Investor calls for Woodside to align its business with global climate goals include:
● 2020: 50% of shareholders voting for scope 1, 2, and 3 emission targets and
exploration and capital expenditure plans aligned with the climate goals of the Paris
Agreement;
● Since 2021: the Climate Action 100+ investor initiative demanding Woodside “align
future capital expenditures with the Paris Agreement’s objective of limiting global
warming to 1.5° Celsius”, which remains unmet;4
● 2021: 19% of shareholders voting for the company to disclose plans to manage down
oil and gas assets in line with the Paris climate goals, and 15% for a similar resolution
in 2022; and
● 2022: 49% of shareholders voting against Woodside’s climate plan in 2022.
Rather than respond to these calls, Woodside has moved in the opposite direction, drastically
increasing exposure to climate-related transition risks by committing billions to new projects
incompatible with the Paris Agreement and a net zero by 2050 pathway, and completing a
merger that has approximately doubled its oil and gas production and expanded potential oil
and gas growth capital expenditure to 55% of the company’s market capitalisation.5
Increasing transition risk
In its landmark May 2021 Net Zero Emissions by 2050 Scenario (NZE), the International
Energy Agency (IEA) found that to have a 50% chance of limiting global warming to 1.5°C:
“The rapid drop in oil and natural gas demand in the NZE means… no new oil and natural gas
fields are required beyond those that have already been approved for development.”6
This position is consistent with a “large consensus” of Paris-aligned climate scenarios, which
have found “developing any new oil and gas fields is incompatible with limiting warming to
1.5°C”.7
The IEA’s 2022 World Energy Outlook (WEO) reiterated this conclusion: “No one should
imagine that Russia’s invasion can justify a wave of new oil and gas infrastructure in a world
that wants to reach net zero emissions by 2050”.8 In fact, the latest NZE projects even sharper
declines in gas demand than the previous version, falling 23% globally by 2030.9
Demonstrating the immense financial risk posed by a net zero transition, Woodside’s own
2022 analysis showed average annual free cash flow from (pre-merger) producing and
sanctioned assets would be decimated under NZE, barely covering Woodside’s 2017-2021
average annual dividend payout for the majority of the next two decades.10 Woodside’s $7 billion11 debt load will impose additional financing cash outflows, further eroding any potential
shareholder returns.
This financial risk is becoming increasingly likely to materialise, with markets rapidly moving
to align policy with climate goals. Japan12 and Korea,13 key markets for Woodside, have both
announced plans to reduce gas in their energy mixes by 2030. IEEFA found in late 2021 that
over 60% of proposed LNG import and gas power infrastructure in emerging Asia is unlikely
to be built, a situation only exacerbated by high gas prices since.14
Yet Woodside plans to increase production by more than 4% a year from 2023 to 2027.15
Betting capital against climate goals
Despite the IEA’s clear warnings since May 2021, in December of that year, Woodside
announced a final investment decision on the $12.0 billion Scarborough-Pluto 2 project.16
Woodside will need to contribute $8.9 billion to Scarborough-Pluto, which multiple independent
analyses have found is incompatible with Paris and a net zero by 2050 scenario.17 Climate
Analytics concludes the Scarborough-Pluto project:
● “Represents a bet against the world implementing the Paris Agreement”, and
● “Is not 1.5°C consistent and consequently is a major stranded asset risk”.18
Scarborough-Pluto is not the only multi-billion dollar bet Woodside is making against climate
action. Woodside is also pursuing the Browse gas project, which if approved would produce
up to 1.6 billion tonnes of CO2-e over its lifetime (equivalent to more than three times
Australia’s annual emissions19) and potentially operate until the mid-2060s.20 This flies in the
face of IEA modelling showing a net zero by 2050 pathway would see gas supply falling by
72% by 2050.21
Despite already being laden with climate risks from its existing portfolio, Woodside’s decision
to take on BHP’s entire petroleum portfolio has roughly doubled the company’s oil and gas production.22 BHP’s portfolio included developments with capex costs of up to $17.5 billion
this decade, including the greenfield deepwater Trion and Calypso projects.23
Independent sensitivity analysis by KPMG has revealed even just a 10% drop from its base
case long-term oil price assumptions would decrease the net present value of:
● Scarborough by 80% to just $383 million;
● Sangomar by 24%;
● Trion by 63%; and
● Browse by 141% (becoming a $158 million liability).24
These potential impairments pale in comparison to those that would be recorded under NZE,
which models an oil price 50% below KPMG’s base case by 2030.25
Woodside’s decisions to sanction Scarborough and continue pursuing Trion, Browse and
other expansion projects, the value of which rely on the world failing to move towards Paris
alignment, represents an abject failure of corporate governance and risk management that
investors must act to address.
Shareholder support for this resolution is required to ensure returns from Paris-aligned
production are maximised, while preventing capital being wasted on projects that are
incompatible with climate goals Woodside claims to support.