Woodside. These shares are acquired on market. Participation in the NEDSP is voluntary and therefore the shares are not • J Stausholm (resigned 30 June 2008) subject to any performance conditions. Remuneration Policy Board fees are not paid to the CEO, as the time spent on Woodside’s Remuneration Policy aims to attract, retain and Board work and the responsibilities of Board membership motivate talented and highly skilled non-executive directors are considered in determining the remuneration package and to remunerate fairly and responsibly having regard to: provided as part of his normal employment conditions. The total remuneration paid to, or in respect of, each non-executive • the level of fees paid to non-executive directors relative director in 2008 is set out in Table 2 on page 47. to other major Australian companies;

Table 1 - Annual base Board and committee fees for non-executive directors

Position Board Audit & Risk Human Resources Sustainability Nominations Committee & Compensation Committee Committee Committee Chairman of the Board(1) $590,000(3) ($500,000)(4) $175,000(3) Non-executive directors(2) ($170,000)(4) Committee Chairman $50,000(3) $30,000(3) $30,000(3) Nil ($40,000)(4) ($21,000)(4) ($21,000)(4) Committee member $25,000(3) $20,000(3) $20,000(3) Nil ($20,000)(4) ($14,000)(4) ($14,000)(4) (1) Inclusive of committee work. (3) Annual fee from 1 July 2008. (2) Board fees, other than the Chairman. (4) Annual fee up to 30 June 2008.

46 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Table 2 - Total remuneration paid to non-executive directors in 2008

Short-term Post employment Cash salary and fees Cash Non Pension Prescribed bonuses monetary super benefits Non-executive director Salaries, NEDSP(1) Short-term Benefits and Company Directors’ Total fees and incentive / allowances contributions retiring allowances bonus(2) to super- allowance(2) annuation $ $ $ $ $ $ $

MA Chaney 2008 545,001 49,050 594,051 2007 310,263 - - - 20,206 - 330,469 JR Broadbent(3) 2008 86,042 21,979 9,722 117,743 2007 146,750(10) 48,917 - - 17,610 - 213,277 MA Cilento(8) 2008 10,069 - - - 906 - 10,975 2007 ------E Fraunschiel 2008 234,500 21,105 255,605 2007 207,833 - - - 18,705 - 226,538 A Jamieson(4) 2008 206,555 206,555 2007 173,665 - - - - - 173,665 PJMH Jungels 2008 241,942 28,018 269,960 2007 221,424(10) 24,603 - - - - 246,027 (5) DI McEvoy 2008 276,500 19,845 296,345 2007 249,697 - - - 17,073 - 266,770 D Megat 2008 199,791 30,656 230,447 2007 13,008 - - - - - 13,008 I Robertson(4)(6) 2008 109,597 109,597 2007 ------J Stausholm(4)(7) 2008 103,550 103,550 2007 184,646 - - - - - 184,646 CB Goode(9) 2008 ------2007 109,949(10) 176,718 - - 25,800 - 312,467 RR Caplan(9) 2008 ------2007 153,836 - - - - - 153,836 A T Calvert(9) 2008 ------(10)

2007 136,585 39,375 - - - - 175,960 Governance Sustainability (1) Relates to participation in the NEDSP. (2) Non-executive directors are not entitled to cash bonuses nor directors’ retiring allowance. (3) Retired 4 July 2008. (4) Board fees for directors who are both nominated and employed by the Shell Group are paid directly to their employing company, not the individual. (5) This amount includes $56,000 which Mr McEvoy received during the year as consulting fees for extra services he provided outside his normal Board and committee duties. These fees were paid on commercial terms and conditions at market rates. (6) Appointed 30 June 2008. (7) Resigned 30 June 2008. (8) Appointed 11 December 2008. (9) Mr Goode retired as Chairman and director on 31 July 2007. Dr Calvert and Mr Caplan resigned as directors on 7 November 2007 and 11 October 2007 respectively. (10) The 2007 ‘salaries, fees and allowances’ figure has been re-stated to correct an error in the 2007 Remuneration Report, which included the NEDSP values in ‘salaries, fees and allowances’.

Executives Remuneration Policy The executive remuneration policy and structure discussed Woodside’s Remuneration Policy aims to reward executives in this report applies to all Woodside senior executives. The fairly and responsibly in accordance with the Australian (and specific remuneration disclosures in this report are provided in some instances, international) market and ensure that for the following executives: Woodside: • D Voelte, Managing Director and Chief Executive Officer • provides competitive rewards that attract, retain and • M Chatterji, Executive Vice President and Chief Financial motivate executives of the highest calibre; Officer • sets demanding levels of performance which are clearly • R Cole, Executive Vice President Corporate Centre, linked to an executive’s remuneration; General Counsel and Joint Company Secretary • structures remuneration at a level that reflects • L Della Martina, Executive Vice President Pluto the executive’s duties and accountabilities and is • E Howell, Executive Vice President North West Shelf competitive within Australia and, for certain roles, • A Kantsler, Executive Vice President, Health and Safety(1) internationally; • V Santostefano, Executive Vice President Production • benchmarks remuneration against appropriate • F Ahmed, Executive Vice President Project Development comparator groups at the 75th percentile; • PD Moore, Executive Vice President Emerging LNG • aligns executive incentive rewards with the creation of (departed 31 July 2008) value for shareholders; and • K Spence, Executive Vice President Enterprise Capability • complies with applicable legal requirements and (departed 4 July 2008) appropriate standards of governance.

(1) On 12 February 2009 Mr Kantsler was appointed to Executive Vice President, Health and Safety. For the full 2008 year Mr Kantsler held the position of Executive Vice President, Exploration, New Ventures and Mergers and Acquisitions. 47 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Executive remuneration is reviewed annually having Table 4 - Target percentage of total remuneration ‘not at regard to individual and business performance (compared risk’ and ‘at risk’ for Woodside’s executives against agreed financial and non-financial performance Not at Risk At Risk measures set at the start of the year), relevant comparative FAR VAR information and expert advice from both internal and Position STI LTI independent external sources. CEO 33.3% 33.3% 33.3%

Executive remuneration and company performance Executives 45%-50% 30%-33% 20%-22% The committee assists the Board in continually seeking to strengthen the link between executive remuneration Woodside’s Securities Dealing Policy prohibits executives and Woodside’s performance. The Executive Incentive who participate in an equity-based executive incentive Plan (EIP), described in more detail below, is an integral plan, from entering into any transaction which would part of Woodside’s overall approach to performance- have the effect of hedging or otherwise transferring to based remuneration. Under the EIP, the variable or ‘at risk’ any other person the risk of any fluctuation in the value element of executive remuneration is linked to financial of any unvested entitlement in Woodside securities. The and non-financial performance measures aimed at aligning policy also requires executives proposing to enter into remuneration with shareholder wealth. arrangements to limit the economic risk of a vested holding in Woodside securities to first notify the CEO (or, where There are a number of internal and external factors relevant the notifying executive is the CEO, the Chairman) of their to Woodside’s performance over the past five years. In intention to enter into such arrangements and subsequently addition, the Board believes Woodside’s performance is to provide details of such arrangements within two also attributable to the ability to motivate and retain its business days after the arrangements are entered into. executives and the effectiveness of the remuneration Adherence to this policy by executives is monitored by six policies in place over that time. Table 3 below shows the monthly directors’ questionnaires to management. key financial measures of company performance over the past five years. Executive Incentive Plan (EIP)

Remuneration structure The VAR component of executive remuneration for executives other than the CEO for the 2008 year, is Woodside’s remuneration structure for executives has two delivered through the EIP. The EIP was approved by components: shareholders at the 2005 AGM. The EIP aims to reward • Fixed Annual Reward (FAR) - the ‘not at risk’ component executives for meeting or exceeding their individual (unrelated to performance) which includes base salary, performance targets, while at the same time linking the superannuation contribution and other allowances reward to the creation of long term sustainable wealth for such as motor vehicle and health insurance. FAR is shareholders. determined on the basis of the scope of the executive’s role and the individual level of knowledge, skill and Executives are eligible to receive awards in the form of experience. cash and variable pay rights (VPRs) under the EIP. VPRs are an equity-linked form of award, with one VPR representing • Variable Annual Reward (VAR) - the ‘at risk’ component a conditional right to either cash or shares with a value (related to performance) which includes a short equivalent to the prevailing market value of a Woodside term incentive (STI) and a long term incentive (LTI). share. The value of the award is determined at the time Executives are eligible to receive a VAR allocation based of grant. The number of VPRs awarded under the EIP is on a percentage of their FAR, as determined by the calculated by dividing the value of the award by the volume Board at the start of the year with reference to market weighted average price (VWAP) of Woodside’s shares over comparator groups and the scope of the executive’s a specified period. To align with the methodology used role. Except in the case of the CEO, VAR is delivered to calculate the relative total shareholder return (RTSR) in through the EIP, which is discussed in more detail the EIP and in recognition of share price volatility within below. the industry, on 15 October 2008 the Board approved changing the VWAP used for the EIP from a five day VWAP In addition, executive remuneration may include any to a VWAP based on an average over all trading days in participation in equity based retention plans or general the month of December of the relevant performance year. employee share plans, as discussed below. Table 4 on this The Woodside share price as at that date was $39.15. page sets out the target percentage of total remuneration This change is effective from the 2008 performance year ‘not at risk’ and ‘at risk’ for Woodside’s executives. onwards.

Table 3 - Woodside five year performance

Year ended 31 December 2008 2008 2007 2006 2005 2004

Net Profit After Tax ($ million) 1,786 1,030 1,427 1,107 1,146 Earnings Per Share (cents)(1) 261 153 217 169 175 Dividends Per Share (cents) 135 104 126 93 59 Production (MMboe) 81.3 70.6 67.9 59.7 57.4 Shares closing price ($) 36.70 50.39 38.11 39.19 20.10 3 Year rolling TSR (%)(2) 0.98 41.25 42.55 54.71 21.95 Relative TSR(3) 2nd Quartile 2nd Quartile 2nd Quartile 1st Quartile 1st Quartile (1) Basic and diluted earnings per share from total operations. (2) This calculation is annualised and measured in Australian dollars. The significant change in the three year rolling TSR percentage for 2008 is due to the impact of the economic downturn. (3) As discussed under the STI component of EIP on page 49.

48 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c The Board determines whether VPRs are to be satisfied in • health and safety (e.g. TRCF(3), HPIF(4)); cash or shares at the time of vesting. If satisfied in shares, • environment (e.g. greenhouse gas emissions, category the shares would be purchased on market. If satisfied in ‘C’ incidents, flared gas); and cash, the amount would be based on the market value • human resources (e.g. voluntary turnover). of a Woodside share at the vesting date (reflecting price (1) EBIT = Earnings Before Interest and Taxes movements from the time of allocation). No amount is (2) ROACE = Return on Average Capital Employed payable by the recipient executive on the vesting of their (3) TRCF = Total Recordable Case Frequency award. (4) HPIF = High Potential Incident Frequency

The Board has power under the rules of the EIP to These KPIs are chosen because they align individual terminate, suspend or amend the EIP, and to alter performance with the achievement of Woodside’s business the management or administration of the EIP. Board plan and objectives. decisions about the operation of the EIP are made on the recommendation of the committee. The executive receives a performance rating in accordance with the annual performance review process. This rating Short term incentives (STI) is then used to determine entitlements under the STI Executive remuneration is linked to Woodside’s short term component of VAR. This assessment is conducted by the performance through the STI component of VAR. The CEO and approved by the committee. STI component is determined by the outcome of the EIP The performance assessment for the CEO is conducted by Scorecard (Scorecard)(which is set and approved annually the Board. by the Board), and individual performance. The Scorecard is currently based on four fundamental The STI award for a performance year is provided in cash measures: (as to 2/3 or 66.67%) and VPRs (as to 1/3 or 33.33%) (time-tested VPRs). These VPRs have a time-test hurdle for • safety – based on total recordable case frequency; vesting, requiring that the executive’s employment not be • production; terminated with cause or by resignation (prior to retirement) • operating expenditure; and for three years after allocation (subject to some accelerating • Woodside’s one year total return to shareholders, ranked conditions). There are no future performance conditions for within an international peer group (Peer Group). Total vesting of Time-tested VPRs. return to shareholders is the growth in the value of shares over the performance year, plus the value of dividends and Long term incentives (LTI) other distributions paid out over that year (assuming that Executive remuneration is linked to Woodside’s long term dividends and other distributions are reinvested in shares performance through the LTI component of VAR. The LTI at the closing price on the first trading day after payment), component is allocated in the form of VPRs which are less new equity subscribed. subject to long term vesting conditions (RTSR-tested VPRs). The Peer Group for 2008 comprises Woodside and the The vesting of the RTSR-tested VPRs is conditional on Governance following companies: a satisfactory ranking of Woodside’s RTSR over a three Sustainability • Apache Corporation or four year period in comparison with the Peer Group, • Anadarko Petroleum Corporation as described above. This measure was chosen because • BG Group PLC it aligns performance with achieving increased value to shareholders (prior to 2007, the VPRs were based on an • CNOOC Limited absolute hurdle of total shareholder return not a relative • Marathon Oil Company measure (TSR-tested VPRs)). The vesting schedule set out • Murphy Oil Corporation below in Table 5 is applied on the third anniversary of the • Petro-Canada allocation of these VPRs. • Pioneer Natural Resources Company If no RTSR-tested VPRs vest at this time (because Woodside • Repsol YPF, S.A. has not performed at or above the 50th percentile of the Peer • Santos Ltd Group), the test is re-applied on the fourth anniversary of the • Talisman Energy Inc. allocation of the VPRs. If no VPRs vest at this time, all VPRs for the particular allocation year lapse. The financial measures for the Scorecard were chosen because of the impact they have on shareholder value. Vesting of all RTSR-tested and TSR-tested VPRs will also The non-financial measure of safety was chosen to align only occur if an executive’s employment has not been performance with Woodside’s values and reputation. terminated with cause or by resignation prior to retirement (subject to some accelerating conditions). A summary of The base STI award for the participants in the EIP is pooled the terms and conditions for VPRs under EIP are in Table 8 and the Scorecard result (with a possible value of between on page 53. Summaries of executive interest in VPRs and zero and two) is used as a multiple to adjust the value of PRs are in Table 12, on page 55 and 56. the pool(s). The adjusted pool(s) are allocated among the participants based on their individual performance relative to Table 5 - Vesting schedule other executives. Woodside RTSR percentile Under the EIP an executive’s performance is assessed Vesting of RTSR-tested VPRs position within Peer Group against their individual performance agreement, which is set at the start of each year and includes key performance Less than 50th percentile no vesting indicators (KPIs) relevant to the executive’s areas of Equal to 50th percentile 50% vest responsibility. KPIs may include the following: Equal to 75th percentile 100% vest 150% vest (i.e. 50% uplift for • financial (e.g. revenue, operating costs, EBIT(1), Equal to 100th percentile topping Peer Group) ROACE(2), lifting costs, drilling costs); Vesting between these percentile points is on a pro rata basis. • operational (e.g. production volumes, project progress);

49 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Equity based retention plans Employee share plan

As part of a retention strategy for senior executives, some In April 2007 Woodside introduced the Woodside Share executives participate in equity based retention plans. Purchase Plan (WSPP) which is available to all employees, including executives. The WSPP provides eligible employees Participating executives receive an allocation of pay rights (PRs) with an opportunity to acquire Woodside shares and to share under the retention strategy. The number of PRs allocated, and in the growth of the company. The WSPP year is based on a the conversion rights attached to the PRs, are determined in the 1 July to 30 June period (WSPP Year). same way as for VPRs allocated under the EIP. Participants in the WSPP elect to sacrifice an amount of salary, The condition for award of PRs is outstanding individual and this amount is applied by the WSPP Trustee to purchase performance, as assessed by the CEO by reference to the Woodside shares on market. The maximum amount that demonstrated capacity of the executives to contribute to the could be salary sacrificed in the 2008/09 WSPP Year was generation of sustainable value for shareholders. Vesting $12,000 and the minimum was $3,000. Woodside provides of the PRs is conditional on maintenance of acceptable funds to the WSPP Trustee to buy additional Woodside shares individual performance. As the primary intention of the PRs (matching shares) on market at a fixed ratio to the shares was to provide a retention mechanism, no other performance purchased with sacrificed funds (in the 2008/09 WSPP Year the conditions were imposed on vesting of the PRs allocated in ratio was one for one and a half; while in the 2007/08 WSPP respect of the 2007 year (Offer 1). Year the ratio was one for one). This matching ratio and the To ensure Woodside is achieving a satisfactory level of minimum and maximum amounts may change from year to performance to maintain the plan, the terms of offer under year at the discretion of the Board. the retention plans for 2008 (Offer 2) require company All shares purchased under the WSPP are held in trust. To performance of RTSR at or above the 50th percentile of the become finally entitled to the matching shares funded by Peer Group before vesting can occur. Woodside, a participant must remain a Woodside employee, One third of the PRs will vest on each of the first, second for a three year qualification period. Participants cannot and third anniversaries of the allocation date (subject to dispose of shares purchased with sacrificed funds within this some accelerating conditions). Entitlement to PRs is lost if three year qualification period, unless they cease employment a participating executive resigns or is terminated with cause with Woodside (in which case they become entitled to deal before the due date for vesting. with the shares purchased with sacrificed funds, but lose their entitlement to matching shares). After the three year The Board will determine whether PRs are to be satisfied qualification period participants may elect to have their WSPP in cash or in Woodside shares at the time of vesting. If shares retained in the trust for up to a further seven years, satisfied in shares, the shares would be purchased on provided they remain in the employment of Woodside. market. If satisfied in cash, the amount would be based on the five day volume weighted average price of a Woodside Participants receive any dividends paid on shares held in the share at the vesting date (reflecting price movements from trust, have voting rights, may participate in any rights issues the time of allocation). and receive any bonus issues.

Table 9 on page 54 provides a summary of the terms and The matching shares are a form of remuneration that is not conditions for PRs under equity based retention plans. dependent on the employees’ individual performance or Woodside’s performance. The purpose of the WSPP is to link

Table 6 - Summary of contractual provisions for executives

Name Employing company Contract duration Termination Termination notice period notice period company(2)(3) Executive(3)

D Voelte(1) Woodside Petroleum Ltd Unlimited 12 months 6 months Fixed Term Contract until 31 March M Chatterji Woodside Energy Ltd 2010 with a one year option for 12 months 6 months extension by both parties R Cole Woodside Energy Ltd Unlimited 12 months 6 months L Della Martina Woodside Energy Ltd Unlimited 12 months 6 months Fixed Term Contract until 30 E Howell Woodside Energy Ltd September 2009 with a one year 12 months 6 months option for extension by both parties A Kantsler Woodside Energy Ltd Unlimited 12 months 6 months V Santostefano Woodside Energy Ltd Unlimited 12 months 6 months Fixed Term Contract until 13 February F Ahmed Woodside Energy Ltd 12 months 6 months 2012 PD Moore(4) Woodside Energy Ltd Unlimited 12 months 6 months K Spence(4) Woodside Energy Ltd Unlimited 12 months 6 months (1) Other benefits: Mr Voelte’s employment in Australia may have adverse tax consequences for Mr Voelte and his wife in respect of his non-Australian income. Woodside has agreed to a limited ‘taxation equalisation’ provision to compensate for this. Mr Voelte and his wife may claim reimbursement of tax paid or payable to the Australian Taxation Office for income or gain in relation to certain disclosed investments in the US to a maximum of US$500,000 over the period of Mr Voelte’s employment. (2) Termination provisions – Woodside may choose to terminate the contract immediately by making a payment equal to the ‘Company Notice Period’ of FAR in lieu of notice. In the event of termination for serious misconduct or other nominated circumstances, executives are not entitled to this termination payment. (3) On termination of employment, executives will be entitled to the payment of any FAR calculated up to the termination date, any annual leave entitlement accrued at the termination date and any payment or award permitted under the EIP Rules. Executives are restrained from certain activities for specified periods after termination of their employment in order to protect Woodside’s interests. (4) Mr Moore departed Woodside on 31 July 2008. Mr Spence departed Woodside on 4 July 2008.

50 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c employee remuneration with shareholder value by providing Long term incentive employees with the opportunity and incentive to purchase For the performance year ending 31 December 2008 and shares in Woodside, rather than to link remuneration with each subsequent performance year, the CEO is entitled performance. to receive LTI calculated in the same manner as for the Table 11 on page 54 provides a summary of executives’ EIP, except for the change in STI/LTI allocation referred to interests in shares under the WSPP. above. The rationale for the award and the methodology of assessment is the same as for LTI awards under the EIP. Contracts for Executives In 2008, 50% of the CEO’s anticipated LTI VAR allocation Each executive has a contract of employment. Table 6 for performance years 2008, 2009 and 2010 (normally on page 50 contains a summary of the key contractual allocated in the year following the performance year) was provisions of the contracts of employment for the brought forward and allocated in 2008 (Accelerated LTI). The executives. Accelerated LTI is valued at $1,312,500 for each of the three CEO Variable Annual Reward (VAR) performance years 2008, 2009 and 2010 but remains subject to the RTSR-test. This change was made to ensure retention From the time when the EIP was introduced until the end of the CEO’s services and in recognition of the inability of the of the 2007 performance year, the CEO received the VAR CEO to influence the RTSR performance of Woodside (and component of his annual remuneration through participation the consequential value of unvested LTI entitlements) after in the EIP. As part of its 2008 annual review of the CEO’s his departure. remuneration, the Board resolved to restructure the VAR component of the CEO’s remuneration package. As the The remaining LTI VAR entitlement for performance years revised VAR structure for the CEO does not align with the 2008, 2009 and 2010 (being the assessed entitlement for structure applicable to other executives under the EIP, the each performance year, less the value of the Accelerated LTI CEO will not participate in the EIP for any performance for that performance year) (LTI VAR Balance) will be allocated year after 31 December 2007. The CEO remains entitled in February 2009, March 2010 and March 2011 and be subject to receive full VAR entitlements under the EIP in respect of to RTSR-testing after three years, in February 2012, March performance years ended on or before 31 December 2007. 2013 and March 2014 respectively. The vesting conditions for these LTI VAR Balance allocations reflect those contained Under the revised structure, the CEO’s VAR entitlements will in the EIP. A summary of the terms and conditions of the be varied as follows: CEO’s VAR for 2008 is contained in Table 7 on page 52. • The allocation between STI and LTI will change from 60% STI, 40% LTI to 50% STI, 50% LTI, resulting in a For the performance year ending 31 December 2011 and remuneration package of one-third FAR, one-third STI each subsequent performance year, the CEO will be entitled and one-third LTI. to an amount of LTI VAR to be satisfied by the allocation of • STI will continue to be allocated as two-thirds cash and RTSR-tested VPRs with the same vesting and performance Governance

one-third time-tested VPRs. conditions as if they were allocated under the EIP, calculated in Sustainability the way as described in ‘Remuneration Structure’ above and in These changes were made with the benefit of advice from accordance with the targets set out in Table 3 on page 48. two external remuneration consultants, to better align the CEO’s remuneration package with domestic and international VAR for prior years comparator groups. The remuneration of the CEO is now governed by his Executive Contract. VAR awards to Mr Voelte for the 2005, 2006 and 2007 performance years remain on the terms and conditions of Short term incentive the EIP as set out in Table 8 on page 53.

For the performance year ending 31 December 2008 and 2008 Remuneration Details each subsequent performance year, the CEO will be entitled Table 13 on page 57 summarises the remuneration both paid to receive STI calculated, and treated in all respects (including and payable to the executives for the 2008 performance year, performance conditions, hurdles and timing), as if it was an including the VAR allocation. The value of the Scorecard for entitlement arising under the EIP, except for the change in 2008 was 0.9 out of a maximum possible result of 2. STI/LTI allocation referred to above. The total potential amount of the STI pool for 2008 ranged from a minimum of $0 up to a maximum of $27.8 million. The actual STI pool for 2008 was $12.5 million for 88 participants (including the executives).

51 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Table 7 – Summary of terms and conditions of VPRs for the CEO’s 2008 VAR allocation

Terms and Conditions 2008 VAR Allocation STI time-tested VPRs LTI RTSR-tested VPRs Accelerated LTI Allocation Date 27 February 2009 14 March 2008 Pricing Date 31 December 2008 31 December 2007 Grant Date 19 February 2008 19 February 2008 Volume Weighted Average $33.4994 $48.2501 Price Performance condition EIP Scorecard and individual Not applicable (for allocation) performance assessment Reason for performance See above under ‘Short term Not applicable condition (allocation) incentives’ (STI) Performance condition Not applicable If Woodside TSR performance equals or exceeds 50th Peer Group percentile for (for vesting) relevant period, VPRs vest on sliding scale Reason for performance Not applicable Relative TSR is independent of market conditions and is considered a more relevant condition (vesting) measure of management performance in terms of value delivered to shareholders over the medium to long term Vesting Date(2) 27 February 2012 Initial vesting 27 February 31 March 2011(1) 2012 Application of Retesting Not applicable If RTSR threshold not No retesting applies to the Accelerated LTI VPRs achieved as at 27 February 2012, retest on 27 February 2013. Lapse of VPRs before If employment terminated for cause or by resignation all If employment terminated for cause or by Vesting Date unvested VPRs will lapse resignation all unvested VPRs will lapse Accelerated LTI is also subject to varied vesting conditions: • Accelerated LTI allocated in respect of the 2008 performance year will only vest where the CEO remains employed with Woodside on 31 March 2009; • Accelerated LTI allocated in respect of the 2009 performance year will only vest where the CEO remains employed with Woodside on 31 March 2010; and • Accelerated LTI allocated in respect of the 2010 performance year will only vest where the CEO remains employed with Woodside on 31 March 2011. Lapse of VPRs if not Not applicable If threshold RTSR not If threshold RTSR not achieved Accelerated LTI vested achieved on retest, TSR-tested VPRs will lapse VPRs will lapse

(1) Vesting of the Accelerated LTI is also conditional on an RTSR-test in 2011 which is undertaken in the same way as under the EIP. Limited accelerated vesting applies to the Accelerated LTI if a change of control event occurs during the 2008, 2009 or 2010 performance years. (2) Provision is made for accelerated vesting in certain events such as total and permanent disability, death or a change in control of Woodside.

