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ABC News
29-05-2025
- Business
- ABC News
Gas or hot air? Can Woodside lower energy prices and save the planet?
If it goes to full term, Australia's biggest ever resource project will pass the ton. This week, Woodside Petroleum was given the federal government green light to extend the North West Shelf venture — a gas project spawned in 1963 — by a further 40 years, taking it through to 2070. The environmental approval process for the extension, however, has taken on a life of its own. After more than seven years of negotiations and appeals, annoyed Woodside officials have become increasingly vocal in their criticisms of the ongoing delays. But on Wednesday, Woodside supremo Meg O'Neill, while her usual curt self, by her own admission was "delighted" by the proposed approval from the newly minted environment minister, Murray Watt. The project would, she said, provide the state with energy security, shore up domestic supply, keep international customers on a leash, aid the energy transition and help alleviate cost of living pressures. "We need to manage the pace of the energy transition," she told reporters at the post announcement press conference. She then homed in on the recent federal election campaign and the focus on living costs and particularly exorbitant energy costs. "Natural gas and the increased supply of natural gas is part of the solution to help bring those power prices down," she argued. Woodside has just over a week to agree to the conditions laid down by the federal government. But green groups are apoplectic, and all parties are bracing for legal appeals. But there are wider concerns, too. It's a well-worn argument from industry players. But it raises a couple of issues. Gas was always seen as a transition fuel, a stopgap measure to generate power during peak times as we weaned ourselves off coal during the renewable energy rollout. The Albanese government last year acknowledged the delays in building adequate renewable supplies and the extended role that gas will need to play as a result. But are we contemplating a delay that is likely to extend another 45 years? That's a timeline that doesn't quite gel with net zero targets by 2050. And what of the claims that all this extra gas will assist in reducing electricity prices? Australia already is one of the world's biggest gas producers and exporters. Why would even more gas production make any difference to local electricity prices? That's a point Josh Runciman, the lead analyst for Australian gas at the Institute for Energy Economics and Financial Analysis, has questioned. "The amount of gas that will actually flow from the North West Shelf extension into the domestic market is a key question here," he told ABC's The Business. Western Australia is the only state or territory to demand gas producers put aside a percentage of production for domestic use. But even that has its shortcomings. "Woodside is currently behind on its domestic reservation commitments," he said. "It's meant to supply 15 per cent of reserves. They're nowhere near that." The uproar over soaring energy costs mostly relate to the east coast dominated National Energy Market after gas exporters ran the system dry, sending electricity prices soaring. Western Australia, however, is neither connected to the National Electricity Market nor to the east coast network of gas pipelines, so extra production from the North West Shelf is unlikely to have any impact on electricity for most of the country. When it comes to emissions, gas might be better than coal but it's still a dirty fuel. It is the lesser of two evils. Much of Woodside's future production — the gas expected to continue providing feedstock for its giant Karratha plant — is expected to come from a new offshore development well to the north of the North West Shelf and the huge Pilbara based processing plant. Known as Browse, it too has been decades in the making. But there are technical issues with the gas in this field, with a high percentage of carbon dioxide. To extract that, and to remain in line with emissions commitments, it will need to be net zero from day one of its production. That will require an elaborate carbon capture and storage program that, ultimately, may limit the economic viability of the field. Already, there are concerns of a global glut of the energy source with planned major lifts in output from the United States, Canada, the Middle East and now Australia. Russia, meanwhile, which has the world's biggest gas fields, has been forced to divert supplies to China on the cheap after its invasion of Ukraine. Shikha Chaturvedi, the head of JP Morgan's global natural gas strategy, sees prices ultimately heading in just one direction. "We see a downward global LNG price trajectory with increased volatility, driven by a structurally oversupplied market," she told clients earlier this year. So, why would Woodside embark upon such a huge project? Mr Runciman isn't surprised. "When you look at declining markets, generally, companies will compete until it's last man standing and I suspect Woodside's move is part of that." Oil giants and tax revenue often are considered mutually exclusive terms, at least in Australia. While Norway and Qatar net huge sums annually, Australia has struggled to bring multi-national resource giants to heel, even with a Petroleum Resources Rent Tax. The Australian Tax Office has fought mammoth court battles against the likes of Chevron and ExxonMobil over unpaid tax. It's a delicate issue for Woodside, which this week noted: "Over four decades, the project has paid more than $40 billion in royalties and excise." While royalties are a cost of doing business, they are not a tax. They are payments for the right to exploit a resource owned by the state. That aside, Woodside is, however, one of the country's biggest taxpayers, forking out $814 million last year, $653 million the year before and $2.9 billion in 2022. But its payments under the PRRT scheme indicate the shortcomings of the regime. While it paid $890 million in PRRT in 2023, it last year received a $91 million benefit and a $313 million benefit in 2022. When the world began stepping back from hydrocarbons and petrochemicals as governments embraced zero emissions pledges, Woodside stepped forward. Two years ago, it took control of BHP's massive petroleum business, based mostly in the Gulf of Mexico. That ethos still pervades Woodside's ethos as it this week championed the North West Shelf expansion with the company arguing that without gas, we would need more coal. That's an idea that Mr Runciman rejects. It is renewables replacing coal, not gas, he said. "A sustained effort to focus on renewables would complement gas, not lead to additional coal." The question is whether we'll still be transitioning in 2070.
Reuters
28-05-2025
- Business
- Reuters
Australia approves Woodside's North West Shelf LNG project extension
SYDNEY, May 28 (Reuters) - The Australian government approved on Wednesday Woodside Energy's ( opens new tab request to extend the life of its North West Shelf gas plant, after a six-year review process dogged by delays, appeals and backlash from green groups. Environment Minister Murray Watt said in a statement the decision to approve the extension of the project would be subject to strict conditions "particularly relating to the impact of air emissions levels from the operation".
