By Peter Milne
Woodside boss Meg O’Neill says the energy major’s climate plan is “upfront, credible and honest”, despite the likelihood investors will reject it at the company’s annual general meeting next week.
O’Neill said on Friday that the company was working to address the biggest concern of investors that it was not moving fast enough to reduce its own emissions nor help its customers reduce their carbon footprint.
Three of Australia’s four biggest industrial carbon polluters are gas export plants because of the vast amount of energy needed to cool gas to a liquid making it fit for shipping.
CEO Meg O’Neill presented Woodside’s results just five days before its crucial AGM.Credit: Dominic Lorrimer
O’Neill said Woodside was investigating technologies to reduce those emissions but “it’s not going to be easy or cheap”.
“Addressing climate change is incredibly complex and challenging,” she added after Woodside reported a 31 per cent drop in revenue for the March quarter on the back of less production and lower gas prices.
Woodside’s revenue for the quarter ending March 31 clocked in at $US2.97 billion ($4.65 billion), 31 per cent weaker than the $US4.3 billion revenue of the same quarter last year, as the global gas markets continue to return to normal pricing after the spike caused by Russia’s invasion of Ukraine two years ago.
The average price paid by Woodside’s customers of $US63 (per barrel of oil equivalent) for the quarter was 25 per cent lower than the average price one year ago ($US85). Production guidance for the full year was unchanged.
Woodside’s annual general meeting on Wednesday is expected to be fiery, with investors tipped to focus more on the company’s climate strategy instead of revenue. The climate plan copped a 49 per cent no vote in 2022 and the result, despite being advisory and non-binding, was a huge blow to the environmental credentials of Australia’s largest oil and gas company. Its board and senior management have since lobbied hard to reverse it.
Three of the four biggest proxy advisers that guide investors on how to vote – CGI Glass Lewis, Institutional Shareholder Service and the Australian Council of Superannuation Investors – have determined their concerns had not been addressed and told investors to vote down Woodside’s new climate plan. CGI Glass Lewis also recommends shareholders reject Woodside chair Richard Goyder’s re-election.
While Woodside predicts a strong gas market for decades, it did model a rapid decline in demand in its revised climate plan released in February.
“We are still a cashflow-positive business in that circumstance,” O’Neill said.
Woodside can offset its emissions and used almost 660,000 tonnes of carbon credits in 2023 to meet its corporate climate goals. However, less than 1 per cent of the credits used were Australian.
The federal government has revised the safeguard mechanism governing large industrial carbon polluters to achieve significant reductions this decade, starting from July 2023, and is not accepting overseas carbon credits.
O’Neill said Woodside was ahead of the game after starting a carbon business in 2018 and has been investing in Australian offset projects since then.
“We’re very well-prepared to meet the obligations of the safeguard mechanism out to 2030,” she said, adding that any additional credits needed to meet its corporate targets could still be sourced internationally.
Woodside’s approach to the carbon pollution from customers burning its oil and gas – its so-called Scope 3 emissions – has disappointed some investors.
Rather than a commitment to reducing its 2023 Scope 3 emissions of 73 million tonnes of CO₂, Woodside aims to invest $US5 billion in “new energy products and lower carbon services” by 2030.
Its most advanced project – to produce 60 tonnes a day of liquid hydrogen in Oklahoma to serve as a green transport fuel – suffered a setback when the first draft of a mechanism for credits under President Biden’s Inflation Reduction Act “wasn’t what we were hoping”.
O’Neill said Woodside was lobbying for more favourable treatment in the final mechanism.
The $54 billion company has a more ambitious plan south of Perth to initially produce 300 tonnes of hydrogen a day, mainly from gas, with offsets bought for the emissions. The key issue with hydrogen investments is getting enough confidence in customer demand.
O’Neill said Japanese customers were interested in buying ammonia – that is made from hydrogen – to form part of the fuel mix in coal-fired power stations to reduce emissions.
Keppel, a large Singaporean operator of energy-hungry data centres, and Woodside are jointly investigating the possible export of liquid hydrogen.
O’Neill said Singapore had legislated that data centres must use less carbon intensive power to be allowed to expand.
“That’s a market where you’ve got business that wants to grow, but has to come up with a solution, that’s a very appealing option for us,” she said.
More of Woodside’s gas will be sold in Western Australia after the state government extended permission for gas from the Pluto field to be processed at Woodside’s nearby North West Shelf plant. The deal, which lasts until December 2025, has doubled the amount of gas that cannot be exported from 15 to 30 per cent.
The release of the agreement details comes as Australia’s most gas-dependent state faces an unfamiliar shortage this decade. A state parliamentary inquiry into WA’s gas policy, which heard large users call for lower exports, is expected to release its recommendations in the next few months.
Woodside is forging ahead with major projects to boost longer-term production. The Sangomar oil project off the coast of Senegal is 96 per cent complete, with the first production scheduled for mid-year.
In WA, Woodside has started drilling the Scarborough gas field, and the first modules of processing equipment have arrived at the Pluto gas plant, which is being expanded to double its capacity.
“Overall, the Scarborough and Pluto Train 2 projects were 62 per cent complete at the end of the first quarter, and we remain on target for first LNG [liquified natural gas] cargo in 2026,” O’Neill said.
Woodside shares traded flat on Friday, closing at $29.40 a share.
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