52 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c for for (1) LTI TSR-tested VPRs TSR-tested LTI $40.3049 If compounded TSR of If compounded is equal to or above Woodside of 11%pa TSR Hurdle Rate ending on days 30 consecutive testing date adopted because it TSR was is a widely accepted measure creation of shareholder wealth the medium to long term over to set was - initial approach TSR benchmark an absolute percentage March test as at 14 Initial vesting 2009 TSR-test not met as at 14 If 2 next 2009, retest over March 2011 March until 13 years 19 April 2005 19 13 March 2006 March 13 2006 March 13 If TSR-test not met by 13 March March 13 TSR-test not met by If VPRs will lapse 2011,TSR-tested 2005 VPR Allocation VPR 2005 STI Time- STI tested VPRs tested Not applicable Not applicable 2009 March 13 Not applicable cause or by terminated for If employment VPRs will lapse resignation all unvested Not applicable

(1) LTI TSR-tested VPRs TSR-tested LTI $35.7804 Woodside Economic Value Added (EVA) and individual performance (EVA) Added Value Economic Woodside If compounded TSR of If compounded is equal to or above Woodside of 11.5%pa TSR Hurdle Rate adopted because it TSR was is a widely accepted measure creation of shareholder wealth the medium to long term over to set was – initial approach TSR benchmark an absolute percentage March test as at 16 Initial vesting 2010 TSR-test not met as at 16 If 2 next retest over 2010, March 2012 March until 15 years 15 TSR-test not met by If VPRs TSR-tested 2012, March will lapse for 30 consecutive days ending days 30 consecutive for on testing date 15 March 2007 March 15 2007 March 15 1 January 2006 2006 VPR Allocation VPR 2006 STI Time- STI tested VPRs tested Woodside EVA was adopted as a measure of the value added by Woodside’s operations during the Woodside’s added by adopted as a measure of the value was EVA Woodside shareholders added for remuneration to value to linking executive with a view year, relevant against individual executives, measure assesses the contribution made by individual performance The the has as its ultimate objective strategic plan, which Woodside’s aligned to pre-set individual objectives maximization of shareholder returns Not applicable Not applicable 2010 March 15 Not applicable Not applicable If employment terminated for cause or by cause or by terminated for If employment VPRs will lapse resignation all unvested

Governance Sustainability

LTI RTSR-tested VPRs RTSR-tested LTI $48.2501 Not applicable Not applicable TSR performance Woodside If 50th Peer equals or exceeds relevant Group percentile for on sliding VPRs vest period, scale 2007 in adopted TSR Relative market of independent is - considered is and conditions of measure relevant more a performance management to delivered value of terms in medium the over shareholders term long to test Initial vesting 2011 March 14 threshold not achieved If RTSR as at retest on 14 2011, March 14 2012 March not achieved If threshold RTSR VPRs TSR-tested on retest, will lapse 14 March 2008 March 14 1 January 2007 31 December 2007 2007 VPR Allocation VPR 2007 STI Time- STI tested VPRs tested See above See above under ‘Short term incentives’ (STI) Not applicable Not applicable 2011 March 14 Not applicable cause or by terminated for If employment VPRs will lapse resignation all unvested Not applicable EIP Scorecard and individual performance assessment LTI RTSR-tested VPRs RTSR-tested LTI $33.4994 If Woodside TSR performance TSR performance Woodside If 50th Peer equals or exceeds relevant Group percentile for on sliding VPRs vest period, scale Not applicable Not applicable TSR is independent Relative conditions and is of market considered a more relevant measure of management in terms of value performance to shareholders over delivered the medium to long term 2012 27 February Initial vesting threshold not achieved If RTSR retest 2012, as at 27 February 2013 on 27 February not achieved If threshold RTSR VPRs on retest, RTSR-tested will lapse 1 January 2008 27 February 2009 27 February 31 December 2008 2008 VPR Allocation VPR 2008 STI Time- STI tested VPRs tested Not applicable EIP Scorecard and individual performance assessment See above under ‘Short term incentives’ (STI) Not applicable 27 February 2012 Not applicable by or cause for terminated employment If VPRs will lapse resignation all unvested Not applicable (2) The Board set the TSR Hurdle Rate with reference to Woodside’s Cost of Equity Capital annually before VPRs were allocated. VPRs were Cost of Equity Capital annually before Woodside’s to with reference TSR Hurdle Rate set the Board The Woodside. in control of death or a change as total and permanent disability, such in certain accelerated vesting events is made for Provision

Performance Performance condition (for vesting) Table 8 - Summary of terms and conditions for VPRs under the EIP 8 - Summary of terms and conditions for Table 2006 and 2005. 2008, under the EIP for 2007, to the executives VPRs awarded table summarises the terms and conditions of following The and Terms Conditions Allocation Date Date Pricing Grant Date Weighted Volume Price Average Performance condition (for allocation) for Reason performance condition (allocation) for Reason performance condition (vesting) Date Vesting Application of Retesting VPRs Lapse of Vesting before Date VPRs if Lapse of not vested (1) (2)

53 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Table 9 - Summary of terms and conditions for PRs under equity based retention plans

Terms and Conditions Offer 1 Offer 2

Allocation Date 15 March 2007 1 November 2008 Pricing Date 15 March 2007 1 November 2008 Grant Date 15 March 2007 1 November 2008 Volume Weighted Average Price $35.7804 $49.2459 Performance condition (for allocation) Outstanding individual performance Outstanding individual performance Reason for performance condition See above under ‘Executive Remuneration Policy’ See above under ‘Executive Remuneration Policy’ (allocation) Performance condition (for vesting) Maintenance of acceptable individual performance Maintenance of acceptable individual performance over period from allocation date to vesting date. One over period from allocation date to vesting date. third of the PRs will vest on each of the first, second Minimum level of company RTSR performance at or and third anniversaries of the allocation date. above 50th percentile of the Peer Group over period from allocation date to vesting date. One third of the PRs will vest on each of the first, second and third anniversaries of the allocation date. Reason for performance condition (vesting) See above under ‘Executive Remuneration Policy’ See above under ‘Executive Remuneration Policy’ Vesting Date(1) 15 March 2008; 15 March 2009; 15 March 2010 15 March 2009; 15 March 2010; 15 March 2011 Lapse of PRs before Vesting Date If employment terminated for cause or by If employment terminated for cause or by resignation all unvested PRs will lapse. resignation all unvested PRs will lapse. (1) Provision is made for accelerated vesting in certain events such as total and permanent disability, death or a change in control of Woodside.

Table 10 – CEO Shares Shares

Name Plan Type Shares Opening Balance Lapsed Closing Balance

D Voelte 2004 LTI Award(1) Deferred Shares 69,404 - 69,404

(1) Awarded and vested in 2005 on the basis of individual performance for the 2004 performance year. The shares are held in trust and Mr Voelte may not deal with or dispose of any of the shares until the earliest of: the end of a period of five years commencing on the grant date; the time when Mr Voelte ceases to be employed by Woodside; or the time when any person acquires a relevant interest in 50.1% of Woodside’s issued share capital. Mr Voelte’s interest in the shares may be forfeited in certain circumstances, including summary termination of his employment with Woodside.

Table 11 - Summary of executives’ interests in shares under the WSPP

Name WSPP Year Opening balance Shares purchased Matching Closing balance under WSPP shares 2008 WSPP(1) 124 173 201 498 D Voelte 2007 WSPP(2) - 62 62 124 2008 WSPP 124 173 201 498 M Chatterji 2007 WSPP - 62 62 124 2008 WSPP 124 173 201 498 R Cole 2007 WSPP - 62 62 124 2008 WSPP 124 173 201 498 L Della Martina(4) 2007 WSPP 2008 WSPP - - - - E Howell 2007 WSPP - - - - 2008 WSPP 124 117 117 358 A Kantsler 2007 WSPP - 62 62 124 2008 WSPP 124 173 201 498 V Santostefano 2007 WSPP - 62 62 124 2008 WSPP - - - - F Ahmed(5) 2007 WSPP 2008 WSPP 124 117 117 358 PD Moore(3) 2007 WSPP - 62 62 124 2008 WSPP - - - - K Spence 2007 WSPP - - - - (1) 2008 WSPP refers to the plan for the 2008/09 Plan Year as well as the purchases made in 2008 for the 2007/08 Plan. The matching shares for the 2008 WSPP were granted on 20 June 2008 and had a fair value of $52.82 per share. (2) 2007 WSPP refers to the plan for the 2007/08 Plan Year. The matching shares for the 2007 WSPP were granted on 29 August 2007 and had fair values of $48.25, $55.93, and $62.82 per share respectively. The last two purchases for 2007 WSPP were made in 2008. (3) 179 matching shares lapsed for Mr Moore upon his departure. (4) Mr Della Martina did not meet the definition of KMP under AASB 124 for previous years but did fall within the definition for 2008. Previous year’s comparative figures are not shown. (5) Mr Ahmed is included as one of the five most highly remunerated executives of the Woodside Group for 2008. Previous year’s comparative figures are not shown. As at 31 December 2008, no matching shares had vested for any executives. As at 31 December 2008, other than note (3) above no matching shares had lapsed for any Executives. The fair value of rights as at their date of grant has been determined by reference to the share price at acquisition. The fair value of rights is amortised over the vesting period, such that ‘Total remuneration’ includes a portion of the fair value of unvested equity compensation during the year. The amount included as remuneration is not related to or indicative of the benefit (if any) that individual Executives may ultimately realise should these equity instruments vest.

54 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Table 12a- Summary of the executives’ interests in VPRs and PRs Time-tested VPRs and PRs (Offer 1 only) Name Allocation Vesting Awarded Vested in % of total Fair value(2) of VPR/PR for performance year date date(1) but not 2008 vested vested 2008 2007 2006 2005

D Voelte March 2006 13/03/2009 12,827 22.80 March 2007(3) 15/03/2010 20,122 37.30 March 2008 14/03/2011 16,514 34.72 February 2009 27/02/2012 28,209 47.92 M Chatterji March 2006 13/03/2009 3,429 22.80 March 2007 15/03/2010 5,517 37.30 March 2007 15/03/2010 26,270 8,758 33 31.87 March 2008 14/03/2011 4,314 34.72 February 2009 27/02/2012 7,451 47.92 R Cole March 2006 13/03/2009 - 22.80 March 2007 15/03/2010 1,370 37.30 March 2007 15/03/2010 12,015 4,007 33 31.87 March 2008 14/03/2011 1,757 34.72 February 2009 27/02/2012 4,544 47.92 L Della Martina(7) March 2006 13/03/2009 22.80 March 2007 15/03/2010 37.30 March 2007 15/03/2010 11,178 3,728 33 31.87 March 2008 14/03/2011 34.72 February 2009 27/02/2012 2,916 47.92 E Howell(4) March 2006 13/03/2009 22.80 March 2007 15/03/2010 525 37.30 March 2007 15/03/2010 14,532 4,846 33 31.87 March 2008 14/03/2011 1,905 34.72 February 2009 27/02/2012 3,110 47.92 A Kantsler March 2006 13/03/2009 3,278 22.80 March 2007 15/03/2010 1,650 37.30 March 2007 15/03/2010 19,563 6,523 33 31.87 March 2008 14/03/2011 2,542 34.72 February 2009 27/02/2012 4,273 47.92 V Santostefano(4) March 2006 13/03/2009 22.80 March 2007 15/03/2010 1,327 37.30 March 2007 15/03/2010 10,340 3,448 33 31.87 March 2008 14/03/2011 1,670 34.72 February 2009 27/02/2012 2,910 47.92 F Ahmed(8) March 2007 15/03/2010 March 2008 14/03/2011 February 2009 27/02/2012 3,246 47.92

(5) Governance

PD Moore March 2006 13/03/2009 - 2,186 100 22.80 Sustainability March 2007 15/03/2010 - 2,215 100 37.30 March 2007(6) 15/03/2010 19,003 8,447 44 31.87 March 2008 14/03/2011 - 1,971 100 34.72 February 2009 27/02/2012 - K Spence(9) March 2006 13/03/2009 - 3,309 100 22.80 March 2007 15/03/2010 - 2,010 100 37.30 March 2008 14/03/2011 - 1,748 100 34.72 February 2009 27/02/2012 -

(1) Vesting date and exercise date are the same. Vesting is subject to satisfaction of vesting conditions. (2) In accordance with the requirements of AASB 124 Related Party Disclosures, the fair value of rights as at their grant date has been determined by applying the binomial valuation method. The fair value of rights is amortised over the vesting period, such that ‘Total remuneration’ includes a portion of the fair value of unvested equity compensation during the year. The amount included as remuneration is not related to or indicative of the benefit (if any) that individual executives may ultimately realise should these equity instruments vest. (3) Incorporates a VPR allocation of $900,000 in respect of the 2006 performance year, awarded in addition to the EIP entitlements. (4) Ms Howell and Mr Santostefano were not within the definition of KMP under AASB 124 for the 2006 financial year but are considered KMP for 2007 and 2008. 2006 comparative figures are not shown. (5) Mr Moore’s time-tested VPRs allocated in March 2006, March 2007 and March 2008 vested on his departure from Woodside (31 July 2008). The time-tested VPRs to be allocated in February 2009 will vest on a pro-rata basis immediately on allocation. (6) In relation to the equity based retention plan, Mr Moore received the first 1/3 vesting of PRs (6,335) in March 2008 and a pro-rata vesting of PRs (2,112) from the second 1/3 allocation, with the remaining PRs (10,556 or 55%) lapsing on his departure from Woodside (31 July 2008). (7) Mr Della Martina did not meet the definition of KMP under AASB 124 for previous years but did fall within the definition for 2008. Previous year’s comparative figures are not shown. (8) Mr Ahmed is included as part of the top five most highly remunerated executives of the Woodside Group for 2008. Previous year’s comparative figures are not shown. (9) Time-tested VPRs allocated to Mr Spence in March 2006, March 2007 and March 2008 vested on his departure from Woodside (4 July 2008). The time-tested VPRs to be allocated in February 2009 will vest on a pro-rata basis immediately on allocation.

55 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Table 12b - RTSR-tested VPRs, TSR-tested VPRs and Performance Linked PRs(3)

Name Allocation Vesting date(1) Awarded Vested in % of total Fair value(2) of VPR/PR for performance year date but not 2008 vested vested 2008 2007 2006 2005

D Voelte March 2006(4) 13/03/2011 50,464 14.25 March 2007(5) 15/03/2012 40,245 22.30 March 2008 14/03/2012 33,161 29.16 March 2008(8) 31/03/2011 27,202 43.29 March 2008(8) 31/03/2011 27,202 43.29 March 2008(8) 31/03/2011 27,202 43.29 February 2009(9) 27/02/2013 39,179 40.25 M Chatterji March 2005(10) 15/04/2008 - 3,674 100 March 2006 13/03/2011 6,859 14.25 March 2007 15/03/2012 11,034 22.30 March 2008 14/03/2012 8,953 29.16 February 2009 27/02/2013 14,185 40.25 R Cole March 2006 13/03/2011 - 14.25 March 2007 15/03/2012 2,741 22.30 March 2008 14/03/2012 4,862 29.16 February 2009 27/02/2013 8,650 40.25 L Della Martina(11) March 2006 13/03/2011 14.25 March 2007 15/03/2012 22.30 March 2008 14/03/2012 29.16 February 2009 27/02/2013 5,552 40.25 E Howell(6) March 2006 13/03/2011 14.25 March 2007 15/03/2012 1,051 22.30 March 2008 14/03/2012 3,954 29.16 February 2009 27/02/2013 7,895 40.25 A Kantsler March 2006 13/03/2011 6,554 14.25 March 2007 15/03/2012 3,300 22.30 March 2008 14/03/2012 7,036 29.16 February 2009 27/02/2013 10,847 40.25 V Santostefano (6) March 2006 13/03/2011 14.25 March 2007 15/03/2012 2,654 22.30 March 2008 14/03/2012 3,465 29.16 February 2009 27/02/2013 5,540 40.25 F Ahmed(12) March 2007 15/03/2012 March 2008 14/03/2012 November 2007 15/03/2011 6,091 45.61 February 2009 27/02/2013 8,238 40.25 PD Moore(7) March 2006 13/03/2011 4,372 14.25 March 2007 15/03/2012 4,430 22.30 March 2008 14/03/2012 5,453 29.16 February 2009 27/02/2013 4,874 40.25 K Spence(13) March 2006 13/03/2011 6,618 14.25 March 2007 15/03/2012 4,020 22.30 March 2008 14/03/2012 4,800 29.16 February 2009 27/02/2013 5,621 40.25 (1) Vesting date and exercise date are the same. Vesting is subject to satisfaction of vesting conditions. (2) In accordance with the requirements of AASB 124 Related Party Disclosures, the fair value of rights as at their date of grant has been determined by applying the binomial valuation method. The fair value of rights is amortised over the vesting period, such that ‘Total remuneration’ includes a portion of the fair value of unvested equity compensation during the year. The amount included as remuneration is not related to or indicative of the benefit (if any) that individual executives may ultimately realise should these equity instruments vest. (3) Vesting date is from 13 March 2009 to 13 March 2011 in respect of 2006 allocations, from 15 March 2010 to 15 March 2012 in respect of March 2007 allocations, on 14 March 2011 or 14 March 2012 in respect of March 2008 allocations, and on 27 February 2012 or 27 February 2013 in respect of February 2009 allocations. (4) Incorporates a TSR tested VPR allocation of $1,000,000 in respect of the 2005 performance year, awarded in addition to the EIP entitlements. (5) Incorporates a VPR allocation of $900,000 in respect of the 2006 performance year, awarded in addition to the EIP entitlements. (6) Ms Howell and Mr Santostefano were not within the definition of KMP under AASB 124 for the 2006 financial year but are considered KMP for 2007 and 2008. 2006 comparative figures are not shown. (7) Mr Moore’s TSR Tested and RTSR Tested VPRs remain subject to the normal vesting conditions. (8) Mr Voelte’s Accelerated LTIs. (9) This allocation represents the remaining 50% of Mr Voelte’s 2008 LTI VAR allocation (excludes the Accelerated LTI VARs). (10) Mr Chatterji received 3,674 Equity Linked Cash Incentives (ELCIs), which were granted in April 2005, in respect of Mr Chatterji’s Long Term Incentive award for the 2004 performance year, prior to the introduction of the Executive Incentive Plan (EIP). In accordance with the conditions of the award, the ELCIs were due to be converted to a cash payment on 15 April 2008. In keeping with encouraging equity participation at the executive level, prior to vesting the Board approved that the ELCIs be satisfied through an allocation of WPL shares, which can be held in the EIP Trust, rather than via a cash payment. (11) Mr Della Martina did not meet the definition of KMP under AASB 124 for previous years but did fall within the definition for 2008. Previous year’s comparative figures are not shown. (12) Mr Ahmed is included as part of the top five most highly remunerated executives of the Woodside Group for 2008. Previous years comparative figures are not shown. (13) Mr Spence’s TSR Tested and RTSR Tested VPRs remain subject to the normal vesting conditions.

Other than those noted in footnote 8, no PRs or VPRs have lapsed for any executive. The number of VPRs for the March 2007 VPR allocation as reported in the 2007 Annual Report was determined using the VWAP of a share over the five trading days preceding 15 March 2007. The number of VPRs for the March 2008 VPR allocation as reported in the 2007 Annual Report was determined using the VWAP of a share over the five trading days preceding 31 December 2007. The number of VPRs for the February 2009 VPR allocation has been determined using the VWAP of a share based on an average over all trading days in the month of December 2008, which was $33.4994. Based on the previous five day VWAP methodology, this would have been $33.6567.

56 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c % 59 51 53 50 51 47 54 48 50 49 49 54 54 42 32 52 39 30 related Performance Performance

$ 857,487 925,468 871,996 747,444 929,530 980,073 942,394 Total 4,847,259 6,243,199 1,195,777 . The cash payment is subject to PAYG is subject to PAYG cash payment The . 2,405,189 2,109,310 1,231,706 1,066,245 1,413,515 1,173,691 1,542,312 1,483,036 remuneration

(13) (13) ------$ 267,789 655,127 Termination / Termination sign on benefits (7) (4) $ 111,425 267,384 280,148 161,482 864,810 783,259 644,575 323,505 261,852 281,571 303,588 284,283 475,086 442,781 240,946 349,993 417,554 Superannuation Guarantee (Administration) Act 1992 Act Superannuation Guarantee (Administration) 1,770,849

(3) income tax and paid as part of their normal Go (PAYG) You As is subject to Pay cash payment The . payments Share plan Share-based - - - (10) - $ 12,292 12,752 12,722 12,908 49,938 88,065 34,387 73,966 85,031 71,396 53,831 86,563 100,000 103,102 Company Company Pension super Pension superannuation contributions to to contributions Post employment Post , the fair value of rights as at their date of grant has been determined by applying the binomial valuation method. The fair value of value fair The method. applying the binomial valuation of rights as at their date grant has been determined by value , the fair (11) (11) (3) Governance Sustainability 7,762 7,762 2,614 8,008 8,233 8,478 4,783 8,478 8,008 $ 13,512 38,142 68,149 12,352 88,592 13,636 88,318 242,850 230,890 Superannuation Guarantee (Administration) Act 1992 Act Superannuation Guarantee (Administration) Benefits and allowances Non monetary Related Party Disclosures Party Related (2) $ 217,456 195,396 194,975 128,662 168,730 286,318 499,204 416,273 304,439 169,545 208,396 183,854 245,341 161,113 190,156 222,559 1,593,600 1,890,000 Short-term Short-term Short-term Cash bonuses incentive bonus (1) (1) $ 667,396 637,023 374,173 561,613 344,135 829,938 729,507 412,097 461,468 394,853 608,655 336,907 630,024 290,640 470,940 325,629 2,481,466 2,287,623 allowances Salaries, fees and Salaries, Cash salary and fees 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2008 2007 2008 2007 Year (5) (9) (6) (12)

(8) Voelte elected to receive a cash payment in lieu of all superannuation contributions, accordance with the a cash payment elected to receive Voelte and allowances. amount is included in salaries, fees The monthly salary. that of the benefit (if any) amount included as remuneration is not related to or indicative The equity compensation during the year. of unvested value includes a portion of the fair remuneration’ that ‘Total period, such the vesting rights is amortised over vest. ultimately realise should these equity may instruments individual executives and allowances. amount is included in salaries, fees The income tax and paid as part of their normal monthly salary. Table 13 - Compensation of executives 13 for the year ended 31 December 2008 Table Executives Voelte, D Director Executive M Chatterji, and Chief President Vice Executive Financial Officer R Cole, President Vice Executive Corporate Centre and Joint SecretaryCompany L Della Martina, Pluto President Vice Executive Howell, E North President Vice Executive Shelf West A Kantsler, Health President Vice Executive and Safety V Santostefano, President Vice Executive Production Ahmed, F Project President Vice Executive Development PD Moore, Emerging President Vice Executive LNG K Spence, President, Vice Executive Enterprise Capability Mr Resident Tax Australian from December 2008, as a non from January2008. 2008Subsequently, the balance paid as a superannuation-in-lieu allowance, to November the minimum contribution to superannuation and receive elected to receive Voelte (1) Mr year. paid in the following is actually which year, earned in the respective amount represents the short-term incentive The (2) and health insurance. motor vehicle and benefits including but not limited to travel, of allowances the value (3) Reflects 124 AASB incorporates all equity based plans. In accordance with the requirements of (4) ‘Share plan’ 2008. within the definition for 2007figures are not shown. but was comparative years previous for 124 AASB (5) Mr Della Martina did not meet the definition of KMP under 2008. Group for 2007figures are not shown. comparative Woodside of the most highly remunerated executives Ahmed is included as one of the top five (6) Mr section above. Annual Reward’ Variable VPRs, as described in the ‘CEO LTI Accelerated and Balance VAR 2008 LTI Voelte’s VPRs comprising Mr incorporates This (7) 2008. on 31 July Woodside (8) Mr Moore departed 2008. on 4 July Woodside (9) Mr Spence departed in lieu of all superannuation contributions, accordance with the a cash payment Ahmed has elected to receive tax purposes Mr Australian a non-resident for As (10) has been re-stated 2007to address a misprint in the report. The benefits and allowances Remuneration (11) Acquisitions. and Mergers Ventures Exploration, New President, Vice the full 2008Mr Kantsler held position of Executive year For Health and Safety. President, Vice 2009appointed to Executive Mr Kantsler was February On 12 (12) Mr Spence is $329,024. and for as at 31 December 2008,the accounting standards,Mr Moore is $292,113 but not vested as required by for VPRs awarded of RTSR-tested value remaining fair The (13)

57 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Directors’ report (continued) Indemnification and insurance of directors and officers Rounding of amounts The company’s constitution requires the company to The amounts contained in this report have been rounded indemnify each director, secretary, executive officer or to the nearest million dollars under the option available to employee of the company or its wholly owned subsidiaries the company under Australian Securities and Investments against liabilities (to the extent the company is not Commission Class Order 98/0100 dated 10 July 1998. precluded by law from doing so) incurred in or arising Signed in accordance with a resolution of the directors. out of the conduct of the business of the company or the discharge of the duties of any such person. The company has entered into deeds of indemnity with each of its directors, secretaries, certain senior executives, and employees serving as officers on wholly owned or partly owned companies of Woodside in terms of the indemnity Michael Chaney, AO provided under the company’s constitution. Chairman The company has paid a premium under a contract 18 February 2009 insuring each director, officer, secretary and employee who is concerned with the management of the company or its subsidiaries against liability incurred in that capacity. Disclosure of the nature of the liability covered by and the amount of the premium payable for such insurance is subject to a confidentiality clause under the contract of Don Voelte insurance. The company has not provided any insurance Chief Executive Officer for the external auditor of the company or a body corporate 18 February 2009 related to the external auditor.

Non-audit services and auditor independence Table 14 - Directors’ relevant interests in Woodside declaration shares as at date of report. Details of the amounts paid or payable to the external Director Relevant interest in shares auditor of the company, Ernst & Young, for audit and non- MA Chaney 20,000 audit services provided during the year are disclosed in note DR Voelte 69,902 32 to the Financial Report. E Fraunschiel 75,626 A Jamieson 3,000 Based on advice provided by the Audit & Risk Committee, PJMH Jungels 8,973 the directors are satisfied that the provision of non-audit DI McEvoy 6,749 services by the external auditor during the financial year is D Megat 597 compatible with the general standard of independence for MA Cilento - auditors imposed by the Corporations Act for the following I Robertson - reasons: • all non-audit services were provided in accordance with Woodside’s External Auditor Policy and External Auditor Guidelines; and Auditor’s Independence Declaration • all non-audit services were subject to the corporate governance processes adopted by the company and In relation to our audit of the financial report of Woodside have been reviewed by the Audit & Risk Committee to Petroleum Ltd. for the year ended 31 December 2008, to ensure that they do not affect the integrity or objectivity the best of my knowledge and belief, there have been no of the auditor. contraventions of the auditor independence requirements of the Corporations Act or any applicable code of professional Further information on Woodside’s policy in relation to the conduct. provision of non-audit services by the auditor is set out in section 7 of the Corporate Governance Statement on page 43.

The auditor independence declaration, as required under Ernst & Young section 307C of the Corporations Act, is set out on this page and forms part of this report.

Proceedings on behalf of the company No proceedings have been brought on behalf of the company, nor has any application been made in respect of the company under section 237 of the Corporations Act. G H Meyerowitz Partner Perth 18 February 2009

58 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c 2008 Financial Report

Contents

Income statement 60 Balance sheet 61 Cash flow statement 62 Statement of changes in equity 63 Notes to and forming part of the financial report 65 1. Summary of significant accounting policies 65 2. Segment reporting 75 3. Revenues and expenses 78 4. Taxes 80 5. Earnings per share 83 6. Dividends paid and proposed 83 7. Receivables 84 8. Inventories 84 9. Other financial assets 85 10. Other assets 85 11. Exploration and evaluation assets 86 12. Oil and gas properties 87 13. Other plant and equipment 88 14. Payables 88 15. Interest-bearing liabilities 89 16. Tax payable 89 17. Other financial liabilities 89 18. Other liabilities 89 19. Provisions 90 20. Contributed equity 90 21. Other reserves 91 22. Retained earnings 92 23. Cash and cash equivalents 92 24. Financial and capital risk management 92 25. Discontinued operations 102 26. Expenditure commitments 103 27. Employee benefits 104 28. Key management personnel compensation 109 Financial Report 29. Events after the balance sheet date 113 30. Related party disclosure 114 31. Contingent liabilities 114 32. Auditor remuneration 115 33. Joint ventures 115 34. Associated entities 116 35. Subsidiaries 117

Directors’ declaration 120 Independent audit report 121 Shareholder information 122

59 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Income statement For the year ended 31 December 2008

Consolidated Parent 2008 2007 2008 2007 Notes $m $m $m $m Continuing operations

Revenue from sale of goods 3(a) 5,990 3,841 - - Cost of sales 3(b) (1,969) (1,244) - - Gross Profit 4,021 2,597 - -

Other income 3(c) 168 122 929 886 Other expenses 3(d) (891) (641) (6) (7) Profit from continuing operations before tax 3,298 2,078 923 879 and net finance costs

Finance income 3(e) 9 38 7 13 Finance costs 3(f) (32) (29) (28) (20) Profit from continuing operations before tax 3,275 2,087 902 872

Taxes Income tax (expense)/benefit (868) (574) 8 3 Petroleum Resource Rent Tax (PRRT) expense (621) (244) - - Total taxes 4(a) (1,489) (818) 8 3 Profit from continuing operations after tax 1,786 1,269 910 875

Discontinued operations Loss from discontinued operations after tax - (239) - - Profit from total operations after tax 1,786 1,030 910 875

Profit attributable to minority interest - - - - Profit attributable to equity holders of the parent 1,786 1,030 910 875

Basic and diluted earnings per share from continuing operations attributable to the ordinary equity holders of the parent (cents) 5 261 189

Basic and diluted earnings per share from total operations attributable to the ordinary equity holders of the parent (cents) 261 153

Dividend per share (cents) 6(b) 135 104 The accompanying notes form part of the Financial Report.

60 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Balance sheet As at 31 December 2008

Consolidated Parent 2008 2007 2008 2007 Notes $m $m $m $m

Current assets Cash and cash equivalents 23 141 138 - - Receivables 7(a) 533 491 - 186 Inventories 8(a) 108 75 - - Other financial assets 9(a) 44 3 - - Other assets 10(a) 19 89 - - Total current assets 845 796 - 186

Non-current assets Receivables 7(b) - - 2,675 1,844 Inventories 8(b) 54 9 - - Other financial assets 9(b) 184 140 233 250 Other assets 10(b) 8 91 - - Exploration and evaluation assets 11 1,172 737 - - Oil and gas properties 12 12,428 7,619 - - Other plant and equipment 13 111 130 - - Deferred tax assets 4(d) 127 208 - - Total non-current assets 14,084 8,934 2,908 2,094 Total assets 14,929 9,730 2,908 2,280

Current liabilities Payables 14(a) 1,672 998 - 1 Interest-bearing liabilities 15(a) - 414 - - Tax payable 16 542 327 445 328 Other financial liabilities 17(a) - 119 - - Other liabilities 18(a) 22 7 - - Provisions 19 127 99 - - Total current liabilities 2,363 1,964 445 329

Non-current liabilities Payables 14(b) - - 178 174 Interest-bearing liabilities 15(b) 2,957 618 - - Deferred tax liabilities 4(d) 1,110 1,217 - - Other financial liabilities 17(b) 4 112 - 22 Other liabilities 18(b) 292 173 - - Provisions 19 1,271 552 - - Total non-current liabilities 5,634 2,672 178 196 Total liabilities 7,997 4,636 623 525 Net assets 6,932 5,094 2,285 1,755

Equity Financial Report Issued and fully paid shares 20(a) 2,104 1,553 2,104 1,553 Shares reserved for employee share plans 20(b) (142) (137) (142) (137) Other reserves 21 53 (155) 41 38 Retained earnings 22 4,690 3,833 282 301 Equity attributable to equity holders of the parent 6,705 5,094 2,285 1,755 Minority interest 227 - - - Total equity 6,932 5,094 2,285 1,755 The accompanying notes form part of the Financial Report.

61 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Cash flow statement For the year ended 31 December 2008

Consolidated Parent 2008 2007 2008 2007 Notes $m $m $m $m Cash flows from operating activities Profit after tax from total operations 1,786 1,030 910 875 Adjustments for: Non-cash items Depreciation and amortisation 969 837 - - Impairment loss 132 57 - - Diminution in value of controlled entity - - - (8) Unrealised foreign exchange loss 543 2 - - Defined benefit superannuation plan net actuarial loss 39 24 - - Share of associates’ net profit (6) (7) - - Exploration and evaluation expensed (previously capitalised) 51 40 - - (Gain)/loss on sale of non-current assets (19) 164 - (23) Gain on derivative financial instruments (109) (19) - - Increase in provisions 23 14 - - Net finance costs 23 11 21 7 Dividend income - - (929) (847) Tax expense 1,489 818 (8) (3) Working capital adjustments (Increase)/decrease in trade and other receivables (9) 52 - (8) Increase in inventories (46) (35) - - Decrease in other assets and liabilities 92 34 - - Increase in trade and other payables 48 71 - - Cash generated from operations 5,006 3,093 (6) (7) Payments received from employees relating to employee share plans (ESP) 30 56 30 56 Purchases of shares relating to ESP (35) (15) (35) (15) Interest received 9 20 7 13 Dividends received 5 7 929 847 Interest paid (46) (102) (29) (20) Income tax paid (1,009) (583) (994) (567) Petroleum Resource Rent Tax (paid)/refunded (176) 6 - - Net cash from/(used in) operating activities 3,784 2,482 (98) 307

Cash flows (used in)/from investing activities Payments for capital and exploration expenditure (4,799) (2,646) - - Proceeds from sale of/(payments for) investments in (5) controlled entities 102 530 23 Proceeds from sale of exploration and evaluation assets 32 29 - - Proceeds from sale of oil and gas properties 100 61 - - Payments for restorations (3) - - - Net cash (used in)/from investing activities (4,568) (2,026) (5) 23

Cash flows from/(used in) financing activities Proceeds from/(repayments of) borrowings 1,060 (622) - - Payment to cash reserve (31) - - - Proceeds from minority interests 152 - - - Advances (to)/from controlled entities - - 481 (330) Proceeds from underwriters of Dividend Reinvestment Plan (DRP) 254 338 - - Dividends paid (net of DRP) (254) (338) - - Dividends paid outside of DRP (378) - (378) - Net cash from/(used in) financing activities 803 (622) 103 (330)

Net increase/(decrease) in cash held 19 (166) - - Cash and cash equivalents at the beginning of the financial year 138 314 - - Effects of exchange rate changes on the balances of cash held in foreign currencies (16) (10) - - Cash and cash equivalents at the end of the financial year 23 141 138 - - The accompanying notes form part of the Financial Report.

62 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Statement of changes in equity For the year ended 31 December 2008

Issued and Shares Other Retained Minority Total fully paid reserved for reserves earnings interest equity shares employee (Note 21) (Note 22) (Note 20(a)) share plans (Note 20 (b)) Consolidated $m $m $m $m $m $m

Balance at 1 January 2007 706 (178) 24 3,650 - 4,202

Currency translation differences - - (30) - - (30) Cash flow hedges - - (147) - - (147) Available-for-sale financial assets - - (8) - - (8)

Total expense for the year - - (185) - - (185) recognised directly in equity - Dividend Reinvestment Plan 846 - - - - 846 Share issue costs 1 - - - - 1 Employee share plan purchases - (19) - - - (19) Employee share plan redemptions - 53 - - - 53 Dividends applied - 7 - - - 7 Share-based payments - - 6 - - 6 Profit attributable to equity holders - - - 1,030 - 1,030 of the parent Dividends paid - - - (847) - (847)

Balance at 31 December 2007 1,553 (137) (155) 3,833 - 5,094

Balance at 1 January 2008 1,553 (137) (155) 3,833 - 5,094

Currency translation differences - - 71 - - 71 Cash flow hedges - - 145 - - 145 Available-for-sale financial assets - - (24) - - (24)

Total expense for the year - - 192 - - 192 recognised directly in equity

Dividend Reinvestment Plan 550 - - - - 550 Share issue costs 1 - - - - 1 Disposal to minority interests - - - - 227 227

Employee share plan purchases - (38) - - - (38) Financial Report Employee share plan redemptions - 29 - - - 29 Dividends applied - 4 - - - 4 Share-based payments - - 16 - - 16 Profit attributable to equity holders - - - 1,786 - 1,786 of the parent Profit attributable to minority ------interest Dividends paid - - - (929) - (929)

Balance at 31 December 2008 2,104 (142) 53 4,690 227 6,932 The accompanying notes form part of the Financial Report.

63 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Statement of changes in equity For the year ended 31 December 2008

Issued and Shares Other Retained Minority Total fully paid reserved for reserves earnings interest equity shares employee (Note 21) (Note 22) (Note 20(a)) share plans (Note 20(b)) Parent $m $m $m $m $m $m

Balance at 1 January 2007 706 (178) 38 273 - 839

Dividend Reinvestment Plan 846 - - - - 846 Share issue costs 1 - - - - 1 Employee share plan purchases - (19) - - - (19) Employee share plan redemptions - 53 - - - 53 Dividends applied - 7 - - - 7 Profit attributable to equity holders - - - 875 - 875 of the parent Dividends paid - - - (847) - (847)

Balance at 31 December 2007 1,553 (137) 38 301 - 1,755

Balance at 1 January 2008 1,553 (137) 38 301 - 1,755

Dividend Reinvestment Plan 550 - - - - 550 Share issue costs 1 - - - - 1 Employee share plan purchases - (38) - - - (38) Employee share plan redemptions - 29 - - - 29 Dividends applied - 4 - - - 4 Share-based payments - - 3 - - 3 Profit attributable to equity holders - - - 910 - 910 of the parent Dividends paid - - - (929) - (929) - Balance at 31 December 2008 2,104 (142) 41 282 - 2,285 The accompanying notes form part of the Financial Report.

64 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

1. Summary of significant accounting policies

(a) Basis of preparation The Financial Report is a general purpose Financial Report, which has been prepared in accordance with the requirements of the Corporations Act, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board.

The Financial Report has been prepared on a historical cost basis, except for derivative financial instruments and certain other financial assets, which have been measured at fair value.

The Financial Report is presented in Australian dollars. The amounts contained in this report have been rounded to the nearest million dollars under the option available to the Group under Australian Securities and Investments Commission Class Order 98/0100 dated 10 July 1998, unless otherwise stated.

Apart from changes in accounting policy noted below, the accounting policies adopted are consistent with those disclosed in the annual financial report for the year ended 31 December 2007. Certain comparative information has been reclassified to be presented on a consistent basis with the current year’s presentation.

Changes in accounting policy The adoption of new and amending Standards and Interpretations mandatory for annual periods beginning on or after 1 January 2008 did not result in any significant changes to the accounting policies that were in place as at and for the year ended 31 December 2007, except for the following:

• AASB 2007-4 Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments. The Group has elected to adopt the indirect method of cash flow presentation as permitted by AASB 2007-4 and AASB 107 Cash Flow Statements. The Group believes that the indirect method of presenting cash flows provides more relevant information as it results in increased comparability of the Group’s Cash Flow Statement with those of its peer group; and

• Interpretation 1003 Australian Petroleum Resource Rent Tax (PRRT). The Interpretation specifies that Australian PRRT is within the scope of AASB 112 Income Taxes. The Interpretation does not change how the Group measures PRRT expenses. As a result of the application of the Interpretation, Woodside presents PRRT expense as part of taxes. In 2007, the Group presented PRRT expense of $244 million as part of its cost of production and PRRT assets ($27 million) and deferred liabilities ($542 million) as other assets and liabilities.

(b) Statement of compliance The Financial Report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board.

The Directors have elected to early adopt the following Accounting Standards and Interpretations even though the pronouncements are not required to be applied until subsequent reporting periods:

• AASB 2008-1 Amendments to Australian Accounting Standard - Share-based Payment: Vesting Conditions and Cancellations; and

• Interpretation 16 Hedges of a Net Investment in a Foreign Operation.

The early adoption of these standards did not result in any significant changes to the accounting policies of the Group. Financial Report (c) Basis of consolidation The consolidated financial statements comprise the financial statements of the Group as at 31 December each year.

Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date at which control is transferred out of the Group.

At acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values in accordance with the purchase method of accounting. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill.

The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Investments in subsidiaries are carried at cost less allowances for diminution in value.

65 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

1. Summary of significant accounting policies (continued)

(c) Basis of consolidation (continued) All intercompany balances and transactions, including unrealised profits and losses arising from intra-group transactions, have been eliminated in full.

Minority interests not held by the Group are allocated their share of the net profit after tax in the consolidated income statement and are presented within equity in the consolidated balance sheet, separately from parent shareholders’ equity.

(d) Revenue

Product revenue Revenue earned from the sale of oil, gas and condensate produced is recognised when the risks and rewards of ownership of the product are transferred to the customer. This policy is applied to the Group’s different operating arrangements as follows:

• revenue earned under a lease or licence conferring ownership rights to production in which the Group has a working interest with other producers, is recognised in earnings on the basis of the Group’s interest in the relevant lease or licence (‘entitlements’ method). Revenue is not reduced for royalties and other taxes payable from production, except where royalties are payable ’in kind’;

• revenue from ‘take or pay’ contracts is recognised in earnings when the product has been drawn by the customer or recorded as unearned revenue when not drawn by the customer;

• revenue earned under a risk service contract is recognised when the Group has legally enforceable entitlement to the proceeds; and

• revenue earned under a production sharing contract is recognised on the basis of the Group’s share of oil, gas or condensate allocated to the contractor party or parties under the contract.

Interest revenue Interest revenue is recognised as interest accrues, using the ‘effective interest’ method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument.

Dividend revenue Dividend revenue is recognised when the right to receive payment is established.

Services revenue Revenue for services rendered is recognised in proportion to the stage of completion of a contract.

(e) Exploration and evaluation Expenditure on exploration and evaluation is accounted for in accordance with the ‘area of interest’ method. The Group’s application of the accounting policy for the cost of exploring and of evaluating discoveries is closely aligned to the US GAAP-based ‘successful efforts’ method.

Exploration licence acquisition costs are capitalised and subject to half-yearly impairment testing.

All exploration and evaluation expenditure, including general permit activity, geological and geophysical costs and new venture activity costs, is expensed as incurred except where:

• the expenditure relates to an exploration discovery that, at the balance date, has not been recognised as an area of interest, as assessment of the existence or otherwise of economically recoverable reserves is not yet complete; or

• an area of interest is recognised, and it is expected that the expenditure will be recouped through successful exploitation of the area of interest, or alternatively, by its sale.

The costs of drilling exploration wells are initially capitalised pending the results of the well. Costs are expensed where the well does not result in the successful discovery of economically recoverable hydrocarbons and the recognition of an area of interest. Areas of interest are recognised at the field level. Subsequent to the recognition of an area of interest, all further evaluation costs relating to that area of interest are capitalised.

Each potential or recognised area of interest is reviewed half-yearly to determine whether economic quantities of reserves have been found or whether further exploration and evaluation work is underway or planned to support the continued carry forward of capitalised costs.

66 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

1. Summary of significant accounting policies (continued)

(e) Exploration and evaluation (continued) Upon approval for the commercial development of an area of interest, accumulated expenditure for the area of interest is transferred to oil and gas properties. The recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest. Where a potential impairment is indicated, assessment is performed for each area of interest to which the exploration and evaluation expenditure is attributed. To the extent that capitalised expenditure is not expected to be recovered it is charged to the income statement. In the cash flow statement, cash flows associated with capitalised exploration and evaluation expenditure are classified as cash flows from investing activities. Exploration and evaluation expenditure expensed is classified as cash flow from operating activities in the cash flow statement.

(f) Oil and gas properties Oil and gas properties are carried at cost and include construction, installation or completion of production and infrastructure facilities such as pipelines and platforms, capitalised borrowing costs, transferred exploration and evaluation assets, development wells, and the cost of dismantling and restoration. Subsequent capital costs, including major maintenance, are included in the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Otherwise costs are charged to the income statement during the financial period in which they are incurred.

(g) Other plant and equipment Other plant and equipment is stated at cost less accumulated depreciation and any impairment in value.

(h) Depreciation and amortisation Oil and gas properties and other plant and equipment are depreciated to their estimated residual values at rates based on their expected useful life. The major categories of assets are depreciated as follows:

Category Method Estimated useful lives (years) Oil and gas properties Land Not depreciated - Buildings Straight line over useful life 40 Transferred exploration and evaluation Units-of-production basis over proved plus 5-50 assets and offshore plant and equipment probable reserves Onshore plant and equipment Straight line over the lesser of useful life and the 5-50 life of proved plus probable reserves Marine vessels Straight line over useful life 10-40 Other plant and equipment Straight line over useful life 5-15 Financial Report

(i) Impairment of assets The carrying amounts of all assets, other than inventory, financial assets and deferred tax assets, are reviewed half-yearly to determine whether there is indication of an impairment loss. If any such indication exists, the asset’s recoverable amount is estimated. For any asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash generating unit to which the asset belongs. If the carrying amount of an asset (or cash generating unit) exceeds its recoverable amount, the asset (or cash generating unit) is written down. Generally, the Group evaluates its oil and gas properties on a field-by-field basis. The recoverable amount of an asset is determined as the higher of its value in use and fair value less cost to sell. Value in use is determined by estimating future cash flows after taking into account the risks specific to the asset and discounting them to their present value using a risk adjusted pre-tax discount rate that reflects current market assessment of the time value of money. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

67 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

1. Summary of significant accounting policies (continued)

(j) Non-current assets held for sale and discontinued operations Non-current assets and disposal groups that are expected to be recovered primarily through a sale transaction rather than through continuing use, are classified as held for sale and measured at the lower of their carrying amount and net disposable value. They are not depreciated or amortised. To be classified as held for sale, an asset or disposal group must be available for immediate sale in its present condition and its sale must be highly probable. An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to its net disposable value. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss. A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the income statement.

(k) Derivative financial instruments and hedge accounting The Group uses derivative financial instruments such as swaps, options, futures and forward contracts to hedge its risks associated with commodity price, interest rate and foreign currency fluctuations. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value in line with market fluctuations. The unrealised gain or loss on remeasurement is immediately recognised in the income statement, except where hedge accounting applies. The fair values of derivative financial instruments that are traded on an active market are based on quoted market prices at the balance sheet date. The fair value of financial instruments not traded on an active market is determined using appropriate valuation techniques. Hedge accounting When a derivative is designated as a hedge for accounting purposes, the relationship between the derivative and the hedged item is documented, as is its risk management objective and strategy for undertaking the hedge transaction. Also documented is the assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been, and will continue to be, highly effective in offsetting changes in fair values or cash flows of hedged items. For the purposes of hedge accounting, hedges are classified and accounted for as follows:

Hedge type and risk Accounting treatment Fair value hedge Exposure to changes in the fair value Changes in fair value of derivatives that are designated and qualify as fair value of a recognised asset, liability or hedges are recorded in the income statement, together with any changes in committed transaction the fair value of the hedged risk that are attributable to the asset, liability or committed transaction. Cash flow hedge Exposure to variability in cash flows The effective portion of changes in the fair value of derivatives is recognised in associated with a highly probable equity in the hedging reserve. The gain or loss relating to any ineffective portion forecasted transaction or a committed is recognised in the income statement immediately. foreign currency transaction Amounts accumulated in equity are taken to the income statement in the periods when the hedged item affects income, for instance, when the forecast sale that is hedged takes place. Hedge of net investment Exposure to changes in the net The accounting treatment is substantially similar to a cash flow hedge. assets of foreign operations from foreign exchange movements

Hedge accounting is discontinued when the hedging instrument expires, no longer qualifies for hedge accounting or is terminated. At that point in time, any cumulative gain or loss on the hedging instrument recognised in equity remains in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the income statement for the year.

68 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

1. Summary of significant accounting policies (continued)

(k) Derivative financial instruments and hedge accounting (continued)

Embedded derivatives Derivatives embedded in the Group’s contracts that change the nature of a host contract’s risk and are not clearly and closely related to the host contract, are initially recognised at fair value on the date the contract is entered into, with fair value movements reported in the income statement.

(l) Provision for restoration The Group records the present value of the estimated cost of legal and constructive obligations to restore operating locations in the period in which the obligation arises. The nature of restoration activities includes the removal of facilities, abandonment of wells and restoration of affected areas.

A restoration provision is recognised and updated at different stages of the development and construction of a facility and then reviewed on an annual basis. When the liability is initially recorded, the estimated cost is capitalised by increasing the carrying amount of the related exploration and evaluation assets or oil and gas properties. Over time, the liability is increased for the change in the present value based on a risk adjusted pre-tax discount rate appropriate to the risks inherent in the liability. The unwinding of the discount is recorded as an accretion charge within finance costs. The carrying amount capitalised in oil and gas properties is depreciated over the useful life of the related asset (refer Note 1(h)).

Costs incurred that relate to an existing condition caused by past operations and do not have a future economic benefit are expensed.

(m) Joint ventures The Group’s interests in jointly controlled assets are accounted for by recognising its proportionate share in assets and liabilities from joint ventures, except where as operator Woodside takes on the role as independent contractor. In these instances, receivables and payables relating to jointly controlled operations are brought to account on a gross basis.

Joint venture expenses and the Group’s entitlement to production are recognised on a pro rata basis according to the Group’s joint venture interest.

Investments in jointly controlled entities, where the Group has significant influence, but not control, are accounted for using the equity method of accounting. Under the equity method, the cost of the investment is adjusted by the Group’s proportionate share of the results of the venture.

(n) Borrowing costs Borrowing costs incurred for the acquisition or construction of qualifying assets are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Assets are considered to be qualifying assets when this period of time is substantial (greater than 12 months).

The interest rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate applicable to the Group’s outstanding borrowings during the year.

(o) Foreign currency The functional currency and presentation currency of Woodside Petroleum Ltd. and the majority of its Australian Financial Report subsidiaries is Australian dollars (A$).

Translation of foreign currency transactions Transactions in foreign currencies are initially recorded in the functional currency of the transacting entity at the exchange rates ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the rates of exchange ruling at that date. Exchange differences in the consolidated Financial Report are taken to the income statement, with the exception of differences on foreign currency borrowings that provide an effective hedge against a net investment in subsidiaries with a functional currency other than Australian dollars. These are taken directly to the foreign currency translation reserve until the disposal of the net investment, at which time they are recognised in the income statement.

69 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

1. Summary of significant accounting policies (continued)

(o) Foreign currency (continued)

Translation of the financial results of foreign operations Foreign subsidiaries and some Australian subsidiaries have a functional currency other than Australian dollars (usually US dollars) as a result of the economic environment in which they operate. As at the reporting date, the assets and liabilities of these subsidiaries are translated into the presentation currency of the Group at the rate of exchange ruling at the balance sheet date. The income statements are translated at the average exchange rates for the reporting period, or at the exchange rates ruling at the date of the transactions. Exchange differences arising on the translation of foreign subsidiaries are taken to the foreign currency translation reserve.

On disposal of a subsidiary with a functional currency other than Australian dollars, the deferred cumulative amount recognised in the foreign currency translation reserve relating to that particular subsidiary is recognised in the income statement.

Hedge transactions Derivatives and other financial instruments are used to hedge foreign exchange risk relating to certain transactions (refer Note 1(k)).

(p) Leases Assets held under leases that transfer to the Group substantially all the risks and rewards of ownership of the leased asset, are treated as finance leases. Finance leases are capitalised at the inception of the lease, at the lower of the fair value of the leased asset and the present value of the minimum lease payments.

Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in the income statement over the lease term.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating lease assets are not capitalised and payments are recognised in the income statement as an expense over the lease term. Lease incentives received are recognised in the income statement as an integral part of the total lease expense.

(q) Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at bank and short-term deposits with an original maturity of three months or less. Cash and cash equivalents are stated at face value in the balance sheet.

For the purposes of the cash flow statement, cash and cash equivalents are reported net of outstanding bank overdrafts. Interest is charged as an expense using the ‘effective yield’ method.

(r) Trade and other receivables Trade and other receivables, including receivables from related parties, are initially recognised at fair value and subsequently measured at amortised cost less an allowance for uncollectable amounts. Collectability and impairment are assessed on a regular basis.

Subsequent recoveries of amounts previously written off are credited against other expenses in the income statement.

(s) Inventories Inventories include hydrocarbon stocks, consumable supplies and maintenance spares. Inventories are valued at the lower of cost and net realisable value. Cost is determined on a weighted average basis and includes direct costs and an appropriate portion of fixed and variable production overheads where applicable. Inventories determined to be obsolete or damaged are written down to net realisable value.

70 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

1. Summary of significant accounting policies (continued)

(t) Investments Investments are classified as either available-for-sale or held for trading, and are initially recognised at fair value plus, in the case of investments not held for trading, any directly attributable transaction costs.

After initial recognition, investments are remeasured to fair value. Changes in the fair value of available-for-sale investments are recognised as a separate component of equity until the investment is sold, collected or otherwise disposed of, or until the investment is determined to be impaired, at which time the cumulative change in fair value previously reported in equity is included in earnings. Changes in the fair value of held for trading investments are recognised in the income statement.

For investments that are actively traded in organised financial markets, fair value is determined by reference to stock exchange quoted market bid prices at the close of business on the balance sheet date. Where investments are not actively traded, fair value is established by using other market accepted valuation techniques.

(u) Investments in associates The Group’s investments in its associates are accounted for using the equity method of accounting in the consolidated financial statements. An associate is an entity in which the Group has significant influence and is neither a subsidiary nor a joint venture.

