Australia has big plans for its oil and gas industry, despite calls from environmentalists to reduce its fossil fuel output. The country's biggest company, Woodside, is planning to expand its exploration activities in response to the growing energy demand from the Asian market, despite having made ambitious climate pledges in recent years. Santos also plans to go ahead with a major gas pipeline, following the dismissal of a lawsuit from Tiwi Islanders in opposition to the project. And, following a year of several major U.S. megamergers, it seems Australia could be following suit as companies discuss the potential consolidation of its oil and gas assets.
Woodside, Australia's largest oil and gas producer, is continuing to pursue oil and gas exploration activities in a bid to develop the country's fossil fuel industry while demand remains high. This news came following the company's announcement of far-reaching emissions reduction targets that appear to be at odds with new exploration. Woodside announced that it had cut emissions from operations and generating the electricity it uses by 11 percent in 2022, compared to the average between 2016 and 2020. Like many other oil and gas majors, it aims to achieve net-zero carbon emissions by the mid-century.
However, much of Woodside's emissions cuts have come from buying contentious carbon offsets according to a recent report. Woodside has invested in land-based conservation projects to offset the emissions produced in its oil and gas operations. The report also suggested that Woodside's carbon emissions from operations actually increased by around 3 percent. The reason this was not reported by the company is because its emissions targets only cover Scope 1 and 2 emissions, not Scope 3 - the emissions produced from burning Woodside's oil and gas products. This has led environmentalists to accuse the firm of greenwashing.
Woodside has big aims for Australian oil and gas, with plans to develop the Scarborough and Browse gas fields off the northern Western Australian coast, as well as extend the life of its North West Shelf gas processing plant to 2070. It will also pursue oil development projects in Senegal and the Gulf of Mexico, as part of its "low-carbon energy" strategy.
Like many other countries, Australia has had to battle with energy shortages over the last couple of years, with consumers feeling the pinch. Industry actors believe that expanding exploration activities could help to unlock new reserves and ensure the country's energy security. Energy companies hope that new oil and gas exploration will help tackle the near-term structural gas shortfalls in Eastern and Western Australia. However, it would require collaborative work between the government and industry to develop an energy strategy that recognises gas as a transition fuel and embraces carbon capture and storage (CCS) technology, according to industry groups.
Australian Energy Producers has called for the expansion of oil and gas exploration in its 2024-25 pre-budget submission. There has been no new exploration licensing since August 2022 and the group is asking for annual licensing rounds to resume. The CEO of Australian Energy Producers, Samantha McCulloch, stated, "After more than a year of policy instability, government interventions and project approval delays, a recalibration of the policy and investment environment for natural gas is needed to secure our energy future. A new gas supply is urgently needed from coast to coast to ensure reliable and affordable energy for homes and businesses… We are calling on the federal government to work with gas producers, energy users, and state governments on an action plan to bring on new supply to address near-term structural shortfalls. Whether it's through streamlining environmental approvals or fixing the broken offshore regulatory system, Australia needs to move quickly to secure the economic, energy security and emissions reduction benefits of natural gas."
Meanwhile, some major gas projects are going ahead. Following the federal court dismissal of a lawsuit from Tiwi Islanders opposing the construction of a new gas pipeline, Santos's $5.8-billion Barossa offshore gas project is expected to advance. Work on the pipeline had been paused during the legal process. The islanders unsuccessfully accused Santos of not adequately assessing the submerged cultural heritage along the pipeline route, which runs 7km along Cape Fourcroy.
In addition, this month, discussions concluded on whether Woodside Energy and Santos would undergo a potential $52-billion megamerger. The two companies failed to agree on a valuation, leading them to halt discussions. Santos said in a statement, "An initial exchange of information, sufficient combination benefits were not identified to support a merger that would be in the best interests of Santos shareholders." Several U.S. companies have undergone major mergers in recent months in a bid to consolidate oil and gas assets and create new energy powerhouses. If Woodside and Santos can come to an agreement in the future, it could create a massive gas producer capable of attracting higher levels of international investment.
By Felicity Bradstock for Oilprice.com
Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK. More
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For Australia and the rest of the world, helping their economies grow is their uppermost goal for today, tomorrow and the future while any environmental threat to our planet might not materialize 400-500 years from now if it ever does.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert