These calls include: • 50% of shareholders voting for scope 1, 2, and 3 emission targets, and exploration and capital expenditure plans aligned with Paris in 2020, • 19% of shareholders voting for the company to manage down oil and gas production in line with Paris in 2021, and • The Climate Action 100+ investor initiative’s unmet demand to “align future capital expenditures with the Paris Agreement’s objective of limiting global warming to 1.5° Celsius”.2 Yet Woodside has moved in the opposite direction, drastically increasing exposure to climate-related transition risks by committing billions to new projects incompatible with Paris and a net-zero by 2050 scenario, and pursuing a merger that would approximately double its oil and gas production.3 Betting against climate goals In December 2021, Woodside announced a final investment decision (FID) to proceed with the $12.0 billion4 Scarborough-Pluto 2 project,5 consisting of a $5.7 billion greenfield offshore field (73.5% Woodside, 26.5% BHP)6 and the new $5.6 billion onshore Pluto 2 LNG train (51% Woodside, 49% GIP).7 Assuming the BHP merger proceeds, Woodside plans to spend $7.7 billion on Scarborough-Pluto, which multiple independent analyses have found is incompatible with Paris and a net-zero by 2050 scenario.
Despite Woodside’s climate rhetoric, management cites a global LNG demand forecast consistent with around 3°C of global warming when discussing investment in Scarborough.8 The International Energy Agency’s (IEA) Net-Zero Emissions by 2050 Scenario (NZE) – modelled to provide a 50% chance of limiting global warming to 1.5°C – projects Australia’s LNG trade to fall 25% below 2020 levels by 2030, and to halve by 2040.9 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”.
Five months before the Scarborough FID, the IEA found “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.”11 Carbon Tracker finds “Pluto Train 2 is not competitive even in the [IEA’s 2.7°C warming scenario] STEPS – that is, a world that utterly fails to decarbonise – meaning the deal with BHP is likely going to trigger Woodside to sanction one of its worst assets, increasing risk for its investors.”12 Scarborough-Pluto is not the only multi-billion dollar bet Woodside is making against climate action. The company increased its stake in the Sangomar offshore project in Senegal to 82% in July 2021.13 Carbon Tracker identified the $3.9 billion Sangomar project as the third highest cost oil project sanctioned in 2020 that is incompatible with the IEA’s (net-zero by 2070) Sustainable Development Scenario,14 let alone a net-zero by 2050 scenario. Even excluding the impact of the BHP merger, Woodside plans to spend around $2 billion on Scarborough-Pluto and a further ~$1 billion on Sangomar in 2022.15 Woodside’s proportion of the total capex costs for Scarborough-Pluto and Sangomar ($9.4 billion) could see the company spending more than half its current market capitalisation on projects that are incompatible with Paris. The immense stranded asset risk facing Woodside under the NZE is becoming increasingly likely to materialise, with key markets rapidly moving to align with global climate goals. Japan16 and Korea17, both key markets for Woodside, have announced plans to reduce gas in their energy mix by 2030, while IEEFA has found over 60% of proposed LNG import and gas power infrastructure in emerging Asia is unlikely to be built.