The financial statements of associates, prepared for the same reporting period as the Group and applying consistent accounting policies, are used by the Group to apply the equity method. The investment in the associate is carried in the consolidated balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associate, less any impairment in value. The consolidated income statement reflects the Group’s share of the associate’s after tax profit or loss from operations.

Where there has been a change recognised directly in the associate’s equity, the Group recognises its share of any changes and discloses this, when applicable, in the consolidated statement of changes in equity.

(v) Employee provisions Provision is made for employee benefits accumulated as a result of employees rendering services up to the end of the reporting period. These benefits include wages and salaries, annual leave and long service leave.

Liabilities in respect of employee services rendered that are expected to be settled after twelve months are recognised in the balance sheet and measured at the present value of the estimated future cash outflow to be made to the employee. In determining the present value of future cash outflows, consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using appropriate discount rates.

Liabilities expected to be settled within twelve months of the reporting date are measured at the amount expected to be paid.

(w) Share-based payments Shares or rights over shares (equity-settled transactions) are offered as incentives to employees of the Group. The Group has three schemes currently in operation being the Woodside Share Purchase Plan (WSPP), the Executive Incentive Plan (EIP) and the equity based retention plan. The Woodside Employee Share plan (WESP) was closed in 2006; however employees are

required to repay or refinance WESP loans by 31 December 2009. The acquisition of shares on market under the share plans Financial Report is deducted from equity and disclosed as shares reserved for employee share plans. The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which the rights are granted and recognised on a straight line basis over the period in which the vesting conditions are fulfilled, ending on the date at which the relevant employees become fully entitled to the award (vesting date). Fair value is determined by using a binomial or Black - Scholes option pricing model.

The cost of an equity-settled award is adjusted if modifications of its terms increase the fair value of the award measured at the date of modification.

71 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

1. Summary of significant accounting policies (continued)

(x) Retirement benefits All employees of the Group’s Australian entities are entitled to benefits under the Group’s superannuation plan due to retirement, disability or death. The Group has a defined benefit component and a defined contribution component within the plan. The defined benefit section of the plan is closed to new members.

The defined benefit component provides defined lump sum benefits based on years of service and final average salary. A liability or asset in respect of the defined benefit component of the superannuation plan is recognised in the balance sheet and is measured at the present value of the defined benefit obligation at the reporting date less the fair value of the superannuation fund’s assets at that date. The defined benefit obligation includes actuarial estimates of future variables such as employee turnover and the plan’s rate of return. The cost of the defined benefit component is charged to the income statement systematically over the employee’s service life. Gains and losses arising from changes in actuarial estimates are recognised immediately as income or expense in the income statement.

The defined contribution component receives fixed contributions from Group companies and the Group’s legal or constructive obligation is limited to these contributions. Contributions to the defined contribution fund are recognised as an expense as incurred.

(y) Financial liabilities Borrowings are initially recognised at fair value less transaction costs. Borrowings are subsequently carried at amortised cost, except for those designated in a fair value hedge relationship as described before. Any difference between the proceeds and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest rate method.

Trade and other payables are carried at amortised cost when goods and services are received, whether or not billed to the Group.

Dividends payable are recognised when declared by the Group.

(z) Tax

Income tax Income tax expense on the profit or loss for the year comprises current and deferred tax expense.

Current tax expense is the expected tax payable on the taxable income for the year, and any adjustment to tax payable in respect of previous years.

Temporary differences arise between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax expense is determined based on changes in temporary differences.

Deferred tax assets and liabilities are recognised for temporary differences using the balance sheet liability method, at the tax rates expected to apply when the assets are realised or liabilities are settled.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that sufficient future taxable income will be available to utilise those temporary differences and losses.

Tax consolidation The parent and its wholly owned Australian controlled entities have elected to enter into tax consolidation with Woodside Petroleum Ltd as the head entity of the tax consolidated group.

The tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax consolidated group are recognised in the separate financial statements of the members of the tax consolidated group, using the ‘stand alone’ approach.

Petroleum Resource Rent Tax (PRRT) PRRT is considered, for accounting purposes, to be a tax based on income. Accordingly, current and deferred PRRT expense is measured and disclosed on the same basis as income tax.

Goods and Services Tax (GST) Revenues, expenses, assets and liabilities are recognised net of GST except where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item.

72 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

1. Summary of significant accounting policies (continued)

(z) Tax (continued) The net amount of GST recoverable from, or payable to the taxation authority is included as part of receivables or payables in the balance sheet. Cash flows are included in the cash flow statement on a gross basis and the GST component of cash flows arising from investing and financing activities that is recoverable from or payable to the taxation authority is classified as an operating cash flow. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to the taxation authority.

(aa) Royalties and excise duty

Royalties and excise duty under existing regimes are considered to be production-based taxes and are therefore accrued on the basis of the Group’s entitlement to physical production.

(ab) Issued capital

Ordinary share capital is classified as equity and recorded at the value of consideration received. The costs of issuing shares are charged against share capital.

(ac) Critical accounting estimates, assumptions and judgements

In applying the Group’s accounting policies, management continually evaluates judgements, estimates and assumptions based on experience and other factors, including expectations of future events that may have an impact on the Group. All judgements, estimates and assumptions made are believed to be reasonable based on the most current set of circumstances available to management. Actual results may differ from those judgements, estimates and assumptions. Significant judgements, estimates and assumptions made by management in the preparation of these financial statements are outlined below.

(i) Critical accounting estimates and assumptions

(1) Impairment of assets

In determining the recoverable amount of assets, in the absence of quoted market prices, estimates are made regarding the present value of future cash flows. For oil and gas properties, expected future cash flow estimation is based on reserves, future production profiles, commodity prices and costs.

The carrying value of oil and gas properties, exploration and evaluation and other plant and equipment as at 31 December 2008 is $13,711 million (2007: $8,486 million).

(2) Restoration obligations

The Group estimates the future removal costs of offshore oil and gas platforms, production facilities, wells and pipelines at different stages of the development and construction of assets or facilities. In most instances, removal of assets occurs many years into the future. This requires judgemental assumptions regarding removal date, future environmental legislation, the extent of reclamation activities required, the engineering methodology for estimating cost, future removal Financial Report technologies in determining the removal cost, and liability specific discount rates to determine the present value of these cash flows. For more detail regarding the policy in respect of provision for restoration refer to Note 1(l).

Restoration obligations have a carrying value as at 31 December 2008 of $1,265 million (2007: $541 million).

(3) Reserve estimates

Estimation of reported recoverable quantities of proven and probable reserves include judgemental assumptions regarding commodity prices, exchange rates, discount rates, and production and transportation costs for future cash flows. It also requires interpretation of complex geological and geophysical models in order to make an assessment of the size, shape, depth and quality of reservoirs, and their anticipated recoveries. The economic, geological and technical factors used to estimate reserves may change from period to period. Changes in reported reserves can impact asset carrying values, the provision for restoration and the recognition of deferred tax assets, due to changes in expected future cash flows. Reserves are integral to the amount of depreciation, depletion and amortisation charged to the income statement and the calculation of inventory. Reserve estimates are prepared in accordance with Woodside’s Hydrocarbon Resource Inventory Management Process and guidelines prepared by the Society of Petroleum Engineers.

73 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

1. Summary of significant accounting policies (continued)

(ac) Critical accounting estimates, assumptions and judgements (continued)

(ii) Critical judgements in applying the Group’s accounting policies

(1) Exploration and evaluation The Group’s accounting policy for exploration and evaluation assets is set out at Note 1(e). The application of this policy requires management to make certain estimates and assumptions as to future events and circumstances, in particular, the assessment of whether economic quantities of reserves have been found. Any such estimates and assumptions may change as new information becomes available. If, after having capitalised expenditure under the policy, the Group concludes that it is unlikely to recover the expenditure by future exploitation or sale, then the relevant capitalised amount will be written off to the income statement. The carrying amount of exploration and evaluation assets as at 31 December 2008 is $1,172 million (2007: $737 million).

(2) United States of America deferred tax asset The Group has recognised a net deferred tax asset in 2008 of $100 million (2007: $100 million) in respect of tax losses and temporary differences associated with its operations in the United States of America. In accordance with the recognition criteria outlined in AASB 112 Income Taxes, the Group has exercised its judgement in deciding that it is probable that sufficient future taxable income will be available to utilise the deferred tax assets.

(ad) New Standards and Interpretations not yet adopted The following new Standards and Interpretations have a potential impact on the Financial Report, but have an effective date after the financial reporting date.

AASB 3 Business Combinations (2008), AASB AASB 3 and AASB 127 are the result of the joint IASB-FASB Business 127 Consolidated and Separate Financial Combinations Phase II project. The Standards alter the manner in which Statements and AASB 2008-3 Amendments to business combinations and changes in ownership interests in subsidiaries Australian Accounting Standards arising from are accounted for. Consequential amendments to other Standards are made AASB 3 and AASB 127 through AASB 2008-3. AASB 8 Operating Segments AASB 8 will replace AASB 114 Segment Reporting and adopts a management approach to report on a company’s operating segments. The information reported would be that which management uses internally for evaluating the performance of operating segments and allocating resources to those segments. AASB 2007-3 Amendments to Australian AASB 2007-3 was issued as a consequence of the issuance of AASB 8. Accounting Standards arising from AASB 8 AASB 101 Presentation of Financial Statements The revised AASB 101 is the result of phase A of the IASB’s financial (Revised, September 2007) statement presentation project. The revised Standard introduces ‘total comprehensive income’, which represents the change in equity during a period, other than changes resulting from transactions with owners in their capacity as owners. AASB 2007-8 Amendments to Australian AASB 2007-8 was issued as a consequence of the issuance of the revised Accounting Standards arising from AASB 101 AASB 101. (Revised, September 2007) AASB 2007-10 Further Amendments to AASB 2007-10 makes further changes to presentation and disclosure and Australian Accounting Standards arising from builds on the changes made by AASB 2007-8 Amendments to Australian AASB 101 Accounting Standards arising from AASB 101. AASB 2008-5 Amendments to Australian The Standard is the result of the IASB’s first Annual Improvements Project. Accounting Standards arising from the Annual It makes amendments to several Accounting Standards which may result in Improvements Project changes for presentation, recognition or measurement. AASB 2008-6 Further Amendments to Australian The Standard is the result of the IASB’s first Annual Improvements Project. Accounting Standards arising from the Annual It makes amendments to several Accounting Standards which may result in Improvements Process changes for presentation, recognition or measurement. AASB 2008-7 Amendments to Australian The Standard makes clarifying amendments to several other Accounting Accounting Standards – Cost of an Investment Standards. Amongst other things the Standard specifies the accounting for in a Subsidiary, Jointly Controlled Entity or certain transactions where a newly formed entity becomes the new parent Associate of another entity or group.

The potential effect of these Standards and Interpretations is yet to be fully determined. However, it is not expected that the new Standards and Interpretations will significantly affect the Group’s financial position.

74 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

2. Segment reporting

The Group’s primary reporting format is business segments and its secondary reporting format is geographical segments.

(a) Business segments The Group has the following reportable segments:

North West Shelf Business Unit Exploration, evaluation, development, production and sales of Liquefied Natural Gas, pipeline natural gas, condensate, Liquefied Petroleum Gas and crude oil from the North West Shelf ventures.

Australia Business Unit Exploration, evaluation, development, production and sale of crude oil and pipeline natural gas in assigned permit areas including Laminaria, Legendre, Mutineer–Exeter, Enfield, Vincent, Otway, and Stybarrow ventures (Legendre assets were sold on 30 March 2007).

Pluto Business Unit Exploration, evaluation and development of Liquefied Natural Gas in assigned permit areas.

United States Business Unit Exploration, evaluation, development, production and sale of pipeline natural gas, condensate and crude oil in assigned permit areas.

Group and unallocated This segment comprises the activities undertaken by all other business units and corporate costs.

Discontinued operations On 25 December 2007, the Group disposed of its onshore and offshore production, development and exploration interests in Mauritania. The operations disposed previously formed the majority of the Middle East and Africa Business Unit. The remaining operations of the Middle East and Africa Business Unit are now included within the Group and unallocated business segment.

(b) Geographical segments The Group operates in four main geographical segments as follows:

Australia The main operating activities, producing assets and a significant portion of sales of the Group are within Australia.

Asia The majority of the Group’s sales are made to customers within this region.

United States of America Exploration, evaluation, development, production and sale of pipeline natural gas, condensate and crude oil in assigned permit areas. Financial Report Other Exploration, evaluation and development activities in other areas.

75 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

2. Segment reporting (continued) - 20 53 57 (82) (31) 124 155 (581) (715) (524) (366) (819) $m (233) 2007 4,004 2,626 1,860 1,030 9,730 4,636 2,274 (1,378) - - 9 15 (98) (32) 132 168 784 Consolidated (861) (348) (543) $m 2008 5,990 4,021 3,298 1,786 7,997 5,720 (1,010) (1,969) (1,489) 14,929 ------2 2 9 3

(8) (1) 29 (45) (89) (22) 163 (134) (241) (218) (239) $m (233) 2007 ------Operations Discontinued $m 2008 - - 38 53 57

(82) (29) 122 152 (536) (626) (516) (818) (125) $m 2007 3,841 2,597 2,078 1,269 9,730 4,636 2,265 (1,244) - - 9 15 Continuing Operations (98) (32) 784 132 168 (861) (348) (543) $m 2008 1,786 5,720 7,997 4,021 3,298 5,990 (1,010) (1,969) (1,489) 14,929 - - (5)

65 12 47 93 57 44 (11) (12) (30) (53) (231) (180) $m 2007 1,154 1,454 - - 9 6 9 (3) 66 64 Group and (21) (33) (57) unallocated 562 (170) (393) (490) $m 2008 1,173 3,106 - -

(8) 45 (7) 21 57 (19) (86) (69) 158 166 179 (113) (233) (264) $m 2007 1,107 - - 87 21 (23) (10) (87) (12) 237 117 963 115 132 (120) (110) (157) (162) United States Business Unit $m 2008 ------6 (1) (1) (2) (2) (35) (10) (41) 385 738 $m 2007 1,247 Pluto Pluto - - - - - (4) (8) (8) (3) 16 (12) (12) (23) (27) 953 Business Unit $m 2008 5,471 3,778 - - - (4) 27 45 (87) (15) (23) 941 930 974 874 (349) (440) $m 2007 1,381 2,986 - - - (8) Australia 49 40 73 (40) 734 (269) (507) (784) Business Unit $m 2008 2,585 1,801 1,883 3,243 1,405 - - 6 (2) 52 29 (57) (18) 381 (418) (161) (636) $m 2007 2,237 1,601 1,633 3,236 1,657 - - 9 (5) 27 (73) (34) 164 (697) (226) (996) Business Unit $m 2008 3,102 2,106 2,094 4,079 2,446 1,084 North West Shelf West North Revenue from sale of goods Revenue Cost of sales Cost of production Shipping and direct sales costs Oil and gas properties depreciation amortisation cost of sales Total Gross profit Other income Exploration and evaluation Other costs results Segment Finance income Finance costs Taxes to minority interest attributable Profit to equity holders of attributable Profit the parent assets Segment liabilities Segment Other segment information and other investments Associates of oil and gas property Acquisition assets, intangible assets and other non- exploration) assets (excluding current other than Non-cash expenses depreciation and amortisation Impairment loss on sale of discontinued operations Loss Segment accounting policies Segment policies described in Note 1. Segment accounting policies are the same as consolidated entity’s - business segments reporting Primary

76 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

2. Segment reporting (continued)

Secondary reporting – geographical segments

United States of Australia Asia Other Consolidated America

2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 $m $m $m $m $m $m $m $m $m $m

Segment revenue

Revenue from sale of goods (by location of customer) 886 409 4,109 3,290 520 158 475 147 5,990 4,004

Segment assets (by location of assets) 13,712 8,447 22 25 960 1,024 235 234 14,929 9,730

Other segment information Acquisition of oil and gas property assets, intangible assets and other non-current assets (excluding exploration) 5,596 2,075 - - 115 186 9 13 5,720 2,274 Financial Report

77 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

3. Revenues and expenses

Consolidated Parent 2008 2007 2008 2007 $m $m $m $m Continuing operations (a) Revenue from sale of goods

Liquefied Natural Gas North West Shelf 1,252 738 - - Pipeline natural gas Australia 378 271 - - United States of America 120 140 - - 498 411 - - Condensate North West Shelf 741 688 - - Ohanet 39 39 - - Otway 24 - - - United States of America 15 16 - - 819 743 - - Oil North West Shelf 687 431 - - Laminaria 183 328 - - Mutineer–Exeter 39 73 - - Legendre - 5 - - Enfield(1) 813 901 - - Vincent(1) 103 - - - Stybarrow(1) 1,331 75 - - United States of America 102 1 - - 3,258 1,814 - - Liquefied Petroleum Gas North West Shelf 119 109 - - Otway 18 - - - Ohanet 26 26 - - 163 135 - -

Total revenue from sale of goods 5,990 3,841 - -

(b) Cost of sales

Cost of production Production costs (484) (257) - - Royalties and excise (505) (271) - - Insurance (41) (33) - - Inventory movement 20 25 - - (1,010) (536) - -

Shipping and direct sales costs (98) (82) - - Oil and gas properties depreciation and amortisation Land and buildings (17) (17) - - Transferred exploration and evaluation (50) (38) - - Plant and equipment (783) (541) - - Marine vessels and carriers (11) (30) - - (861) (626) - -

Total cost of sales (1,969) (1,244) - -

Gross profit 4,021 2,597 - - (1) 2008 figures include crude oil hedging loss of $220 million, resulting from settlement of Greater Enfield area Zero Cost Collars. Refer to Note 24(f) for further detail.

78 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

3. Revenues and expenses (continued)

Consolidated Parent 2008 2007 2008 2007 $m $m $m $m

Continuing operations

(c) Other income

Dividend - controlled entities - - 929 847 Other fees and recoveries 34 27 - 8 Share of associates’ net profit 6 7 - - Gain on sale of investments 12 23 - 23 Gain on sale of fixed assets 7 46 - - Change in fair value of embedded derivatives 10 31 - - Gain/(loss) on derivative financial instruments 95 (12) - - Cash flow hedge ineffectiveness 4 - - - Diminution in value of controlled entity - - - 8 Total other income 168 122 929 886

(d) Other expenses

Exploration and evaluation Exploration (269) (402) - - Amortisation of licence acquisition costs (71) (95) - - Evaluation (8) (19) - - Total exploration and evaluation (348) (516) - -

Other costs Depreciation of other plant and equipment (23) (19) - - Defined benefit superannuation plan net actuarial loss (39) (24) - - Exchange loss on cash balances (16) (10) - - Exchange (loss)/gain - other (235) 47 - - General, administrative and other costs (98) (62) (6) (7) Impairment of oil and gas properties (54) (57) - - Impairment of other assets (78) - - - Total other costs (543) (125) (6) (7) Total other expenses (891) (641) (6) (7) Profit from continuing operations before tax and net finance costs 3,298 2,078 923 879

(e) Finance income

Interest Financial institutions 9 10 - - Financial Report Controlled entities - - 7 5 Other entities - 28 - 8 Total finance income 9 38 7 13

(f) Finance costs

Borrowing costs - (3) (28) (20) Unwinding of present value discount (accretion) (32) (26) - - Total finance costs (32) (29) (28) (20) Profit from continuing operations before tax 3,275 2,087 902 872

79 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

4. Taxes

Consolidated Parent 2008 2007 2008 2007 $m $m $m $m

(a) Tax expense/(income) comprises:

Current tax expense Income tax 1,125 725 (8) (4) PRRT 308 35 - - Under/(over) provided in prior years Income tax 4 (13) - 1 PRRT (5) (37) - - Deferred tax expense relating to the movement in deferred tax balances Income tax (261) (128) - - PRRT 318 246 - - Deferred tax benefit arising from previously unrecognised tax losses or temporary differences used - (10) - - to reduce income tax expense Total tax expense/(income) reported 1,489 818 (8) (3) in the income statement

(b) Reconciliation of tax expense to prima facie tax payable

Profit from continuing operations before tax 3,275 2,087 902 872 PRRT expense (621) (244) - - Loss from discontinued operations before tax - (238) - - Profit after PRRT expense from total operations 2,654 1,605 902 872

Tax expense calculated at 30% 796 481 271 262

Tax effect of amounts which are deducted/(added) in calculating taxable income

Sale of assets (8) 17 - (7) Research and development (12) (14) - - Intercompany dividends - - (279) (254) Other 13 - - (5) Foreign tax losses brought to account - (10) - - Foreign expenditure not brought to account 78 113 - - Tax rate differential on non-Australian income (3) 1 - - Under/(over) provided in prior years 4 (13) - 1 PRRT expense 621 244 - - Tax expense/(income) attributable to profit from total operations 1,489 819 (8) (3)

Aggregate tax expense/(income) is attributable to: Continuing operations 1,489 818 (8) (3) Discontinued operations - 1 - - 1,489 819 (8) (3) The tax rate used in the above reconciliation is that applied to resident companies pursuant to the income tax statutes in force in Australia as at the reporting date. There has been no change in the corporate tax rate when compared with the previous reporting period.

(c) Tax recognised directly in equity The following current and deferred amounts were charged directly to equity during the period: Deferred tax (83) (32) - -

80 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

4. Taxes (continued)

Balance at Charged/ Charged/ Acquisition/ Reclassifi- Balance at 1 January (credited) to (credited) to (disposal) cation 31 December income equity

$m $m $m $m $m $m

(d) Deferred tax

Consolidated 2008 Deferred tax assets Arising from temporary differences and tax losses Foreign jurisdiction 208 - 39 - (120) 127

Deferred tax liabilities Arising from temporary differences Exploration and evaluation assets 235 67 9 1 (87) 225 Oil and gas properties 720 157 6 (21) (73) 789 Financial instruments 69 (123) (57) - 16 (95) Other liabilities (154) (133) - - - (287) Provisions (190) (200) - - - (390) Other (5) (9) (2) - 24 8 Arising from PRRT 542 346 - (28) - 860

1,217 105 (44) (48) (120) 1,110

2007 Deferred tax assets Arising from temporary differences and tax losses Foreign jurisdiction 183 46 (21) - - 208

Deferred tax liabilities Arising from temporary differences Exploration and evaluation assets 308 (28) (9) (36) - 235 Oil and gas properties 693 48 (7) (14) - 720 Financial instruments 107 1 (39) - - 69 Other liabilities (79) (75) - - - (154) Provisions (207) 6 - 11 - (190) Other 16 (39) 2 16 - (5) Arising from PRRT 296 246 - - - 542 Arising from tax losses (29) - - 29 - - 1,105 159 (53) 6 - 1,217 Financial Report

81 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

4. Taxes (continued)

Consolidated Parent 2008 2007 2008 2007 $m $m $m $m

(e) Unrecognised deferred tax assets

Tax losses not recognised Revenue 109 81 - - Capital 159 141 159 141 Tax credits not recognised 17 17 17 17 Temporary differences associated with investments 2 2 - - 287 241 176 158

(f) Tax losses At the balance sheet date the Group has unused (recognised and not recognised) tax losses and credits of $1,115 million (2007: $940 million) that are available for offset against future taxable profits. A deferred tax asset of $88 million (2007: $74 million) has been recognised because it is probable that sufficient future taxable profit will be available for use against such losses. No deferred tax asset has been recognised in respect of the remaining tax losses and credits due to the uncertainty of future profit streams.

(g) Tax consolidation The parent and its wholly-owned Australian controlled entities have elected to enter tax consolidation, with Woodside Petroleum Ltd. as the head entity of the tax consolidated group. The members of the tax consolidated group are identified at Note 35(a). Entities within the tax consolidated group have entered into a tax funding arrangement and a tax sharing agreement with the head entity. Under the terms of the tax funding arrangement, Woodside Petroleum Ltd. and each of the entities in the tax consolidated group have agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable from or payable to other entities in the tax consolidated group. The tax sharing agreement entered into between members of the tax consolidated group provides for the determination of the allocation of income tax liabilities between the entities, should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement as payment of any amounts under the tax sharing agreement is considered remote. On 31 January 2008, Pluto LNG Pty. Ltd., Burrup Facilities Company Pty. Ltd. and Burrup Train 1 Pty. Ltd., exited the tax consolidated group. This was due to the acquisition of a 5% minority interest in each company by both Kansai Electric and Tokyo Gas.

82 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

5. Earnings per share

Consolidated 2008 2007

Profit attributable to equity holders of the parent ($m) 1,786 1,030

Weighted average number of shares on issue(1) 685,179,496 671,447,950

Basic and diluted earnings per share from total operations (cents)(2) 261 153

Basic and diluted earnings per share from discontinued operations (cents)(2) - (36) (1) There have been no conversions to, calls of, or subscriptions for ordinary shares or issues of potential ordinary shares since the reporting date and before the completion of this financial report. (2) Earnings per share is calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. The weighted average number of shares makes allowance for shares reserved for employee share plans. Diluted earnings per share is not significantly different from basic earnings per share.

6. Dividends paid and proposed Consolidated Parent 2008 2007 2008 2007 $m $m $m $m

(a) Dividends paid during the year(1) Prior year fully franked final dividend 55 cents, paid 31 March 2008 (2007: 77 cents, paid 28 March 2007) 378 513 378 513

Current year fully franked interim dividend 80 cents, paid 1 October 2008 (2007: 49 cents, paid 26 September 2007) 551 334 551 334

929 847 929 847 (b) Dividend declared (not recorded as a liability)(1) Fully franked final dividend 55 cents, to be paid 6 April 2009 (2007: 55 cents, paid 31 March 2008) 384 378 384 378 Dividend per share in respect of financial year (cents) 135 104 135 104 (c) Franking credit balance Franking credits available for the subsequent financial year arising from: Franking account balance as at 1 January 1,452 1,059 1,452 1,059 Current year tax payment instalments and adjustments 667 371 667 371 Franked dividends received - - - - Interim dividends paid (236) (143) (236) (143) Financial Report

Franking account balance as at 31 December 1,883 1,287 1,883 1,287 Current year income tax payable 429 327 429 327 Dividends declared (165) (162) (165) (162) Franking account balance after payment of tax and dividends 2,147 1,452 2,147 1,452 (1) Fully franked at 30.0% (2007: 30.0%).

83 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

7. Receivables

Consolidated Parent 2008 2007 2008 2007 $m $m $m $m (a) Receivables (current)

Trade receivables(1) 309 293 - - Other receivables Controlled entities(2) - - - 186 Other entities(3) 222 195 - - Dividends receivable Other entities(4) 2 3 - - 533 491 - 186 (b) Receivables (non-current)

Other receivables – controlled entities(2) - - 2,675 1,844 (1) Denominated in a mixture of Australian and US dollars, interest free, and settlement terms of between 7 and 30 days. (2) For terms and conditions relating to receivables from controlled entities, refer to Note 30(b). (3) Receivables are interest free with various maturities. (4) Dividends receivable from other entities are receivable within 30 days of period end.

8. Inventories

Consolidated Parent 2008 2007 2008 2007 $m $m $m $m (a) Inventories (current)

Petroleum products (at cost) Work in progress 1 - - - Goods in transit 5 5 - - Finished stocks 49 29 - - Warehouse stores and materials (at cost) 53 41 - - 108 75 - - (b) Inventories (non-current)

Warehouse stores and materials (at cost) 54 9 - -

84 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

9. Other financial assets

Consolidated Parent 2008 2007 2008 2007 $m $m $m $m (a) Other financial assets (current)

Derivative instruments(2) 44 3 - -

(b) Other financial assets (non-current)

Investment in controlled entities - - 233 250 Investment in associated entities – equity accounted 4 2 - - Other investments (available-for-sale) Listed 5 47 - - Unlisted 6 4 - - Cash held in reserve(1) 43 - - - Derivative instruments(2) 53 12 - - Embedded derivatives (fair value through profit and loss) 73 75 - -

184 140 233 250 (1) Represents restricted cash associated with JBIC facility, refer to Note 24(e). (2) For details relating to derivative instruments, refer to Note 24(f).

10. Other assets Consolidated Parent 2008 2007 2008 2007 $m $m $m $m (a) Other assets (current)

Prepayments 19 59 - - Other - 30 - -

19 89 - -

(b) Other assets (non-current)

Defined benefit superannuation plan - 23 - - Prepayments - 19 - - Development asset 8(1) 49 - -

8 91 - - (1) Reflects impairment loss of $78 million as a result of the suspension of the Oceanway natural gas project, refer to Note 29(c). Additional cost incurred during the year was $37 million. Financial Report

85 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

11. Exploration and evaluation assets (non-current)

Consolidated Parent 2008 2007 2008 2007 $m $m $m $m

(a) Regions Australia Browse Basin 526 333 - - Carnarvon Basin 187 126 - - Bonaparte Basin 105 60 - - Victoria - 13 - -

The Americas Gulf of Mexico 361 290 - - Brazil 13 7 - -

Africa West Africa (Sierra Leone, Liberia, Mauritania) 4 3 - - North Africa (Algeria, Libya) 137 74 - - East Africa (Kenya) 1 1 - -

Total exploration and evaluation assets 1,334 907 - - Less: Accumulated amortisation (162) (170) - -

1,172 737 - -

(b) Reconciliations of the carrying amounts of exploration and evaluation assets at the beginning and end of the financial year: Carrying amount at 1 January 737 1,103 - - Expenditure 474 528 - - Amortisation of licence acquisition costs (71) (95) - - Expensed (previously capitalised) (51) (40) - - Disposals at written down value (16) (151) - - Transferred exploration and evaluation 11 (1) (580) - - Currency translation differences 88 (28) - -

Carrying amount at 31 December 1,172 737 - - (1) Balance of $11 million comprises $12 million transferred to oil and gas properties and $23 million fixed asset reclassification.

86 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

12. Oil and gas properties (non-current)

Land and Transferred Plant and Marine Projects in Total buildings exploration equipment vessels and development and carriers evaluation Consolidated $m $m $m $m $m $m

At 1 January 2007

Historical cost 275 491 6,707 417 1,756 9,646 Accumulated depreciation (163) (185) (2,854) (235) (34) (3,471) Net carrying amount 112 306 3,853 182 1,722 6,175

Year ended 31 December 2007

Carrying amount at 1 January 2007 112 306 3,853 182 1,722 6,175 Additions 16 - 25 - 2,187 2,228 Disposals at written down value (2) (128) (341) (1) (12) (484) Depreciation and amortisation (9) (56) (637) (20) - (722) Impairment loss - - (57) - - (57) Completions and transfers 35 138 1,319 10 (922) 580 Currency translation - (10) (62) - (29) (101) differences Carrying amount at 31 December 2007 152 250 4,100 171 2,946 7,619

At 31 December 2007

Historical cost 324 426 7,413 417 2,946 11,526 Accumulated depreciation (172) (176) (3,313) (246) - (3,907) Net carrying amount 152 250 4,100 171 2,946 7,619

Year ended 31 December 2008

Carrying amount at 1 January 2008 152 250 4,100 171 2,946 7,619 Additions 1 (5) 849 5 4,858 5,708 Disposals at written down value - - (26) - (90) (116) Depreciation and amortisation (2) (54) (816) (11) - (883) Impairment loss - - (54) - - (54) Completions and transfers 213 101 1,963 - (2,306) (29)(1) Currency translation 4 2 142 - 35 183 differences Carrying amount at

31 December 2008 368 294 6,158 165 5,443 12,428 Financial Report

At 31 December 2008

Historical cost 557 522 10,351 422 5,443 17,295 Accumulated depreciation (189) (228) (4,193) (257) - (4,867) Net carrying amount 368 294 6,158 165 5,443 12,428

(1) Balance of $29 million comprises $12 million transferred from exploration and evaluation assets, $17 million transferred from other plant and equipment and $58 million of fixed asset reclassification.

Borrowing costs capitalised in oil and gas properties during the period are $82 million (2007: $95 million), at a weighted average capitalisation rate of 4.9% (2007: 5.9%).

87 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

13. Other plant and equipment (non-current)

Consolidated Parent 2008 2007 2008 2007 $m $m $m $m (a) Other plant and equipment Plant and equipment 184 168 - - Less: Accumulated depreciation (79) (83) - - 105 85 - -

Assets under construction 6 45 - -

111 130 - -

(b) Reconciliations of the carrying amounts of other plant and equipment at the beginning and end of the financial year: Carrying amount at 1 January 130 103 - - Additions 12 46 - - Completions and transfers (12)(1) - - - Depreciation and amortisation (20) (19) - - Currency translation differences 1 - - - Carrying amount at 31 December 111 130 - - (1) Balance of $12 million comprises $17 million transferred to oil and gas properties and $5 million fixed asset reclassification.

14. Payables

Consolidated Parent 2008 2007 2008 2007 $m $m $m $m

(a) Payables (current)

Trade payables(1) 454 288 - - Other payables(1) 1,167 695 - - Amounts payable – controlled entities(2) - - - 1 Interest payable – other entities(3) 51 15 - - 1,672 998 - 1 (b) Payables (non-current)

Amounts payable – controlled entities(2) - - 178 174 (1) Trade and other payables are non interest-bearing and normally settled on 30 day terms. (2) For details relating to payables from controlled entities, refer to Note 30(b). (3) Details regarding interest payable are contained in Note 24(g).

88 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

15. Interest-bearing liabilities Consolidated Parent 2008 2007 2008 2007 $m $m $m $m (a) Interest-bearing liabilities (current)

Bridge facility - 129 - - Bonds - 285 - - - 414 - -

(b) Interest-bearing liabilities (non-current)

Bonds 788 618 - - Debt facilities 2,169 - - - 2,957 618 - - Additional detail regarding interest bearing liabilities is contained in Note 24(e).

16. Tax payable (current) Consolidated Parent 2008 2007 2008 2007 $m $m $m $m

Income tax payable 442 327 445 328 PRRT payable 100 - - - 542 327 445 328

17. Other financial liabilities Consolidated Parent 2008 2007 2008 2007 $m $m $m $m (a) Other financial liabilities (current) Derivative instruments(1) - 119 - -

(b) Other financial liabilities (non-current) Derivative instruments(1) 4 112 - - Financial guarantees(2) - - - 22 4 112 - 22 (1) For details relating to derivative instruments refer to Note 24(f). (2) Guarantees provided by the parent for Group companies, refer to Note 31.

18. Other liabilities Consolidated Parent

2008 2007 2008 2007 Financial Report $m $m $m $m (a) Other liabilities (current) Unearned revenue 17 5 - - Gas purchase commitments 5 2 - - 22 7 - -

(b) Other liabilities (non-current) Unearned revenue 215 150 - - Gas purchase commitments 30 23 - - Defined benefit superannuation plan 47 - - - 292 173 - -

89 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

19. Provisions

Restoration Employee Other Total of operating benefits(2) locations(1) $m $m $m $m

Consolidated

At 1 January 2008 541 110 - 651 Change in provision 698 16 7 721 Unwinding of present value discount 26 - - 26 At 31 December 2008 1,265 126 7 1,398

2008 Current 10 110 7 127 Non-current 1,255 16 - 1,271 1,265 126 7 1,398

2007 Current 3 96 - 99 Non-current 538 14 - 552 541 110 - 651 (1) Details regarding restoration of operating locations are contained in Note 1(l) and 1(ac). (2) Details regarding employee benefits are contained in Note 1(v) and 27.

20. Contributed equity Consolidated Parent 2008 2007 2008 2007 $m $m $m $m

(a) Issued and fully paid shares 698,553,001 (2007: 688,330,535) ordinary shares(1) 2,104 1,553 2,104 1,553

(b) Shares reserved for employee share plans 5,566,571 (2007: 6,338,700) ordinary shares(2) (142) (137) (142) (137) (1) All shares are a single class with equal rights to dividends, capital distributions and voting. The Company does not have authorised capital nor par value in respect of its issued shares. (2) Information relating to the number of Woodside Petroleum Ltd. shares reserved for employee share plans can be found in Note 27(a) and (b).

2008 2007 2008 2007 Shares Shares $m $m

(c) Movements in issues and fully paid shares Balance at 1 January 688,330,535 666,666,667 1,553 706

DRP underwriting agreement Ordinary shares issued at $35.93 (2006 final dividend) - 5,721,577 - 206 Ordinary shares issued at $46.51 (2007 interim dividend) - 2,846,557 - 132 Ordinary shares issued at $54.24 (2008 interim dividend) 4,685,312 255

DRP Ordinary shares issued at $35.28 (2006 final dividend) - 8,709,831 - 307 Ordinary shares issued at $45.86 (2007 interim dividend) - 4,385,903 - 201 Ordinary shares issued at $53.48 (2008 interim dividend) 5,537,154 295

Share issue costs - - 1 1

Balance at 31 December 698,553,001 688,330,535 2,104 1,553

90 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

21. Other reserves

Employee Foreign Hedging Investment Total benefits currency reserve fair value reserve translation reserve reserve $m $m $m $m $m

Consolidated

Balance at 1 January 2007 41 (56) 13 26 24 Cost of share-based payment 6 - - - 6 Cash flow hedges Net deferred gain recognised in equity - - (133) - (133) Gain recognised in revenue - - (14) - (14) Available-for-sale financial assets - - - (8) (8) Currency translation differences - (30) - - (30) Balance at 31 December 2007 47 (86) (134) 18 (155)

Balance at 1 January 2008 47 (86) (134) 18 (155) Cost of share-based payment 16 - - - 16 Cash flow hedges Net deferred gain recognised in equity - - (11) - (11) Loss recognised in revenue - - 156 - 156 Available-for-sale financial assets - - - (24) (24) Currency translation differences - 71 - - 71 Balance at 31 December 2008 63 (15) 11 (6) 53

Parent

Balance at 1 January 2007 38 - - - 38 Cost of share-based payment - - - - - Balance at 31 December 2007 38 - - - 38

Balance at 1 January 2008 38 - - - 38 Cost of share-based payment 3 - - - 3 Balance at 31 December 2008 41 - - - 41

Nature and purpose of reserves Employee benefits reserve Used to record the cost of share-based payments associated with the employee share Foreign currency translation reserve Used to record foreign exchange differences arising from the translation of: • the financial statements of subsidiaries with functional currencies other than A$; and • liabilities that hedge the net investment in subsidiaries with functional currencies other than A$. Financial Report Hedging reserve Used to record the effective portion of changes in the fair value of cash flow hedges. Investment fair value reserve Used to record changes in the fair value of the Group’s available-for-sale investments.

91 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

22. Retained earnings

Consolidated Parent 2008 2007 2008 2007 $m $m $m $m

Movements in retained earnings Balance at 1 January 3,833 3,650 301 273 Net profit for the year 1,786 1,030 910 875 Dividends (929) (847) (929) (847) Balance at 31 December 4,690 3,833 282 301

23. Cash and cash equivalents

Consolidated Parent 2008 2007 2008 2007 $m $m $m $m

Components of cash and cash equivalents Cash at bank(1) 139 130 - - Money market deposits(2) 2 8 - - Total cash and cash equivalents 141 138 - - (1) Cash at bank earns interest at 0.6% (2007: 4.0%). (2) Money market deposits are denominated in A$ and US$ with an average maturity of 2.1 days (2007: 1.5 days) and effective interest rate of 0.1% to 8.1% (2007: 4.4% to 7.5%).

24. Financial and capital risk management

(a) Financial risk management objectives and policies The Group’s management of financial risk is aimed at ensuring net cash flows are sufficient to: • meet all its financial commitments as and when they fall due; • maintain the capacity to fund its committed project developments; • pay a reasonable dividend; and • maintain a long-term credit rating of not less than ‘investment grade’.

The Group continually monitors and tests its forecast financial position against these criteria and, in general, will undertake hedging activity only when necessary to ensure that these objectives are achieved. Other circumstances that may lead to hedging activities include the purchase of reserves and the underpinning of the economics of a new project.

Market (including foreign exchange, commodity price and interest rate risk), liquidity and credit risks arise in the normal course of the Group’s business. These risks are managed under Board approved directives, which underpin treasury policies and processes. The Group’s principal financial instruments, other than derivatives, comprise interest-bearing debt, cash and short-term deposits. Other financial instruments include trade receivables and trade payables, which arise directly from operations.

The Group’s forecast financial risk position with respect to key financial objectives and compliance with treasury policy are regularly reported to the Board. The Audit & Risk Committee oversees both the internal and external auditor reviews of the treasury function.

It is, and has been throughout the period under review, the Group Treasury policy that no speculative trading in financial instruments shall be undertaken.

92 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

24. Financial and capital risk management (continued)

(b) Market risk

(i) Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar. Foreign exchange risk arises from future commitments, assets and liabilities that are denominated in a currency that is not the functional currency of each subsidiary within the Group. Measuring the exposure to foreign exchange risk is achieved by regularly monitoring and performing sensitivity analysis on the Group’s financial position. The Group’s borrowings and deposits are largely denominated in US dollars. Currently there are no foreign exchange hedge programs in place. The Group Treasury manages the purchase of foreign currency to meet operational requirements. The table below shows financial instruments by currency. The Group is principally exposed to foreign exchange risk on those financial instruments denominated in US dollars.

2008 2007 Total AUD USD Other Total AUD USD Other A$m A$m A$m A$m A$m A$m A$m A$m

Consolidated Financial assets Cash 141 38 92 11 138 40 78 20 Receivables 533 99 428 6 491 68 419 4 Other financial assets 228 113 91 24 143 49 94 - 902 250 611 41 772 157 591 24

Financial liabilities Payables 1,672 583 659 430 998 508 409 81 Interest-bearing liabilities(1) 2,967 - 2,967 1,041 - 1,041 - Other financial liabilities 4 - 4 - 231 - 231 - 4,643 583 3,630 430 2,270 508 1,681 81

Parent Financial assets Receivables - - - - 186 186 - -

Financial liabilities Payables 178 178 - - 175 175 - - (1) Excludes deferred borrowing costs.

Borrowings of US$2,050 million (2007: US$913 million) are designated as a hedge of the net investments in the US dollar functional currency subsidiaries outlined in Note 35(a). Foreign exchange gains or losses on these borrowings are recognised in equity to offset the gains or losses on translation of the net investments in the subsidiaries, to the extent Financial Report that they represent an effective hedge. The following table summarises the sensitivity of financial instruments held at the balance sheet date to movement in the exchange rate of the Australian dollar to the US dollar, with all other variables held constant. The 10% sensitivity is based on reasonably possible changes, over a financial year, using the observed range of actual historical rates for the preceding five-year period. Impact on profit Impact on equity Consolidated Parent Consolidated Parent

Post-tax increase/(decrease) 2008 2007 2008 2007 2008 2007 2008 2007 to profit or equity A$m A$m A$m A$m A$m A$m A$m A$m

AUD/USD +10% (2007:+5%) 80 5 - - 120 35 - - AUD/USD -10% (2007:-5%) (98) (5) - - (146) (38) - -

For 2007, a 5% sensitivity is used. The sensitivity in 2008 reflects the increase in volatility of exchange rates during the year.

93 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

24. Financial and capital risk management (continued)

(b) Market risk (continued)

(ii) Commodity price risk

The Group’s revenues are exposed to commodity price fluctuations, in particular oil and gas prices.

The Group Treasury measures exposure to commodity price risk by monitoring and stress testing the Group’s forecast financial position to sustained periods of low oil and gas prices. This analysis is regularly performed on the Group’s portfolio and, as required, for discrete projects and acquisitions.

The Group’s commodity hedging programs utilise financial instruments based on regional benchmarks including New York Mercantile Exchange (NYMEX) West Texas Intermediate (WTI) for oil and NYMEX Natural Gas Henry Hub for gas. Note 24(f) details existing hedging programs. No hedging programs were placed during 2008.

The following table summarises the sensitivity of the fair value of financial instruments held at the balance sheet date to movement in the relevant forward commodity price, with all other variables held constant. The 25% sensitivity is based on reasonably possible changes, over a financial year, using the observed range of actual historical prices for the preceding five-year period. Impact on profit Impact on equity Consolidated Parent Consolidated Parent 2008 2007 2008 2007 2008 2007 2008 2007 Post-tax increase/(decrease) to profit or equity A$m A$m A$m A$m A$m A$m A$m A$m

25% Increase: (2007:+10%) Oil forward price (49) (11) - - (23) (92) - - 25% Decrease: (2007:-10%) Oil forward price 1 19 - - 75 92 - -

For 2007, a 10% sensitivity is used. The sensitivity in 2008 reflects the increase in volatility of commodity prices during the year. Natural gas swaps expired on 31 December 2008, therefore the Group is no longer exposed to hedging gains and losses due to movements in gas commodity prices. In 2007, a 10% increase/decrease in gas price resulted in a $3.3 million decrease/increase in equity respectively.

(iii) Interest rate risk

Interest rate risk is the risk that the Group’s financial position will be adversely affected by movements in interest rates that will increase the cost of floating rate debt or opportunity losses that may arise on fixed rate borrowings in a falling interest rate environment. Interest rate risk on cash and short-term deposits is not considered to be a material risk due to the short- term nature of these financial instruments.

The Group’s main interest rate risk arises from long-term debt. Floating rate debt exposes the Group to cash flow interest rate risk. Fixed rate debt does not expose the Group to fair value interest rate risk as none of the debt is carried at fair value. Interest rate risk is managed by maintaining an appropriate mix of fixed and floating rate debt. The Group may enter into interest rate swaps to manage the ratio of fixed rate debt to floating rate debt. Hedging is undertaken against specific rate exposures only, as disclosed in Note 24(f). No hedging programs were placed during 2008.

The financial instruments exposed to interest rate risk are as follows: Consolidated Parent 2008 2007 2008 2007 A$m A$m A$m A$m

Financial assets Financial and other assets 51 12 - -

Financial liabilities Interest-bearing liabilities(1) (2,171) (129) - - (1) Excludes deferred borrowing costs.

94 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

24. Financial and capital risk management (continued)

(iii) Interest rate risk (continued)

The following table summarises the sensitivity of the financial instruments held at the balance sheet date, following a movement to London Interbank Offered Rate (LIBOR), with all other variables held constant. The 1.5% sensitivity is based on reasonably possible changes, over a financial year, using the observed range of actual historical rates for the preceding five-year period. The sensitivity analysis below excludes the impact on borrowing costs arising from interest-bearing liabilities as these are capitalised as part of long-term qualifying development projects.

Impact on profit Consolidated Parent 2008 2007 2008 2007 Post-tax increase/(decrease) to profit A$m A$m A$m A$m

LIBOR +1.5% (2007:+1%) (19) (11) - - LIBOR -1.5% (2007:-1%) 20 11 - -

For 2007, a 1% sensitivity is used. The sensitivity in 2008 reflects the increased volatility of interest rates during the year.

(c) Liquidity risk The liquidity position of the Group is managed to ensure sufficient liquid funds are available to meet its financial commitments in a timely and cost-effective manner.

The Group Treasury continually reviews the Group’s liquidity position including cash flow forecasts to determine the forecast liquidity position and maintain appropriate liquidity levels. Notes 24(e) and (f) detail the repayment obligations in respect of the amount of facilities and derivatives utilised.

2008 2007 Payables maturity analysis Payables maturity analysis Total < 30 days 30-60 days > 60 days Total < 30 days 30-60 days > 60 days A$m A$m A$m A$m A$m A$m A$m A$m

Consolidated Trade payables 454 418 19 17 288 229 - 59 Other payables 1,167 1,167 - - 695 623 - 72 Interest payable 51 51 - - 15 - 10 5 Total payables 1,672 1,636 19 17 998 852 10 136

Parent

Amounts payable – 178 - - 178 175 1 - 174 Controlled entities Total payables 178 - - 178 175 1 - 174 Financial Report

95 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

24. Financial and capital risk management (continued)

(d) Credit risk Credit risk is the risk that a contracting entity will not complete its obligation under a financial instrument, resulting in a financial loss to the Group.

The Group manages its credit risk on trade debtors and financial instruments by predominantly dealing with counterparties with a credit rating equal to or better than the Group. Customers who wish to trade on unsecured credit terms are subject to credit verification procedures. Receivables balances are monitored on an ongoing basis. As a result the Group’s exposure to bad debts is not significant. The Group’s credit risk is limited to the carrying value of its financial assets. At the balance sheet date there were no significant concentrations of credit risk.

2008 2007 Receivables maturity analysis Receivables maturity analysis Total < 30 days 30-60 days > 60 days Total < 30 days 30-60 days > 60 days A$m A$m A$m A$m A$m A$m A$m A$m

Consolidated Trade receivables 309 308 1 - 293 293 - - Other receivables 222 157 13 52 195 180 12 3 Dividends receivable 2 2 - - 3 3 - - Total receivables 533 467 14 52 491 476 12 3

Parent

Other receivables 2,675 - - 2,675 2,030 - - 2,030 Total receivables 2,675 - - 2,675 2,030 - - 2,030

No receivables are past due at the balance sheet date (2007:nil).

(e) Financing facilities

364-day revolving credit facility The Group has five dual currency (US and Australian dollars) 364-day revolving credit facilities totalling US$350 million. Interest rates are based on LIBOR and are fixed at the commencement of the drawdown period. Interest is paid at the end of the drawdown period. The facilities are subject to a financial covenant and a negative pledge restricting the amount of future secured borrowings. Neither the covenant nor the negative pledge have been breached at any time during the reporting period. The facilities were undrawn at 31 December 2008.

Bi-lateral loan facilities The Group has ten bi-lateral loan facilities totalling US$700 million. Three facilities expire in 2011 with two of these being evergreen facilities. The remaining seven facilities are evergreen facilities with a five-year term. Each year these facilities may be extended by a year subject to the bank’s agreement. All facilities are dual currency in US and Australian dollars with six of these facilities also being multi-currency. Interest rates are based on LIBOR and are fixed at the commencement of the drawdown period. Interest is paid at the end of the drawdown period. The facilities are subject to a financial covenant and a negative pledge restricting the amount of future secured borrowings. Neither the covenant nor the negative pledge have been breached at any time during the reporting period. The facilities were undrawn at 31 December 2008.

Bonds The Group has two unsecured bonds issued to ‘qualified institutional buyers’ in the United States of America as defined in Rule 144A of the US Securities Act 1933. The 2008 US$250 million bond had a fixed rate coupon of 6.60% p.a. and matured on 15 April 2008. The 2011 US$300 million bond has a fixed rate coupon of 6.70% p.a. and matures on 1 August 2011. The 2013 US$250 million bond has a fixed rate coupon of 5.00% p.a. and matures on 15 November 2013. Interest on the remaining bonds is payable semi-annually in arrears. The bonds are subject to various covenants and a negative pledge restricting the amount of future secured borrowings. Neither the covenants nor the negative pledge have been breached at any time during the reporting period.

96 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

24. Financial and capital risk management (continued)

(e) Financing facilities (continued)

Japan Bank for International Cooperation (JBIC) Facility On 24 June 2008, the Group entered into a committed loan facility totalling US$1,500 million (JBIC Facility).The JBIC Facility comprises a 15-year, US$1,000 million tranche with JBIC (JBIC Tranche), and a five-year, US$500 million commercial tranche with a syndicate of eight Australian and international banks arranged by The Bank of Tokyo-Mitsubishi UFJ, Ltd (Commercial Tranche). There is a prepayment option for both the Commercial Tranche and the JBIC Tranche. Interest rates are based on LIBOR. Interest is payable semi-annually in arrears on the JBIC Tranche and with a choice of one, two, three, six, nine or twelve months in arrears on the Commercial Tranche. Both tranches amortise on a straight-line basis, with equal instalments of principal due on each interest payment date (every six months) starting on the earlier of 7 January 2012 or the first 7 January or 7 July to occur no less than 180 days after the commercial start date of the Pluto LNG Project. Under the JBIC Facility, 90% of the receivables from the Pluto LNG Project are pledged to the lenders as security through a trust structure, with a required reserve amount of US$30 million. To the extent that this reserve amount remains fully funded, and no default notice or acceleration notice has been given, the revenues from the Pluto LNG Project continue to flow directly to the Group from the trust account. The JBIC Facility is subject to various covenants and a negative pledge restricting certain future secured borrowings, subject to a number of permitted lien exceptions. Neither the covenants nor the negative pledge have been breached at any time during the reporting period.

Repayment obligations, including interest, in respect of facility drawdowns at the balance sheet date are as follows:

2008 2007 A$m A$m

Due: No later than one year 35 460 Later than one year but not later than two years 35 36 Later than two years but not later than three years 469 36 Later than three years but not later than four years 561 378 Later than four years but not later than five years 923 13 Later than five years 1,659 298 3,682 1,221

(f) Hedging and derivatives

Interest rates The Group manages its exposure to interest rate risk by maintaining a mix of fixed rate and floating rate debt. In general, the fixed rate debt and floating rate debt ratio is managed through an appropriate choice of debt instrument. The Group may enter into interest rate swaps to manage the ratio of fixed rate debt to floating rate debt. Hedging is undertaken against specific interest rate exposures only.

Fair value Instrument Notional Rate Expiry Hedge type 2008 2007 amount A$m A$m Financial Report Interest rate US$250 Receive 5% fixed 2013 Fair value hedge in 2006 - 51 12 swaps million Designated to swap the 2013 Pay LIBOR less US$250 million bond from a fixed 0.10% rate to floating rate exposure. De-designated as a fair value hedge on 1 January 2007.

97 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

24. Financial and capital risk management (continued)

(f) Hedging and derivatives (continued)

Commodity prices The Group’s future revenues are exposed to commodity price fluctuations. The Group may enter into commodity price derivative instruments to manage this exposure.

Fair value Instrument Notional Rate Expiry Hedge type 2008 2007 amount A$m A$m

Crude oil Sell Receive Cash flow hedge - Manages zero cost risk from anticipated oil 6,600,000 bbl US$55 – 77.34/bbl 2008 - (119)(1) collars production receipts from projects in the Greater Enfield 4,400,000 bbl US$55 – 75.94/bbl 2009 44(2) (72) area. Notional volumes amount 2,500,000 bbl US$55 – 73.68/bbl 2010 to approximately 19% of total (4) (40) anticipated production from 2009 to 2010.

Natural gas Sell Receive Cash flow hedge - Manages risk from anticipated gas production swaps (3) 5,310,000 Mmbtu US$8.39/Mmbtu 2008 receipts from Gryphon - 3 Exploration Company. The gas swaps expired on 31 December 2008.

(1) $220million was transferred from equity in 2008 as realised losses. (2) $4 million was transferred from equity in 2008 due to hedge ineffectiveness. (3) $3 million was transferred from equity in 2008 as realised gains.

98 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

24. Financial and capital risk management (continued)

(g) Effective interest rates and maturity profile

The effective interest rates on financial assets and liabilities as at 31 December 2008 were as follows:

Floating Fixed interest rate maturing in Non Total Effective interest interest- interest rate bearing rate 1 year 1-2 2-3 3-4 4-5 more than or less 5 years years 2008 $m $m $m $m $m $m $m $m $m %

Consolidated

Financial assets Cash 139 2 ------141 0.6 Receivables ------533 533 - Other financial assets 97 ------131 228 - Financial liabilities Payables ------(1,672) (1,672) - Interest-bearing liabilities(1) (2,171) - - (434) - (362) - - (2,967) 3.6 Other financial liabilities ------(4) (4) - Net financial assets/ (liabilities) (1,935) 2 - (434) - (362) - (1,012) (3,741)

Parent

Financial assets Receivables ------2,675 2,675 - Other financial assets ------233 233 -

Financial liabilities Payables ------178 178 4.2 Net financial assets/ (liabilities) ------3,086 3,086 (1) The average effective interest rate recognises the impact of interest rate swaps. Financial Report

99 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

24. Financial and capital risk management (continued)

(g) Effective interest rates and maturity profile (continued)

The effective interest rates on financial assets and liabilities as at 31 December 2007 were as follows:

Floating Fixed interest rate maturing in Non Total Effective interest interest- interest rate bearing rate 1 year 1-2 2-3 3-4 4-5 more or less than years 5 years 2007 $m $m $m $m $m $m $m $m $m %

Consolidated

Financial assets Cash 124 14 ------138 4.3 Receivables ------491 491 - Other financial assets 13 ------130 143 - Financial liabilities Payables ------(998) (998) - Interest-bearing liabilities(1) - (414) - - (342) - (285) - (1,041) 5.9 Other financial liabilities ------(231) (231) - Net financial assets/ (liabilities) 137 (400) - - (342) - (285) (608) (1,498) -

Parent

Financial assets Receivables ------2,030 2,030 - Other financial assets ------250 250 -

Financial liabilities Payables ------(175) (175) 7.2 Other financial liabilities ------(22) (22) - Net financial assets/ (liabilities) ------2,083 2,083 - (1) The average effective interest rate recognises the impact of interest rate swaps.

100 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

24. Financial and capital risk management (continued)

(h) Fair values

The carrying amounts and estimated fair values of financial assets and financial liabilities were as follows: Carrying amount Fair value 2008 2007 2008 2007 $m $m $m $m

Consolidated Financial instruments Loans and receivables Receivables: current 533 491 533 491 Available-for-sale financial assets Listed entity investments 5 47 5 47 Unlisted entity investments: at cost 6 4 6 4

Other financial assets Cash 141 138 141 138 Cash held in reserve 43 - 43 - Embedded derivatives 73 75 73 75 Derivative instruments: current 44 3 44 3 Derivative instruments: non-current 53 12 53 12

Other financial liabilities Payables: current (1,672) (998) (1,672) (998) Interest-bearing liabilities: current - (414) - (415) Interest-bearing liabilities: non-current (2,957) (618) (2,981) (631) Derivative instruments: current - (119) - (119) Derivative instruments: non-current (4) (112) (4) (112)

Parent Financial instruments Loans and receivables Receivables: current - 186 - 186 Other receivables controlled entities: non-current 2,675 1,844 2,675 1,844

Financial liabilities Payables: current - (1) - (1) Payables: non-current (178) (174) (178) (174) Financial guarantees - (22) - (22) The methods and assumptions used to estimate the fair value of financial instruments are outlined below:

Cash The carrying amount is the fair value due to the liquid nature of these assets. Financial Report Receivables/payables Due to the short-term nature of these financial rights and obligations, their carrying amounts are estimated to represent their fair values.

101 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

24. Financial and capital risk management (continued)

(h) Fair values (continued)

Other financial assets/liabilities For financial assets and liabilities that are traded in active markets, fair value is determined by reference to quoted market prices at the close of business on the balance sheet date. Where financial assets and liabilities are not actively traded, fair value is established by using other market accepted valuation techniques. Estimated discounted cash flows are used to determine fair value for the remaining financial instruments such as interest rate swaps.

Interest-bearing liabilities Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held.

(i) Capital management

The Group Treasury is responsible for the Group’s capital management. This involves the use of corporate forecasting models, which facilitates analysis of the Group’s financial position including cash flow forecasts to determine the future capital management requirements. Capital management is undertaken to ensure that a secure, cost-effective and flexible supply of funds is available to meet the Group’s operating and capital expenditure requirements. The Group Treasury monitors gearing and treasury policy breaches and exceptions. The gearing ratio at the balance sheet date is 29% (2007: 15%).

The Group Treasury maintains a stable capital base from which the Group can pursue its growth aspirations, whilst maintaining a flexible capital structure that allows access to a range of debt and equity markets to both draw upon and repay capital. An example of the Group’s capital management is the activation of the Dividend Reinvestment Plan (DRP) during a period of high capital expenditure.

The DRP was approved by shareholders at the Annual General Meeting in 2003 for activation as required to fund future growth. The Group announced the activation of the DRP in December 2006 to manage capital requirements. The DRP was activated with the 2006 final dividend and deactivated for the 2007 final dividend. The DRP was reactivated with the 2008 interim dividend being fully underwritten and remains activated for the 2008 final dividend.

25. Discontinued operations

On 26 September 2007, the Group entered into a sale agreement to dispose of all of its shares in Woodside Mauritania Pty. Ltd. and WEL Mauritania B.V. to Petronas Australia Pty. Limited. The disposal was completed on 25 December 2007 for $518 million, on which date control of the business passed to the acquirer.

The entities sold formed part of the Middle East and Africa Business Unit and included all of the Group’s onshore and offshore producing, development and exploration interests in Mauritania. The disposed entities are reported in this financial report as a discontinued operation.

102 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

26. Expenditure commitments Consolidated Parent 2008 2007 2008 2007 $m $m $m $m

(a) Operating lease commitments Rentals payable on non-cancellable operating leases, due: Within one year 714 476 - - After one year but not more than five years 2,030 1,622 - - Later than five years 844 853 - -

3,588 2,951 - -

The Group leases assets for operations including: floating production, storage and off-take vessels, helicopters, supply vessels, cranes, land, mobile offshore drilling units, office premises and computers.

There are no restrictions placed upon the lessee by entering into these leases. Renewals are at the option of the specific entity that holds the lease. Most leases contain a clause enabling upward revision of the rental charge on an annual basis based on the Consumer Price Index.

The Group made payments under operating leases of $539 million during the year (2007: $212 million).

(b) Capital expenditure Expenditure contracted for but not provided for in the accounts, due: Within one year 4,113 2,868 - - After one year but not more than five years 451 1,846 - - Later than five years 13 8 - - 4,577 4,722 - -

(c) Other expenditure commitments Other expenditure commitments predominantly for the future supply of services contracted for but not provided for in the accounts, due: Within one year 85 40 - - After one year but not more than five years 36 9 - - Later than five years - 2 - - 121 51 - - (d) Exploration commitments Exploration expenditure obligations contracted for but not provided for in the accounts, due: Within one year 143 162 - - After one year but not more than five years 114 324 - - Later than five years 2 3 - - 259 489 - - By region: Australia Financial Report Browse Basin 17 107 - - Barrow Basin 113 145 - - Carnarvon Basin 47 104 - - Victoria 15 46 - - The Americas Gulf of Mexico 40 20 - - Brazil 6 30 - - Africa West Africa (Liberia) 16 - - - North Africa (Algeria, Libya) 5 22 - - East Africa (Kenya) - 15 - - 259 489 - - These obligations may be varied from time to time and are expected to be fulfilled in the normal course of operations of the Group.

103 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

27. Employee benefits

(a) Woodside employee share plans

(i) Woodside employee share plan

During 2006, following a review of the Group’s total reward strategy across global operations, it was decided to close the Woodside Employee Share Plan (WESP or the plan) with the last allocation being made to employees in 2006. On announcement of plan closure, unrestricted possession (full entitlement) of these shares was provided immediately to employees. Employees are required to repay or refinance WESP loans by 31 December 2009.

Under the WESP, eligible employees were granted loans for the on-market purchase of shares in Woodside Petroleum Ltd. The loans are interest-free, limited-recourse, are reduced by the application of dividends (after taking into account employee liability for tax on those dividends) and are repayable upon the sale of shares or termination of the employee. Before closing the WESP, the Group assessed incremental loan offer entitlements in accordance with pre-established criteria based on remuneration levels.

WESP members receive all of the rights of ordinary shareholders. Where the loan is repaid by the sale of shares, any remaining surplus on sale is paid to the employee while any shortfall is borne by the Group. The WESP had 1,447 employees participating at 31 December 2008.

The following table illustrates the number and weighted average prices of shares reserved, acquired and redeemed during the year under the WESP on behalf of employees.

2008 2007 Number of Weighted Cost Number of Weighted Cost shares average price shares average price ($/share) $m ($/share) $m

Opening balance 5,572,498 22.21 124 8,806,436 20.92 185 Redemptions during the year (1,523,682) 19.28 (29) (3,233,938) 18.70 (61)

Closing balance 4,048,816 23.31 95 5,572,498 22.21 124 Less cumulative dividends applied - - (17) - - (16)

Shares reserved for employees 4,048,816 19.34 78 5,572,498 19.33 108

Shares eligible for unrestricted possession 4,048,816 23.31 95 5,572,498 22.21 124

Loans to employees under WESP are accounted for as share-based payments to employees for services provided. The fair value of the benefit provided was estimated on issue using the Binomial option pricing model as follows:

Grant date Shares Share price at Employee benefit Valuation assumptions(3) (1) acquired acquisition date (2) fair value Expected Risk free Expected life volatility interest rate ($) ($/share) (%) (%) (years)

2006 February 192,970 44.87 14.06 22.9 5.2 5.0 May 1,172,912 42.90 11. 16 22.9 5.5 3.6 August 319,028 42.87 10.93 22.9 5.9 3.4 (1) The share price at acquisition date is deemed to be the exercise price. (2) The closure of the WESP did not result in incremental employee benefit fair value. (3) The expected life of the instrument is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. All features have been included in the valuation of the benefit.

104 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

27. Employee benefits (continued)

(a) Woodside employee share plans (continued)

(ii) Woodside share purchase plan

The Woodside Share Purchase Plan (WSPP) was activated for employees in April 2007. The WSPP is based on a 1 July to 30 June period (WSPP Year). Eligible employees may elect to salary sacrifice an amount of base salary and receive shares in Woodside Petroleum Ltd. Additional shares are granted (matching shares) at a fixed annual ratio of the shares awarded for the salary sacrifice amount. In the 2008/09 WSPP Year, the ratio was one for one and a half; the ratio for the 2007/08 WSPP Year was one for one. Conditions apply in order for employees to become entitled to the matching shares.

Share acquisitions under the WSPP for the employee sacrificed amounts are made quarterly in arrears. The shares are purchased by the Trustee on market (option to issue) by dividing the sacrificed amount by the volume weighted average price paid for all the shares purchased for participating employees. The sacrificed amount is rounded down to the nearest whole share. Any amount not used is carried forward and applied to the sacrificed amount for the next quarter. Any balance at the end of the specified sacrifice period (normally 12 months) is paid to the participant or carried over to the next sacrifice period if the employee elects to participate. If employment ceases (for whatever reason) during a quarter or after the end of a quarter, but before any shares have been purchased in respect of the quarter, no shares would be transferred to the participant in relation to that quarter.

In order for the matching shares to beneficially vest to the participating employees in the WSPP, the employee needs to hold shares purchased through the sacrificed amount for three years and remain employed at the end of that qualification period.

Matching shares are purchased on a quarterly basis at the same time as the shares purchased using the employee’s sacrificed amount.

If employment ceases because of resignation or termination before the end of the three-year qualification period, the participant forfeits their interest in any matching shares. Shares acquired using any sacrificed amount are released to the participant.

The WSPP had 1,525 employees participating at 31 December 2008. This includes senior executives, who are also entitled to participate in the WSPP.

Matching shares acquired under the WSPP are accounted for as share-based payments to employees for service provided and are measured at cost, being the fair value.

Grant date Matching shares Share price at Employee benefit fair value acquired acquisition date(1)

($) ($/share)

2008 March 59,350 55.93 55.93 June 53,078 62.86 62.86 June 16,419 63.63 63.63

October 119,067 52.82 52.82 Financial Report

2007 August 70,768 48.25 48.25 (1) The share price at acquisition date is the fair value at grant date.

105 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

27. Employee benefits (continued)

(b) Executive share plans

The Executive Incentive Plan (EIP) became effective 1 January 2005. For further details regarding the EIP and the Group’s remuneration structure for the CEO and senior executives refer to the Remuneration Report included in the 2008 Directors’ Report.

An additional element of executive remuneration was introduced in February 2007 by the Board as part of a retention strategy for certain senior employees. Participating employees are entitled to receive an allocation of pay rights (PR) under the retention strategy at the discretion of the Board. The number of PRs allocated, and the conversion rights attaching to the PRs, are determined in the same way as for variable pay rights (VPR) allocated under the EIP, as discussed in the Remuneration Report included in the 2008 Directors’ Report.

To ensure the achievement of a satisfactory level of performance to maintain the plan, offers under the retention plans for 2008 require Company performance of relative total shareholder return (RTSR) at or above the 50th percentile of the Peer Group before vesting can occur (Offer 2 and Offer 3).

The Board will determine whether these pay rights are to be satisfied in cash or in shares at the time of vesting. If satisfied in shares, the shares will be purchased on market. If satisfied in cash, the amount will be based on the market value of a share in Woodside Petroleum Ltd. at the vesting date.

The following table illustrates the number and weighted average prices of shares reserved and acquired during the year by the plan. 2008 2007 Number of Weighted Cost Number of Weighted Cost shares average price shares average price ($/share) $m ($/share) $m

Opening balance 624,666 40.50 25 202,430 46.66 9 Purchases during the year 363,386 57.84 21 422,236 37.55 16 Shares reserved for executives under EIP 988,052 46.88 46 624,666 40.50 25 Shares for the March 2007 and March 2008 grants are held in Trust and the senior employees do not have any beneficial rights to these shares until approval is given by the Board.

The EIP is accounted for as a share-based payment to employees for services provided. The fair value of the benefit provided was estimated using on issue the Binomial option pricing model:

Long term Share Employee Exercise period Valuation assumptions incentive price at benefit Expected Risk free Expected VPRs grant date fair value volatility interest rate life issued Allocation date(1) ($) ($/VPR) From To (%) (%) (years)

Time tested VPR March 2006 59,202 24.50 22.80 13/03/2009 13/03/2009 23 5.7 3.0 March 2007 56,351 40.00 37.30 15/03/2010 15/03/2010 24 5.2 3.0 March 2008 77,771 38.31 34.72 14/03/2011 14/03/2011 24 6.1 3.0 February 2009 128,965 50.95 47.92 27/02/2012 27/02/2012 24 6.6 3.0 Total 322,289

RTSR tested VPR March 2006 143,228 24.50 14.25 13/03/2009 13/03/2011 23 5.7 3.0-5.0 March 2007 112,723 40.00 22.30 15/03/2010 15/03/2012 24 5.2 3.0-5.0 March 2008 180,768 38.31 29.16 14/03/2011 14/03/2012 24 6.1 3.0-4.0 February 2009 251,730 50.95 40.25 27/02/2012 27/02/2013 24 6.6 3.0-4.0 Total 688,449 (1) The grant date of VPRs is 1 January of the year before allocation.

There were no VPRs eligible for unrestricted possession as at 31 December 2008 (2007: nil) and 10,556 (2007: 6,415) VPRs were forfeited during the year then ended. The price payable on the exercise of a VPR is $1 for the total number exercised on any calendar date.

106 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

27. Employee benefits (continued)

(c) Superannuation plan Employees of the Group may be entitled to superannuation benefits on retirement, disability, death or withdrawal under the Group’s Superannuation Plan. The Group has one funded plan with a defined benefit section and a defined contribution section.

The defined benefit section of the plan is closed to new members. All new members receive accumulation only benefits. The defined contribution section receives fixed contributions from Group companies and the Group’s legal or constructive obligation is limited to these contributions.

(i) Defined benefit superannuation plan The Group has a legal obligation to settle defined benefit plan deficits, however these do not need to be settled with an immediate contribution or additional one-off contribution. Any defined benefit plan surplus may only be used to reduce future contributions from the Group.

The present value of the defined benefit obligation has been determined using the Projected Unit Credit Method.

Employer contributions Employer contributions to the defined benefit section of the plan are based on recommendations by the plan’s actuary. Actuarial assessments are made at no more than yearly intervals, and the last such assessment was made as at 31 December 2008.

Funding method The objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded by the time they become payable. To achieve this objective, the actuary has adopted a method of funding benefits known as the ‘attained age normal’ method. This funding method seeks to have benefits funded by means of a total contribution which is expected to be a constant percentage of members’ salaries over their working lifetimes.

Using the funding method described above, in October 2008 the actuary recommended that the payment of employer contributions to the fund recommence. The Group recommenced contributions to the defined benefit section of the plan based on actuary recommended contribution rates for the respective groups of employees from 1 November 2008. Total employer contributions paid by Group companies for the year ending 31 December 2008 were $5 million.

Consolidated 2008 2007 $m $m

(ii) Defined benefit plan balance sheet amounts

Present value of the defined benefit obligation (167) (151) Fair value of defined benefit plan assets 120 174

Net (deficit)/assets in the balance sheet (47) 23

Consolidated Financial Report 2008 2007 % %

(iii) Defined benefit plan categories of plan assets

The major categories of plan assets are as follows: Cash 11 17 Australian equity 29 33 International equity 27 28 Fixed income 10 13 Property 13 9 Other 10 - 100 100

107 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

27. Employee benefits (continued)

(c) Superannuation plan (continued)

Consolidated 2008 2007 $m $m

(iv) Defined benefit plan reconciliations

Reconciliation of the present value of the defined benefit obligation, which is fully funded: Balance at 1 January (151) (126) Current service cost (12) (11) Interest on obligation (9) (7) Actuarial loss (15) (23) Plan participants’ contributions (5) (7) Benefits, administrative expenses, premiums and tax paid 25 24 Net transfers out - (1) Defined benefit obligation at 31 December (167) (151)

Reconciliation of the fair value of plan assets: Balance at 1 January 174 175 Expected return on plan assets 12 12 Actuarial loss (51) (1) Employer contributions 5 4 Plan participants’ contributions 5 7 Benefits, administrative expenses, premiums and tax paid (25) (24) Net transfers in - 1 Fair value of plan assets at 31 December 120 174

Reconciliation of superannuation (liability)/asset: Present value of defined benefit obligation (170) (154) Provision for contributions tax 3 3 Fair value of plan assets 120 174 Superannuation (liability)/asset at 31 December (47) 23

(v) Defined benefit plan amounts recognised in income statement The amounts recognised in the income statement are as follows: Current service cost (12) (11) Interest on obligation (9) (7) Expected return on plan assets 12 12 Net actuarial loss recognised in year (39) (24) Defined benefit plan expense (48) (30)

108 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

27. Employee benefits (continued)

(c) Superannuation plan (continued)

(vi) Defined benefit plan principal actuarial assumptions

The principal actuarial assumptions used as at the balance sheet date for the purpose of calculating the present value of the defined benefit obligation were as follows:

Financial year 2008 2007 Discount rate – active members 3.50% p.a 5.40% p.a. Discount rate – pensioners 3.90% p.a 6.30% p.a. Expected rate of return on plan assets – active members 7.00% p.a 7.00% p.a. Expected rate of return on plan assets – pensioners 8.00% p.a 8.00% p.a. 7.00% p.a for 3 years and 5.00% Expected salary increase rate 5.00% p.a p.a. thereafter. Expected pension increase rate - 2.50% p.a.

The expected rate of return on plan assets is determined by weighting the expected long-term return for each asset class by the benchmark allocation of assets to each class. The returns for each asset class are net of investment tax and investment fees.

(vii) Defined benefit plan historical information Financial year 2008 2007 2006 2005 $m $m $m $m Present value of defined benefit obligation(1) 167 151 127 118 Fair value of plan assets 120 174 175 158 (Deficit)/surplus in plan (47) 23 49 40 Experience adjustments (loss)/gain – plan assets (51) (1) 12 12 Experience adjustments (loss)/gain – plan liabilities (1) (10) (6) 1 (1) Includes any provision for contribution tax on plan surplus or deficit.

(d) Employee benefits expense Consolidated Parent 2008 2007 2008 2007 $m $m $m $m

Employee benefits 147 181 1 1 Defined contribution plan costs 19 11 - - Defined benefit plan expense 48 30 - - 214 222 1 1

28. Key management personnel compensation Financial Report

(a) Compensation of key management personnel Key management personnel (KMP) compensation for the financial period was as follows:

Consolidated Parent 2008 2007 2008 2007 $ $ $ $

Short-term employee benefits 8,314,799 7,612,113 4,460,058 3,969,541 Post employment benefits 449,289 522,486 12,292 12,908 Other long-term benefits - - - - Termination/sign on benefits 922,916 - - - Share-based payment 2,945,868 2,403,416 1,770,849 864,810 12,632,872 10,538,015 6,243,199 4,847,259

109 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

28. Key management personnel compensation (continued)

(b) Key management personnel shareholdings Details of shares held by KMP including their personally related entities for the financial period are as follows:

2008 2007 Opening Acquisition/ Closing Opening Acquisition/ Closing NEDSP(2) WESP(3) NEDSP(2) WESP(3) holding(1) (disposal) holding holding(1) (disposal) holding

Non-executive directors M A Chaney 20,000 - - - 20,000 20,000 - - - 20,000 J R Broadbent(4) 48,620 435 - (5,163) 43,892 47,355 1,102 - 163 48,620 E Fraunschiel 74,552 - - 1,074 75,626 52,702 - - 21,850 74,552 A Jamieson 3,000 - - - 3,000 3,000 - - - 3,000 P H J M Jungels 8,454 519 - - 8,973 7,893 561 - - 8,454 D I McEvoy 2,526 - - 38 2,564 2,500 - - 26 2,526 D Megat - 597 - - 597 - - - - - I Robertson(12) ------M Cilento(13) ------J Stausholm(4) ------C B Goode(5) 259,846 5,276 - 3,052 268,174 A T Calvert(5) 1,236 828 - - 2,064 R R Caplan(5) - - - - -

Executives D Voelte(6) 69,528 - - 374 69,902 69,404 - - 124 69,528 M Chatterji 144 - - 4,048(8) 4,192 20 - - 124 144 R Cole 124 - - 4,381 4,505 - - - 124 124 E Howell 1,032 - - - 1,032 1,000 - - 32 1,032 A J Kantsler 97,114 - - 274 97,388 124,343 - (27,353) 124 97,114 V Santostefano 124 - - 374 498 21,890 - (21,890) 124 124 L Della Martina(7) 124 - - 374 498 P Moore(9)(10) 124 - - 55 179 - - - 124 124 K Spence(11) - - - - - 24,700 - (24,700) - -

(1) Opening holding represents amounts carried forward in respect of KMP or amounts held by KMP who commenced during the period. (2) Relates to participation in the Non-Executive Directors’ Share Plan. (3) Represents the number of shares redeemed under the Woodside Employee Share Plan. (4) Ms Broadbent retired as director on 4 July 2008. Mr Stausholm resigned as director on 30 June 2008. The directors’ closing shareholding represents the amount of shares held at the date of cessation of being a director. (5) Mr Goode retired as Chairman and director on 31 July 2007. Mr Calvert and Mr Caplan resigned as directors on 7 November 2007 and 11 October 2007 respectively. 2008 shareholdings are not shown. (6) Mr Voelte’s shareholding includes 69,404 shares awarded and vested in 2005 on the basis of individual performance for the 2004 performance year. The shares are held in trust and Mr Voelte may not deal with or dispose of any of the shares until the earliest of: the end of a period of five years commencing on the grant date; the time when Mr Voelte ceases to be employed by Woodside; or the time when any person acquires a relevant interest in 50.1% of Woodside’s issued share capital. Mr Voelte’s interest in the shares may be forfeited in certain circumstances, including summary termination of his employment with Woodside. (7) Mr Della Martina did not meet the definition of a KMP under AASB 124 for the 2007 financial year but is considered KMP for 2008. 2007 comparative figures are not shown. (8) Includes 3,674 Equity Linked Cash Incentives (ELCI’s), which were granted in April 2005, in respect of Mr Chatterji’s Long Term Incentive award for the 2004 performance year, before the introduction of the Executive Incentive Plan (EIP). In April 2008, the Board approved that the ELCI’s be satisfied through an allocation of WPL shares, which can be held in the EIP Trust, rather than via a cash payment. (9) Mr Moore departed Woodside on 31 July 2008. The closing shareholding represents the amount of shares held at the date of cessation of being an Executive. (10) 179 matching shares lapsed for Mr Moore upon his departure. (11) Mr Spence departed Woodside on 4 July 2008. (12) Mr Robertson was appointed on 30 June 2008. (13) Ms Cilento was appointed on 11 December 2008.

110 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

28. Key management personnel compensation (continued)

(c) Executives’ interests in variable pay rights (VPR) and pay rights (PR) Time tested VPRs and PRs

Name Allocation Vesting date(2) Awarded Vested in % of Fair value(3) of VPR/PR for performance year date(1) but not 2008 total vested vested 2008 2007 2006 2005

D Voelte March 2006 13/03/2009 12,827 22.80 March 2007(4) 15/03/2010 20,122 37.30 March 2008 14/03/2011 16,514 34.72 February 2009 27/02/2012 28,209 47.92 M Chatterji March 2006 13/03/2009 3,429 22.80 March 2007 15/03/2010 5,517 37.30 March 2007 15/03/2010 26,270 8,758 33 31.87 March 2008 14/03/2011 4,314 34.72 February 2009 27/02/2012 7,451 47.92 R Cole March 2006 13/03/2009 - 22.80 March 2007 15/03/2010 1,370 37.30 March 2007 15/03/2010 12,015 4,007 33 31.87 March 2008 14/03/2011 1,757 34.72 February 2009 27/02/2012 4,544 47.92 L Della Martina(5) March 2006 13/03/2009 22.80 March 2007 15/03/2010 37.30 March 2007 15/03/2010 11,178 3,728 33 31.87 March 2008 14/03/2011 34.72 February 2009 27/02/2012 2,916 47.92 E Howell(6) March 2006 13/03/2009 22.80 March 2007 15/03/2010 525 37.30 March 2007 15/03/2010 14,532 4,846 33 31.87 March 2008 14/03/2011 1,905 34.72 February 2009 27/02/2012 3,110 47.92 A Kantsler March 2006 13/03/2009 3,278 22.80 March 2007 15/03/2010 1,650 37.30 March 2007 15/03/2010 19,563 6,523 33 31.87 March 2008 14/03/2011 2,542 34.72 February 2009 27/02/2012 4,273 47.92 V Santostefano(6) March 2006 13/03/2009 22.80 March 2007 15/03/2010 1,327 37.30 March 2007 15/03/2010 10,340 3,448 33 31.87 March 2008 14/03/2011 1,670 34.72 February 2009 27/02/2012 2,910 47.92 P Moore(7) March 2006 13/03/2009 - 2,186 100 22.80 March 2007 15/03/2010 - 2,215 100 37.30 March 2007(8) 15/03/2010 19,003 8,447 44 31.87 March 2008 14/03/2011 - 1,971 100 34.72 February 2009 27/02/2012 - K Spence(9) March 2006 13/03/2009 - 3,309 100 22.80 March 2007 15/03/2010 - 2,010 100 37.30 March 2008 14/03/2011 - 1,748 100 34.72 February 2009 27/02/2012 - (1) The grant date of VPRs is 1 January of the year before allocation. (2) Vesting date and exercise date are the same. Vesting is subject to satisfaction of vesting conditions. (3) In accordance with the requirements of AASB 124 Related Party Disclosures, the fair value of rights as at their grant date has been determined by applying the binomial valuation method. The fair value of rights is amortised over the vesting period, such that ‘Total remuneration’ includes a portion of the fair value of unvested equity compensation during the year. The amount included as remuneration is not related to or indicative of the benefit (if any) that individual Executives may ultimately realise should these equity instruments vest. (4) Incorporates a VPR allocation of $900,000 in respect of the 2006 performance year, awarded in addition to the EIP entitlements. (5) Mr Della Martina did not meet the definition of a KMP under AASB 124 for previous years but did fall within the definition for 2008. Previous year’s comparative figures are not shown.

(6) Ms Howell and Mr Santostefano were not within the definition of KMP under AASB 124 for the 2006 financial year but are considered KMP for 2007 and 2008. Financial Report 2006 comparative figures are not shown. (7) Mr Moore’s Time-tested VPRs allocated in March 2006, March 2007 and March 2008 vested on his departure from Woodside (31 July 2008). The Time-tested VPRs to be allocated in March 2009 will vest on a pro rata basis immediately on allocation. Mr Moore’s TSR-tested and RTSR-tested VPRs remain subject to the normal vesting conditions. (8) In relation to the equity based retention plan, Mr Moore received the first 1/3 vesting of PRs (6,335) in March 2008 and a pro rata vesting of PRs (2,112) from the second 1/3 allocation, with the remaining PRs (10,556 or 55%) lapsing on his departure from Woodside (31 July 2008). (9) Mr Spence’s Time-tested VPRs allocated in March 2006, March 2007 and March 2008 vested on his departure from Woodside (4 July 2008). The Time-tested VPRs to be allocated in March 2009 will vest on a pro rata basis immediately on allocation. Mr Spence’s TSR-tested and RTSR-tested VPRs remain subject to the normal vesting conditions.

Other than those noted in footnote 8, no PRs or VPRs have lapsed for any Executive. The number of VPRs for the March 2007 VPR allocation as reported in the 2007 Annual Report was determined using the volume weighted average price of a share over the five trading days preceding 15 March 2007. The number of VPRs for the March 2008 VPR allocation as reported in the 2007 Annual Report was determined using the volume weighted average price of a share over the five trading days preceding 31 December 2007. The number of VPRs for the February 2009 VPR allocation as reported in this 2008 Annual Report has been determined using the volume weighted average price of a share based on an average over all trading days in the month of December 2008.

111 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

28. Key management personnel compensation (continued)

(c) Executives’ interests in variable pay rights (VPR) and pay rights (PR) (continued) RTSR-tested VPRs, TSR-tested VPRs(1) and Performance Linked PRs Name Allocation Vesting Awarded Vested in % of total Fair value(4) of VPR/PR for performance year date(2) date(3) but not 2008 vested vested 2008 2007 2006 2005

D Voelte March 2006(5) 13/03/2011 50,464 14.25 March 2007(6) 15/03/2012 40,245 22.30 March 2008 14/03/2012 33,161 29.16 March 2008(9) 31/03/2011 27,202 43.29 March 2008(9) 31/03/2011 27,202 43.29 March 2008(9) 31/03/2011 27,202 43.29 February 2009(10) 27/02/2013 39,179 40.25 M Chatterji March 2005(11) 15/04/2008 - 3,674 100 March 2006 13/03/2011 6,859 14.25 March 2007 15/03/2012 11,034 22.30 March 2008 14/03/2012 8,953 29.16 February 2009 27/02/2013 14,185 40.25 R Cole March 2006 13/03/2011 - 14.25 March 2007 15/03/2012 2,741 22.30 March 2008 14/03/2012 4,862 29.16 February 2009 27/02/2013 8,650 40.25 L Della Martina(7) March 2006 13/03/2011 14.25 March 2007 15/03/2012 22.30 March 2008 14/03/2012 29.16 February 2009 27/02/2013 5,552 40.25 E Howell(8) March 2006 13/03/2011 14.25 March 2007 15/03/2012 1,051 22.30 March 2008 14/03/2012 3,954 29.16 February 2009 27/02/2013 7,895 40.25 A Kantsler March 2006 13/03/2011 6,554 14.25 March 2007 15/03/2012 3,300 22.30 March 2008 14/03/2012 7,036 29.16 February 2009 27/02/2013 10,847 40.25 V Santostefano(8) March 2006 13/03/2011 14.25 March 2007 15/03/2012 2,654 22.30 March 2008 14/03/2012 3,465 29.16 February 2009 27/02/2013 5,540 40.25 P Moore(12) March 2006 13/03/2011 4,372 14.25 March 2007 15/03/2012 4,430 22.30 March 2008 14/03/2012 5,453 29.16 February 2009 27/02/2013 4,874 40.25 K Spence(13) March 2006 13/03/2011 6,618 14.25 March 2007 15/03/2012 4,020 22.30 March 2008 14/03/2012 4,800 29.16 February 2009 27/02/2013 5,621 40.25 (1) Relative total shareholder return and total shareholder return tested. Vesting date is from 13 March 2009 to 13 March 2011 in respect of 2006 allocations, from 15 March 2010 to 15 March 2012 in respect of March 2007 allocations, 14 March 2011 or 14 March 2012 in respect of March 2008 allocations, and on 27 February 2012 or 27 February 2013 in respect of March 2009 allocations. (2) The grant date of VPRs is 1 January of the year before allocation. (3) Vesting date and exercise date are the same. Vesting is subject to satisfaction of vesting conditions. (4) In accordance with the requirements of AASB 124 Related Party Disclosures, the fair value of rights as at their grant date has been determined by applying the binomial valuation method. The fair value of rights is amortised over the vesting period, such that ‘Total remuneration’ includes a portion of the fair value of unvested equity compensation during the year. The amount included as remuneration is not related to or indicative of the benefit (if any) that individual Executives may ultimately realise should these equity instruments vest. (5) Incorporates a TSR-tested VPR allocation of $1,000,000 in respect of the 2005 performance year, awarded in addition to the EIP entitlements. (6) Incorporates a VPR allocation of $900,000 in respect of the 2006 performance year, awarded in addition to the EIP entitlements. (7) Mr Della Martina did not meet the definition of a KMP under AASB 124 for previous years but did fall within the definition for 2008. Previous year’s comparative figures are not shown. (8) Ms Howell and Mr Santostefano did not meet the definition of KMP under AASB 124 for the 2006 financial year but are considered KMP for 2007 and 2008. 2006 comparative figures are not shown. (9) Mr Voelte’s Accelerated Long Term Incentives (LTIs). (10) This allocation represents the remaining 50% of Mr Voelte’s 2008 LTI VAR allocation (excludes the Accelerated LTI VAR). (11) Mr Chatterji received 3,674 Equity Linked Cash Incentives (ELCI’s), which were granted in April 2005, in respect of Mr Chatterji’s LTI award for the 2004 performance year, before the introduction of the Executive Incentive Plan (EIP). In accordance with the conditions of the award, the ELCIs were due to be converted to a cash payment on 15 April 2008. In keeping with encouraging equity participation at the Executive level, in April 2008, the Board approved that the ELCI’s be satisfied through an allocation of Woodside shares, which can be held in the EIP Trust, rather than via a cash payment. (12) Mr Moore’s Time-tested VPRs allocated in March 2006, March 2007 and March 2008 vested on his departure from Woodside (31 July 2008). The Time-tested VPRs to be allocated in March 2009 will vest on a pro rata basis immediately on allocation. Mr Moore’s TSR-tested and RTSR-tested VPRs remain subject to the normal vesting conditions. (13) Mr Spence’s Time-tested VPRs allocated in March 2006, March 2007 and March 2008 vested on his departure from Woodside (4 July 2008). The Time-tested VPRs to be allocated in March 2009 will vest on a pro rata basis immediately on allocation. Mr Spence’s TSR-tested and RTSR-tested VPRs remain subject to the normal vesting conditions. No VPRs/PRs held by any Executive lapsed. The number of VPRs for the March 2007 VPR allocation as reported in the 2007 Annual Report was determined using the volume weighted average price of a share over the five trading days preceding 15 March 2007. The number of VPRs for the March 2008 VPR allocation as reported in the 2007 Annual Report was determined using the volume weighted average price of a share over the five trading days preceding 31 December 2007. The number of VPRs for the February 2009 VPR allocation as reported in this 2008 Annual Report has been determined using the volume weighted average price of a share based on an average over all trading days in the month of December 2008.

112 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

28. Key management personnel compensation (continued)

(d) Summary of Executives’ interests in shares under the Woodside Share Purchase Plan (WSPP)

Name Plan type Opening balance Shares purchased under WSPP Matching shares Closing balance 2008 WSPP(1) 124 173 201 498 D Voelte 2007 WSPP(2) - 62 62 124 2008 WSPP 124 173 201 498 M Chatterji 2007 WSPP - 62 62 124 2008 WSPP 124 173 201 498 R Cole 2007 WSPP - 62 62 124 2008 WSPP - - - - E Howell 2007 WSPP - - - - 2008 WSPP 124 117 117 358 A Kantsler 2007 WSPP - 62 62 124 2008 WSPP 124 173 201 498 V Santostefano 2007 WSPP - 62 62 124 2008 WSPP 124 173 201 498 L Della Martina(3) 2007 WSPP 2008 WSPP 124 117 117 358 P Moore(4) 2007 WSPP - 62 62 124 2008 WSPP - - - - K.Spence 2007 WSPP - - - - (1) 2008 WSPP refers to the plan for the 2008/09 Plan Year as well as the purchases made in 2008 for the 2007/2008 Plan. The matching shares for the 2008 WSPP were granted on 20 June 2008 and had a fair value of $52.82 per share. (2) 2007 WSPP refers to the plan for the 2007/08 Plan Year. The matching shares for the 2007 WSPP were granted on 29 August 2007 and had fair values of $48.25, $55.93, and $62.82 per share respectively. The last two purchases for 2007 WSPP were made in 2008. (3) Mr Della Martina did not meet the definition of a KMP under AASB 124 for the 2007 financial year but is considered KMP for 2008. 2007 comparative figures are not shown. (4) 179 matching shares lapsed for Mr Moore upon his departure.

As at 31 December 2008, no matching shares had vested for any Executives.

As at 31 December 2008, other than Note 4 above no matching shares had lapsed for any Executives.

The fair value of rights as at the date of grant has been determined by reference to the share price at acquisition (refer Note 27(a)(ii)). The fair value of rights is amortised over the vesting period, such that ‘Total remuneration’ includes a portion of the fair value of unvested equity compensation during the year. The amount included as remuneration is not related to or indicative of the benefit (if any) that individual Executives may ultimately realise should these equity instruments vest.

29. Events after the balance sheet date

(a) Dividends Since the reporting date, the directors have declared a fully franked dividend of 55 cents (2007: 55 cents), payable 6 April 2009. The amount of this dividend will be $384 million (2007: $378 million). No provision has been made for this dividend in the financial report as the dividend was not declared or determined by the directors on or before the end of the financial year.

(b) Debt Facilities Financial Report Subsequent to the reporting date, Woodside reached agreements with a number of domestic and international banks to enter into additional debt facilities for US$800 million.

(c) Oceanway In January 2009, Woodside Natural Gas Inc., a wholly owned subsidiary of Woodside Energy Ltd., announced the suspension of its Oceanway natural gas project for the Los Angeles region.

113 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

30. Related party disclosure

(a) Entities with significant influence over the entity Shell Energy Holdings Australia Ltd. is deemed a related party through its 34.27% (2007: 34.27%) interest of 239,383,224 ordinary shares (2007: 235,880,145 ordinary shares) in the shareholding of the Group. In 2008, Shell Energy Holdings Australia Ltd. participated in the Woodside Dividend Reinvestment Plan resulting in an increase in its shareholding in the Group. Shell Energy Holdings Australia Ltd. is a member of the Royal Dutch Shell Group. During the year petroleum products with a total value of $55 million (2007: $36 million) were purchased from Shell Company of Australia Ltd by the Group in its own right or as operator of various joint ventures. These transactions were on normal commercial terms and conditions. At the balance sheet date the liability outstanding to Shell Company of Australia Ltd. in relation to these purchases was $2 million (2007: $1 million). Companies within the Royal Dutch Shell Group provide the Group with various technical services, technology, research and information networks and secondment of management and technical staff on normal commercial terms and conditions. The cost of these various services to the Group was $25 million (2007: $30 million). At the balance sheet date the liability outstanding to the Royal Dutch Shell Group in relation to these services was $nil (2007: $2 million). The Group sold $592 million (2007: $357 million) of oil and gas products to members of the Royal Dutch Shell Group on normal commercial terms and conditions. At the balance sheet date the trade receivable outstanding in relation to these sales was $24 million (2007: $35 million). Solen Versicherungen AG (a wholly owned captive insurance company of the Royal Dutch Shell Group) participates in the Group’s various operational and construction insurance programs. In 2008, the total paid by the Group to Solen Versicherungen AG for its participation was $3 million (2007: $2 million). Applicable insurance premiums are negotiated at arms-length with lead insurers via Woodside’s insurance brokers, with Solen Versicherungen AG following the terms set by the lead insurers. The Group and Shell have common interests in joint ventures (refer Note 33(a)).

(b) Transactions with related parties in the wholly owned group Dividends, interest receivable and diminution in value of investments in subsidiaries are shown in Note 3. Current amounts receivable from controlled entities shown in Note 7(a) are inter-company current balances that attract interest at commercial rates. Non-current amounts owing by controlled entities shown in Note 7(b) are long term interest-free inter-company advances. Non-current amounts payable to controlled entities shown in Note 14(b) are long-term interest- free inter-company advances. Refer to Note 35(a) for a description of the relationship between the parent company and its controlled entities.

(c) Transactions with Directors Mr McEvoy received $56,000 during the year as consulting fees for extra services he provided outside his normal Board and Committee duties. These fees were paid on commercial terms and conditions at market rates.

31. Contingent liabilities

Consolidated Parent 2008 2007 2008 2007 $m $m $m $m

Contingent liabilities at the balance sheet date Not otherwise provided for in the financial report Contingent liabilities arising from subsidiaries(1) 16 14 - - Guarantees(2) 3 3 - 1,041 19 17 - 1,041 (1) Contingent liabilities relate predominately to actual or potential litigation of the Group for which amounts are reasonably estimable but the liability is not probable and therefore the Group has not provided for such amounts in these financial statements. Additionally, there are a number of other claims and possible claims, indeterminable in amount, that have arisen in the course of business against entities in the Group. The Group believes that any resultant liability will not materially affect the financial position of the Group, and therefore no amounts have been included in the table above. (2) Guarantees: • Woodside Petroleum Ltd. and Woodside Energy Ltd. are parties to a deed of cross guarantee (refer Note 35(b)). • Woodside Petroleum Ltd. has guaranteed the discharge by Woodside Finance Ltd. of its financial obligations under debt facilities referred to in Note 24(e). • The Group has also issued guarantees relating to workers compensation liabilities. In 2008, the Group changed the valuation approach with regard to financial guarantees by taking the Woodside Petroleum Ltd. specific probability of default into consideration. This approach is based on the estimation of the ‘expected loss’ at the time the financial guarantee is granted.

114 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

32. Auditor remuneration Consolidated Parent 2008 2007 2008 2007 $000 $000 $000 $000

Amounts received or due and receivable by the auditors of the company for:

Audit and review of financial reports Ernst & Young (Australia) 1,160 1,057 - - Overseas Ernst & Young firms 373 385 - - 1,533 1,442 - - Non audit services Ernst & Young (Australia) Other assurance/advisory services 690 226 - - Other services 30 81 - - 720 307 - -

33. Joint ventures

a) Joint venture interests The Group has the following interests in joint venture assets as at 31 December 2008. Exploration, development and production of hydrocarbons are the principal activities performed across these assets. Related party interests are indicated where applicable (refer to Note 30).

Joint venture assets Group interest % Related party interest %

Australasia Producing and Developing Assets North West Shelf Joint Ventures 12.5 - 50.0 8.3 - 16.7 Enfield and Vincent 60.0 - Laminaria–Corallina 59.9 - 66.7 - Mutineer–Exeter 8.2 - Stybarrow 50.0 - Otway 51.6 - Pluto 90.0 - Exploration and Evaluation Assets Browse Basin 25.0 - 70.0 8.3 - 15.0 Carnarvon Basin 15.8 - 90.0 0.0 - 15.8 Bonaparte Basin 26.7 - 35.0 25.0 - 33.3 Victoria 51.6 - Middle East and Africa Producing Assets Ohanet 15.0 - Exploration and Evaluation Assets Canary Islands 30.0 - Liberia 17.5 - Financial Report Libya 45.0 - 55.0 - Sierra Leone 25.0 - The Americas Producing and Developing Assets Gulf of Mexico 20.0 - 75.0 - Exploration and Evaluation Assets Gulf of Mexico 10.56 - 50.0 - Brazil 25.0 - Asia Exploration and Evaluation Assets Korea 50.0 -

115 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

33. Joint ventures (continued)

(b) Jointly controlled assets The aggregate of the Group’s interest in all jointly controlled assets is analysed as follows; Consolidated Parent 2008 2007 2008 2007 $m $m $m $m Current assets Receivables 47 82 - - Inventories and other 52 69 - - Other assets 9 11 - - 108 162 - - Non-current assets Inventories 17 9 - - Other financial assets 6 19 - - Exploration and evaluation assets 842 618 - - Oil and gas properties 9,697 6,075 - - 10,562 6,721 - -

10,670 6,883 - -

(c) Commitments through jointly controlled assets The aggregate of the Group’s commitments through jointly controlled assets is as follows;

Consolidated Parent 2008 2007 2008 2007 $m $m $m $m Operating lease 711 1,014 - - Capital 4,288 301 - - Exploration and other commitments 268 353 - - 5,267 1,668 - -

(d) Jointly controlled entities Interests in jointly controlled entities are as follows: Country of Group interest % Entity Principal activity incorporation 2008 2007

Marketing services for venturers in the North West Shelf Gas Pty. Ltd. Australia 16.67 16.67 sale of gas to the domestic market. North West Shelf Liaison Company Pty. Liaison for venturers in the sale of Australia 16.67 16.67 Ltd. LNG to the Japanese market. Marketing services for venturers in the North West Shelf Australia LNG Pty. Ltd. Australia 16.67 16.67 sale of LNG to international markets. North West Shelf Shipping Service LNG vessel fleet advisor. Australia 16.67 16.67 Company Pty. Ltd. These entities exist as integrated components of the overall North West Shelf Joint Ventures structure and are held proportionately with the other venturers. There have been no changes to the investment in these entities in the period. All relevant commitments arising through these entities are included in Note 26.

34. Associated entities Group interest % Name of entity Principal activity 2008 2007 Provision of academic and technical training in local Australian Technical College Pilbara Ltd.(1) - - communities. International Gas Transportation Company Ltd.(2) LNG vessel fleet management. 16.67 16.67

(1) Australian Technical College Pilbara Limited was incorporated on 6 December 2006 and is limited by guarantee to a maximum amount of $1. Woodside is one of four members of the company, of which significant influence is present. The associate is incorporated in Australia. (2) Where material, investments in joint venture entities are accounted for using the equity method of accounting. The associate is incorporated in Bermuda.

116 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

35. Subsidiaries

(a) Subsidiaries

Name of entity Notes Country of incorporation Functional currency Parent entity Woodside Petroleum Ltd. (1,2,3) Australia Australian Dollars

Subsidiaries Woodside Energy Ltd. (2,3) Australia Australian Dollars Woodside Energy Holdings Pty. Ltd. (2) Australia Australian Dollars Woodside Energy Holdings (USA) Inc. USA US Dollars Woodside Insurance Inc. (8) USA US Dollars Woodside Energy (USA) Inc. USA US Dollars Gryphon Exploration Company USA US Dollars Woodside Energy (Sahara) Inc. (8) USA US Dollars Gander Inc. (formerly ATS Inc.) USA US Dollars Woodside Offshore LLC (7) USA US Dollars Woodside Natural Gas Inc. USA US Dollars Avila 8 LLC USA US Dollars ABD Inc. (9) USA US Dollars Woodside Eastern Energy Pty. Ltd. (2) Australia Australian Dollars Woodside Energy (Senegal) Pty. Ltd. (2,10) Australia Australian Dollars Woodside Energy (Algeria) Pty. Ltd. (2) Australia US Dollars Woodside SSW Solutions Pty. Ltd. (2,6) Australia Australian Dollars Woodside Petroleum (NEDSP) Pty. Ltd. (2) Australia Australian Dollars Woodside Technical Services Pty. Ltd. (2) Australia Australian Dollars Metasource Pty. Ltd. (2) Australia Australian Dollars Woodside West Kimberley Energy Pty. Ltd. (2) Australia Australian Dollars Woodside Guangdong Shipping (One) Pty. Ltd. (2) Australia Australian Dollars Woodside Guangdong Shipping (Two) Pty. Ltd. (2) Australia Australian Dollars Woodside Mauritania Investments Pty. Ltd. (2) Australia Australian Dollars Woodside Energy Holdings (UK) Pty. Ltd. (2) Australia Australian Dollars Woodside Energy (UK) Ltd. UK US Dollars Woodside Energy Iberia S.A. Spain US Dollars Woodside Energy (N.A.) Ltd. UK US Dollars Woodside Energy (Kenya) Pty. Ltd. (2) Australia US Dollars Woodside Quest Energy Pty. Ltd. (2)(5) Australia Australian Dollars Woodside Energy (Carbon Capture) Pty. Ltd. (2) Australia Australian Dollars Woodside Energy (SL) Pty. Ltd. (2) Australia US Dollars Woodside West Africa Pty. Ltd. (2) Australia US Dollars Woodside Energy Liaison Company (Korea) Pty. Ltd. (2,6) Australia US Dollars Woodside Energy Technologies Pty. Ltd. (2) Australia Australian Dollars Woodside China Liaison Pty. Ltd. (2,10) Australia US Dollars Woodside Japan Liaison Pty. Ltd. (2,10) Australia US Dollars Woodside Energy (Norway) Pty. Ltd. (2) Australia US Dollars Woodside Energy (M.E.) Pty. Ltd. (2) Australia US Dollars Woodside Energy Middle East and Africa Pty. Ltd. (2) Australia US Dollars Woodside Browse Pty. Ltd. (2) Australia Australian Dollars Woodside Burrup Pty. Ltd. (2) Australia Australian Dollars Pluto LNG Pty. Ltd. (4) Australia Australian Dollars Burrup Facilities Company Pty. Ltd. (4) Australia Australian Dollars Financial Report Burrup Train 1 Pty. Ltd. (4) Australia Australian Dollars Woodside Energy Australia Asia Holdings Pte. Ltd. Singapore US Dollars WelCap Insurance Pte. Ltd. Singapore US Dollars Woodside Energy (Korea) Pte. Ltd. Singapore US Dollars Woodside Energy Holdings (South America) Pty. Ltd. (2) Australia Australian Dollars Woodside Energia (Brasil) Investimento em Exploração de Petróleo Ltda. Brazil US Dollars Woodside Energy (Peru) Pty Ltd. (2) Australia US Dollars Woodside Finance Ltd. (2) Australia Australian Dollars Woodside Holdings Pty. Ltd. (2,6) Australia Australian Dollars Woodside Petroleum Holdings Pty. Ltd. (2) Australia Australian Dollars Woodside Petroleum (Timor Sea 19) Pty. Ltd. (2) Australia US Dollars Woodside Petroleum (Timor Sea 20) Pty. Ltd. (2) Australia US Dollars Woodside South East Asia Pty. Ltd. (2,6) Australia Australian Dollars Mermaid Sound Port and Marine Services Pty. Ltd. (2) Australia Australian Dollars Woodside Group Staff Superannuation Pty. Ltd. (2) Australia Australian Dollars Woodside LNG Pty. Ltd. (2,10) Australia Australian Dollars Woodside Petroleum (Northern Operations) Pty. Ltd. (2) Australia Australian Dollars Woodside Petroleum (W.A. Oil) Pty. Ltd. (2) Australia Australian Dollars

117 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report For the year ended 31 December 2008

35. Subsidiaries (continued)

(a) Subsidiaries (continued) Notes (1) Woodside Petroleum Ltd. is the ultimate holding company and the head entity within the tax consolidated group. (2) These companies were members of the tax consolidated group at 31 December 2008. (3) Pursuant to ASIC Class Order 98/1418, relief has been granted to the controlled entity, Woodside Energy Ltd., from the Corporations Act 2001 requirements for preparation, audit and publication of accounts. As a condition of the Class Order, Woodside Petroleum Ltd. and Woodside Energy Ltd. are parties to a deed of cross guarantee. (4) On 31 January 2008, Kansai Electric and Tokyo Gas each acquired 5% of the shares in each of these companies. (5) This company was placed into voluntary liquidation on 18 December 2008. (6) These companies were placed into voluntary liquidation on 21 December 2007 and were deregistered on 3 October 2008. (7) On 31 January 2008, Woodside Energy (USA) Inc acquired Explore Louisiana LLC’s 5% holding in Woodside Offshore LLC. (8) These companies were voluntarily dissolved on 30 December 2008. (9) This company was voluntarily dissolved on 31 March 2008. (10) These companies were placed into voluntary liquidation on 28 June 2007 and were deregistered on 13 February 2008.

(b) Deed of cross guarantee and closed group Woodside Petroleum Ltd. and Woodside Energy Ltd. are parties to a deed of cross guarantee under which each company guarantees the debts of the other. By entering into the deed, the entities have been granted relief from the Corporations Act requirements for the preparation, audit and publication of accounts, pursuant to Australian Securities and Investment Commission (ASIC) Class Order 98/1418. The two entities represent a Closed Group for the purposes of the Class Order.

The consolidated income statement and balance sheet of the members of the Closed Group is set out below. 2008 2007 Closed Group Income Statement $m $m

Profit before tax 2,863 1,923 Taxes (1,532) (975) Net profit 1,331 948

Retained profits at the beginning of the financial year 3,386 3,285 Dividends (929) (847) Retained profits at the end of the financial year 3,788 3,386

118 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Notes to and forming part of the financial report Notes to and forming part of the financial report For the year ended 31 December 2008

35. Subsidiaries (continued)

(b) Deed of cross guarantee and closed group (continued)

2008 2007 Closed Group Consolidated Balance Sheet $m $m

Current assets Cash and cash equivalents 195 70 Receivables 307 532 Inventories 95 62 Other financial assets 14 - Other assets 14 24 Total current assets 625 688

Non-current assets Receivables 57 70 Inventories 53 9 Other financial assets 5,887 2,654 Other assets - 32 Exploration and evaluation assets 145 150 Oil and gas properties 6,696 5,733 Other plant and equipment 103 63 Total non-current assets 12,941 8,711 Total assets 13,566 9,399

Current liabilities Payables 1,222 1,674 Income tax payable 529 313 Other financial liabilities - 119 Other liabilities 47 18 Provisions 107 95 Total current liabilities 1,905 2,219

Non-current liabilities Payables 3,747 921 Deferred tax liabilities 589 696 Other financial liabilities 4 112 Other liabilities 292 196 Provisions 1,121 531 Total non-current liabilities 5,753 2,456 Total liabilities 7,658 4,675 Net assets 5,908 4,724

Equity Financial Report Issued and fully paid shares 2,104 1,553 Shares reserved for employee share plans (142) (137) Reserves 158 (78) Retained earnings 3,788 3,386 Total equity 5,908 4,724

119 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Directors’ declaration

In accordance with a resolution of directors of Woodside Petroleum Ltd, we state that:

1. In the opinion of the directors:

(a) the financial statements and notes thereto, and the disclosures included in the audited 2008 Remuneration Report, comply with Australian Accounting Standards and the Corporations Act;

(b) the financial statements and notes thereto give a true and fair view of the financial position of the company and the Group as at 31 December 2008 and of the performance of the company and the Group for the financial year ended 31 December 2008;

(c) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and

(d) there are reasonable grounds to believe that the members of the Closed Group identified in Note 35 will be able to meet any obligations or liabilities to which they are or may become subject to, by virtue of the deed of cross guarantee.

2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act for the year ended 31 December 2008.

For and on behalf of the Board

Michael Chaney, AO Don Voelte Chairman Chief Executive Officer

Perth 18 February 2009

120 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Directors’ declaration Independent audit report

Independent Audit Report to Members of Woodside Petroleum Ltd. We have audited the accompanying financial report of Woodside Petroleum Ltd. (the Company) and the entities it controlled (the Group) during the year, which comprises the balance sheet as at 31 December 2008, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the Directors’ Declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with the Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence In conducting our audit we have met the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the Directors’ Report. In addition to our audit of the financial report, we were engaged to undertake the services disclosed in the notes to the financial statements. The provision of these services has not impaired our independence.

Auditor’s Opinion In our opinion: 1. the financial report of Woodside Petroleum Ltd. is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the financial position of Woodside Petroleum Ltd. and the consolidated entity at 31 December 2008 and of their performance for the year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulation 2001. 2. the financial report also complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Report on the Remuneration Report Financial Report We have audited the Remuneration Report included in pages 46 to 57 of the directors’ report for the year ended 31 December 2008. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion In our opinion the Remuneration Report of Woodside Petroleum Ltd. and its controlled entities for the year ended 31 December 2008, complies with section 300A of the Corporations Act 2001.

Ernst & Young G H Meyerowitz Partner Perth WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c 18 February 2009 121 Shareholder information As at 12 February 2009

Number of Shareholdings There were 146,599 shareholders. All issued shares carry voting rights on a one for one basis.

Distribution of Shareholdings

Size of shareholding Number of holders Number of shares % of issued capital

1 - 1,000 108,213 43,941,099 6.29 1,001 - 5,000 33,740 69,702,897 9.98 5,001 - 10,000 3,029 21,474,085 3.07 10,001 - 100,000 1,505 33,272,800 4.76 100,001 and over 112 530,162,120 75.90

Total 146,599 698,553,001 100.00

Unmarketable Parcels

There were 1,538 members holding less than a marketable parcel of shares in the company.

Twenty Largest Shareholders

Shareholder Shares held % of issued capital

Shell Energy Holdings Australia Limited 239,383,224 34.27 J P Morgan Nominees Australia Limited 80,779,491 11.57 HSBC Custody Nominees (Australia) Limited 68,056,394 9.74 National Nominees Limited 46,737,241 6.69 ANZ Nominees Limited 18,828,224 2.70 Citicorp Nominees Pty Limited 18,079,218 2.59 UBS Wealth Management Australia Nominees Pty Ltd 4,218,956 0.60 Cogent Nominees Pty Limited 4,213,057 0.60 AMP Life Limited 4,067,861 0.58 Queensland Investment Corporation 2,880,591 0.41 Australian Foundation Investment Company Limited 2,345,000 0.34 Neweconomy com au Nominees Pty Limited <900 Account> 2,229,899 0.32 Share Plan Trustee 1,869,264 0.27 Perpetual Trustee Company Limited 1,663,941 0.24 ANZ Nominees Limited 1,531,357 0.22 Argo Investments Limited 1,408,057 0.20 UBS Nominees Pty Ltd 1,351,444 0.19 RBC Dexia Investor Services Australia Nominees Pty Limited 1,256,833 0.18 BNP Paribas 1,175,623 0.17 Brispot Nominees Pty Ltd 1,073,709 0.15

Total 503,149,384 72.03

Substantial shareholders as disclosed in substantial shareholder notices given to the company are as follows: Shell Energy Holdings Australia Ltd (notice dated 3 May 2001). 228,456,275 34.27

122 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c Shareholder information

Annual General Meeting Australian Securities Exchange Listing The 2009 AGM of Woodside Petroleum Ltd will be held Woodside Petroleum Ltd securities are listed on the at 10 am (AWST) on Friday, 1 May 2009 in the Riverside Australian Securities Exchange (ASX) under the code WPL. Theatre, Level 2, Perth Convention Exhibition Centre, 21 Share price information can be accessed on the company’s Mounts Bay Road, Perth, Western Australia. Details of the website (www.woodside.com.au). business of the meeting will be provided in the AGM notice. American Depositary Receipts The AGM will be webcast live on the internet. An archive version of the webcast will be placed on the website to The Bank of New York sponsors a level one American enable the proceedings to be viewed at a later time. Copies Depositary Receipts (ADR) program in the United States of of the Chairman’s and CEO’s speeches will be available on America. One Woodside share equals one ADR and trades the company’s website. over the counter under the symbol ‘WOPEY’. ADR holders should deal directly with the Bank of New York Shareholder Registry: Enquiries on all matters related to their ADRs. Enquiries should be Investors seeking information about their shareholdings directed to: should contact the company’s share registry: The Bank of New York Computershare Investor Services Pty. Limited Depositary Receipts Division Level 2, 45 St Georges Terrace 101 Barclay Street, 22nd Floor, Perth, Western Australia 6000 New York NY 10286 Postal address: GPO Box D182 Perth, Western Australia 6840 Telephone: +1 888 269 2377 (within United States) +1 212 815 3700 (outside United States) Telephone: 1300 558 507 (within Australia) Email: [email protected] +61 3 9415 4632 (outside Australia) Website: www.adrbny.com Facsimile: +61 8 9323 2033 Email: [email protected] Investor Relations: Enquiries Website: www.computershare.com Requests for specific information on the company can be directed to Investor Relations at: The share registry can assist with queries on share transfers, dividend payments, the Dividend Reinvestment Investor Relations Plan, notification of tax file numbers and changes of name, Woodside Petroleum Ltd address or bank account details. Woodside Plaza Shareholders should quote their Security Reference 240 St Georges Terrace Number (SRN) or Holder Identification Number (HIN) when Perth Western Australia 6000 communicating with the share registry. Telephone: +61 8 9348 4000 The share registry website allows shareholders direct Facsimile: +61 8 9348 2777 access to their holding information and to make changes to Email: [email protected] address and banking details online. Postal address: GPO Box D188 Perth, Western Australia 6840 Dividend Payments Website: www.woodside.com.au Shareholders may have their dividends paid directly into any bank or building society account within Australia. Payments Business Directory are electronically credited on the dividend payment date and confirmed by payment advice. To request direct Australia Covington (America) crediting of dividend payments please contact the share Registered Office Woodside Energy (USA) Inc. registry or download the appropriate form from the share Perth 830 West Causeway Approach, registry website. Woodside Petroleum Ltd Suite #1000 The history of dividends paid by the company can be found on Woodside Plaza Madeville LA, 70471 USA the company’s website (www.woodside.com.au). 240 St Georges Terrace Telephone: +1 985 272 5800 Perth WA 6000 Dividend Reinvestment Plan Tripoli (Africa) Telephone: +61 8 9348 4000 Shareholders with registered addresses in Australia and New Zealand can elect to participate in Woodside’s Dividend Postal address: Woodside Energy (NA) Ltd Reinvestment Plan and have the dividends on some or all GPO Box D188 Corinthia Bab Africa Hotel of their shares automatically reinvested in additional shares. Perth WA 6840 Commercial Centre Zone C, Information on the Dividend Reinvestment Plan is available Level 0 on the company’s website (www.woodside.com.au). Karratha Souk Al Thulatha Al Gadim Tripoli, Libya Election forms are available from the company's website or Burrup Peninsula Telephone: +21 8 21 335 0605 from the share registry. Karratha, WA 6714 Telephone: +61 8 9348 4000 Change of Address or Banking Details Shareholders should immediately notify the share registry in writing of any change to their address or banking arrangements for dividends electronically credited to a bank account. Appropriate forms can be downloaded from the share registry website. WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c 123 Shareholder Information Shareholder information

Key Announcements 2008 Events Calendar 2009 January NWSV production shutdown (Karratha) Key calendar dates for Woodside shareholders in 2009. February Woodside agrees to buy Shell NWS oil assets Please note dates are subject to review.

Woodside reports record net profit (2007) January 22 Fourth Quarter 2008 Report March Neptune commissioning February 18 2008 Full-Year Result and Final Dividend NWSV approves NR2 Project Announcement May Acquisition of Shell NWS Oil Assets 23 Ex-Dividend date for Final Dividend completed Woodside cleared of Mauritanian 27 Record date for Final Dividend allegations April 6 Payment date for Final Dividend July Neptune Project begins production 24 First Quarter 2009 Report Unsolicited offers for Woodside shares 29 AGM Proxy returns close at 10.00am (AWST) August Record 1H 2008 Profit Announcement May 1 Annual General Meeting Vincent Project produces first oil June 30 September NWS Venture produces first LNG from Train Woodside Half-Year End 5 Production Facility July 24 Second Quarter 2009 Report Carbon Pollution Reduction Scheme Green August 19 2009 Half-Year Result and Interim Paper Submission Dividend Announcement October NWS Venture’s Angel Platform produces TBA Ex-Dividend date for Interim Dividend first gas TBA Record date for Interim Dividend December North West Shelf Oil Redevelopment Project Approved September TBA Payment date for Interim Dividend Media release response to Emissions October 23 Third Quarter 2009 Report Trading Scheme White Paper December 31 Woodside Year End

Glossary Quick Reference Guide

1H first half of the calendar year (i.e. the period Angel 16 1 January to 30 June). Contingent resources 14 appraisal drilled to follow up a discovery and evaluate Cossack Pioneer 17 well its commercial potential Diversity 31 Emissions trading 29 condensate hydrocarbons, which are gaseous in a Enfield 18 reservoir, but which condense to form liquids as they rise to the surface Gearing 6,8 Lifting cost 8 development drilled for the purpose of recovering Logo 1 well hydrocarbons Neptune 25 FPSO floating production and storage offtake North Rankin 17 vessel Oceanway 26 LNG liquefied natural gas Oil price 8 LPG liquefied petroleum gas Otway 24 Q1, Q2, Q3, quarters of the calendar year (i.e. Q1 is 1 Pluto 2 21 Q4 January to 31 March, Q2 is 1 April to 30 Power Play 25 June,Q3 is 1 July to 30 September, Q4 is 1 REI (Reportable Environmental Incidents) 5 October to 31 December). Rock art 30 Stybarrow 7 $, $m Australian dollars unless otherwise stated, millions of dollars Train 5 16 TRCF (Total Recordable Case Frequency) 5 Vincent 19 Conversion Factors boe barrel of oil equivalent Product Factor Conversion Factors* TJ Terajoules Domestic Gas 1TJ 163.6 boe t tonne Liquefied Natural Gas (LNG) 1 tonne 8.9055 boe bbl barrel Condensate 1 bbl 1.000 boe MMBtu million British Thermal Units Mcfg thousand cubic feet of gas Oil 1 bbl 1.000 boe MMcfg million cubic feet of gas Liquefied Petroleum Gas (LPG) 1 tonne 8.1876 boe Mtpa million tonnes per annum Gulf of Mexico Gas 1 MMBtu 0.1724 boe kPa thousands of Pascals * Minor changes to some conversion factors can occur over time due to psia pounds per square inch absolute gradual changes in the process stream

124 Woodside Petroleum Ltd | Annual Report 2008 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c 10 Year Comparative Data Summary

Year Ended 31 December 2008 2007(12) 2006(12) 2005 2004(7) 2003 2002 2001 2000 1999

Contents Profit and Loss ($m) Sales Revenues Australia Pipeline Gas 378 271 242 LNG & LPG 1,389 847 915 Chairman’s overview 2 About this report NWS Gas (Pipeline, LNG & LPG) - - 1,052 789 763 725 765 692 595 NWS Oil/Condensate 1,428 1,119 1,106 1,005 772 696 694 644 683 303 Woodside’s strategy 3 This 2008 Annual Report is a summary of Woodside’s Australia - other 2,493 1,381 981 591 487 552 773 936 979 91 Gulf of Mexico 237 158 157 28 ------CEO report 4 operations, activities and financial position as at 31 Algeria 65 65 74 71 77 8 - - - - December 2008. Continuing Operations 5,990 3,841 3,475 2,747 2,125 2,019 2,192 2,345 2,354 989 CFO report 6 Mauritania (Discontinued Operations) - 163 335 ------Total 5,990 4,004 3,810 2,747 2,125 2,019 2,192 2,345 2,354 989 Woodside Petroleum Ltd (ABN 55 004 898 962) is the (1) LNG markets overview 10 EBITDAX Before Significant Items 4,581 3,167 3,179 2,141 1,606 1,386 1,382 1,779 1,937 605 parent company of the Woodside group of companies. EBITDA 4,182 2,592 2,781 1,904 1,923 1,090 404 1,683 1,908 587 Reserves statement 12 EBIT(2) 3,298 1,859 2,235 1,624 1,645 854 114 1,331 1,510 443 In this report, unless otherwise stated, references to Exploration & Evaluation 348 524 422 306 253 296 978 96 29 18 ‘Woodside’ and ‘the Group’, ‘we’, ‘us’ and ‘our’ refer to Depreciation & Amortisation 884 733 546 280 277 236 290 352 398 144 Business reviews 16 Finance Costs 23 10 26 9 1 26 46 70 102 59 Woodside Petroleum Ltd and its controlled entities, as a Tax Expense 1,489 819 782 508 498 301 160 351 441 53 whole. References to ‘the company’ refer to Woodside NPAT Before Significant Items(3) 1,832 1,182 1,396 1,038 672 527 658 818 877 327 North West Shelf 16 NPAT 1,786 1,030 1,427 1,107 1,146 527 (92) 910 967 331 Petroleum Ltd unless otherwise stated. The text does not EPS (cents) Before Significant Items(3)(8) 267 176 212 158 103 79 99 123 132 49 Greater Enfield 18 EPS (cents)(8) 261 153 217 169 175 79 (14) 137 145 50 distinguish between the activities of the parent company DPS (cents)(4) 135 104 126 93 59 46 62 70 82 26 Pluto LNG project 20 and those of its controlled entities. Payout ratio (%) Before Significant Items(3) 51.5 59.9 60.2 59.7 58.5 58.2 62.8 57.1 62.3 53.0 Sunrise 22 EBITDA/Op Cash Flow (%) 110.5 104.4 143.9 137.9 160.5 90.6 33.5 151.8 127.8 105.7 References in this report to a ‘year’ is to the calendar year Balance Sheet ($m) Browse 23 ended 31 December 2008 unless otherwise stated. All Total Assets 14,929 9,730 8,969 6,969 5,446 4,782 5,011 6,115 5,969 4,721 Debt 2,957 1,032 1,820 1,128 1,013 1,068 1,429 1,662 1,415 1,835 Other Australia 24 dollar figures are expressed in Australian currency unless Net Debt 2,816 894 1,507 895 216 891 1,274 1,502 1,140 1,691 otherwise stated. Shareholder Equity 6,932 5,094 4,202 3,501 2,771 2,434 2,320 2,554 2,111 1,691 United States 25 Cash Flow & Capital Expenditure ($m) Other International 26 Woodside is continuing efforts to reduce its environmental Cash Flow From footprint associated with production of the Annual Report. Operations 3,784 2,482 1,933 1,381 1,198 1,203 1,207 1,108 1,493 555 Investing (4,568) (2,026) (1,900) (1,511) (94) (741) (730) (811) (428) (717) Health and Safety 27 In line with changes to the Corporations Act 2001 during Financing 803 (622) 55 (462) (352) (419) (484) (418) (948) 212 Capital Expenditure Sustainable business principles 28 2007, printed copies of the Annual Report will only be Exploration 491 533 499 276 105 113 87 278 233 148 PP&E and E&D(9) 5,012 2,342 1,448 1,303 652 382 343 491 236 288 Environmental excellence 29 posted to shareholders who have elected to receive a printed copy of the report. Ratios (%) Social contribution 30 ROACE Before Significant Items(3) 22.4 19.4 26.8 26.5 19.7 15.0 16.5 22.4 26.8 11.0 The Annual Report is also printed on an environmentally ROACE 22.7 17.1 27.1 26.5 31.5 15.0 (1.5) 24.8 30.7 12.4 Our people 31 Return on Shareholders Funds Before Significant Items(3) 26.3 22.5 33.5 30.2 29.3 21.6 28.4 32.0 41.5 19.4 responsible paper manufactured under ISO 14001 Return on Shareholders Funds 25.8 20.2 34.0 31.6 41.4 21.6 (4.0) 35.6 45.8 19.6 Woodside’s Board of Directors 32 environmental management standards, using Elemental Gearing 28.9 14.9 26.4 20.4 7.2 26.8 35.5 37.0 35.1 50.0 Corporate governance statement 34 Chlorine Free pulps from sustainable, well managed forest. Volumes Sales (million boe) Directors’ report: 45 Australia 2008 Woodside Sustainable Development Report Pipeline Gas 18.9 16.4 15.5 Remuneration report 46 LNG & LPG 18.2 18.2 18.5 NWS Gas (Pipeline, LNG & LPG) - - 34.8 30.8 31.0 27.9 28.2 24.8 26.7 Woodside also publishes a Sustainable Development NWS Oil/Condensate 13.2 12.6 12.8 14.0 14.4 16.2 15.7 15.0 15.1 9.8 2008 Financial Report 59 Australia - other 24.5 15.6 11.7 8.0 9.1 13.3 19.1 23.2 24.8 2.6 Report that combines our Health, Safety, Environment and Gulf of Mexico 3.1 2.6 2.6 0.4 ------Community performance, available on request or from the Mauritania - 2.0 4.3 ------Shareholder information 122 Algeria 2.3 2.3 2.3 2.3 2.3 0.1 - - - - company’s website (www.woodside.com.au). Total (million boe)(6) 80.2 69.7 67.7 59.5 56.6 60.6 62.7 66.4 64.7 39.1 Production (million boe) Shareholder Registry: Enquiries 123 Australia Pipeline Gas 18.9 16.4 15.6 Investor Relations: Enquiries 123 LNG & LPG 18.6 18.6 18.6 NWS Gas (Pipeline, LNG & LPG) - - 35.0 31.5 31.1 28.3 28.5 25.2 26.7 Business Directory 123 NWS Oil/Condensate 13.5 12.7 12.8 13.8 14.3 16.4 16.0 14.8 14.9 10.4 Australia - other 24.9 15.8 11.6 8.2 9.3 13.1 19.9 23.0 24.9 2.6 Key Announcements 2008 124 Gulf of Mexico 3.1 2.6 2.6 0.4 ------Mauritania - 2.2 4.4 ------Events Calendar 2009 124 Algeria 2.3 2.3 2.3 2.3 2.3 0.1 - - - - Total (million boe)(6) 81.3 70.6 67.9 59.7 57.4 60.7 64.2 66.3 65.0 39.7 Glossary 124 Reserves (Proved plus probable) Gas (Tcf) 7. 9 7.8 6.9 4.7 5.1 4.7 4.8 4.5 4.6 4.7 Quick Reference Guide 124 Condensate (MMbbl) 151.4 152.1 144.6 129.7 138.0 145.7 154.9 154.6 149.4 159.2 Oil (MMbbl) 168.8 170.2 221.1 294.5 258.8 341.5 300.1 263.3 236.4 146.1 Conversion Factors 124 Other 10 Year Comparative Data Summary 125 Employees(10) 3,099 2,981 2,888 2,508 2,528 2,219 2,418 2,420 2,198 2,141

Annual Report 2008 Shares High ($) 70.51 56.66 49.80 39.39 21.48 15.10 15.05 16.42 15.25 12.25 Low ($) 26.81 34.81 34.81 19.87 14.11 10.00 11.50 12.29 9.30 7.10 About the cover Close ($) 36.70 50.39 38.11 39.19 20.10 14.80 12.38 13.39 14.75 11.25 Number (000’s) 698,553 688,331 666,667 666,667 666,667 666,667 666,667 666,667 666,667 666,667 The cover picture shows the final inspection inside the No. Shareholders 141,035 131,460 119,003 83,829 72,267 69,491 67,523 55,347 42,135 43,201 Market Capitalisation ($m) 25,637 34,685 25,407 26,127 13,400 9,867 8,253 8,927 9,833 7,500 membrane tank of an LNG carrier. The corrugations in the Finding Costs ($/boe) (3 year average)(5)(11) 4.11 4.59 3.29 5.50 2.22 2.06 1.37 1.23 0.61 0.52 aluminium tank, one of four in the vessel, allow for the Effective Income Tax Rate (%) 32.7 35.8 35.4 31.4 30.3 36.4 235.8 27.9 31.3 13.8 expansion and contraction associated with loading and Net Debt/Total Market Cap (%) 11. 0 2.6 5.9 3.4 1.6 9.0 15.4 16.8 11.6 22.6 (1) Includes Significant Items other than 2002 Successful Efforts and 2001 Gulf of Mexico write-off. off-loading LNG which has been chilled to -160º C. The (2) EBIT is calculated as a profit before income tax, PRRT and net finance costs. photograph was taken at the Samsung Shipyards in Korea, (3) Excludes Significant Items (2002 results restated to reflect effect of successful efforts policy from January 2002). (4) DPS for 2002 includes a 41.0 cents dividend that was declared after 31 December 2002. where Woodside’s new LNG carrier is under construction. (5) Finding cost for 2003 includes acquisitions of additional Scope for Recovery volumes. The 165,000 m³ vessel will be owned by A.P. Moller-Maersk (6) From 2003, Woodside reports oil and condensate on a volumetric basis. and chartered to Woodside on a long-term basis for our (7) From 1 January 2005, Woodside prepares its financial statements in accordance with Australian equivalents to IFRS (AIFRS). To highlight the impact on previously reported data the We have partnered with Green information provided for 2004 has been restated. Information pre 1 January 2004 has not been adjusted for the effects of AIFRS. Reports TM in an initiative that Pluto LNG Project. Woodside will name the 276 m vessel (8) Earnings per share (EPS) has been calculated using the following weighted average number of shares 2008: 685,179,496, 2007: 671,447,950, 2006: 657,178,947, 2005: 655,150,640, ensures our Annual Report in late 2009. Photograph copyright by Samsung Heavy 2004: 653,790,795, Pre 2004: 666,666,667. obligations are not impacting the (9) 2005 PP&E capital expenditure includes acquitions through business combinations of $415,063,000, relating to Gryphon Exploration Company. environment Industries. (10) From 2005 employee numbers do not include third party contractors. Previous years have included third party contractors. (11) Finding cost methodology has changed from 2004 to be in accordance with the FAS69/SEC industry standard. (12) 2006 and 2007 data is presented inclusive of Mauritania operating results. This differs from the Income Statement which presents the Mauritanian result in Discontinued Operations. Further information on the Discontinued Operation is presented in Note 2: Segment Reporting. WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c 125 WorldReginfo - 6f23faca-7960-4e2e-a22c-f0bc43c37c2c - WorldReginfo Annual Report 2008Annual Report

Woodside Petroleum Ltd. Annual Report 2008 ABN 55 004 898 962