Australia’s Woodside Energy defends climate strategy, cites cost as a barrier to gas decarbonisation

This year, a government announcement that it would ramp up the extraction and use of fossil gas until 2050 and beyond – despite its commitment to a 2050 net zero goal – sparked a fierce backlash from environmental groups, who say the interests of powerful fossil fuel companies have been placed before people.

The country’s political leadership, as well as some of its oil and gas producers, still sees a significant role for liquefied natural gas (LNG) as the world shifts to clean energy. Claims that Australian gas exports are “clean” have bolstered the expansion of the LNG industry in the north of the continent over the past decade, though the climate credentials of gas have been increasingly challenged. New studies have found that the fossil fuel could be even dirtier than coal. 

Woodside Energy CEO Meg O’Neill on the company’s climate targets: “Our strategy has been to not put anything out that we are not serious about achieving. We don’t put out targets to try to placate certain stakeholders.” Image: Woodside Energy

Woodside Energy, Australia’s largest oil and gas company, is taking a measured approach as it deliberates over whether to start decarbonising its LNG facilities. Speaking to Eco-Business on the sidelines of the Singapore International Energy Week last month, the company’s chief executive officer Meg O’Neill said technical studies have found that the bulk of its emissions in the 2040s will come from its large LNG plants, but wonders whether decarbonising gas is the “most effective use of shareholder capital”.

“To avoid the emissions will cost US$200 to US$400 per tonne. It’s not cheap,” she said, adding that continuing to use gas to replace coal is a “cost-efficient opportunity” for Woodside. “We are still very bullish on gas and we continue to invest in gas.” 

O’Neill defends Woodside’s climate credentials and shrugs off criticism that it has been ramping up oil production – its latest financial report shows production jumping by 20 per cent quarter-on-quarter. She argues that in many of the Paris Agreement-aligned scenarios drawn up by Intergovernmental Panel on Climate Change (IPCC) scientists, gas demand continues to be robust.

Critics such as the Australasian Centre for Corporate Responsibility, a nonprofit, have argued that the scenario Woodside uses is based on an outdated model, and allows a larger role for oil and gas in Paris-aligned pathways than is possible today, given the current rate of global heating.

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There are a number of our shareholders who want us to be a really high-quality, cost-efficient, low emissions intensity oil and gas company. There are other shareholders who want us to do more on climate.

Meg O’Neill, chief executive officer, Woodside Energy

Woodside’s climate plan includes a reduction in Scope 1 and 2 direct and indirect greenhouse gas emissions of 15 per cent by next year, and 30 per cent by the end of the decade. In 2023, the company said its Scope 1 and 2 emissions dropped by 12.5 per cent compared to an 11 per cent drop in 2022 – and from using 13 per cent fewer carbon credits.

In April, investors voted against the plan in what observers said was the most emphatic rejection of corporate climate policy by shareholders to date. The main objection was Woodside’s dependence on carbon offsets and carbon capture and storage (CCS) technology and misalignment with the Paris climate accord. 

Woodside has a net zero “ambition” – O’Neill does not use the word “target”; the goals are non-binding – for 2050. She said the company has been exploring emissions reduction methods “to understand exactly what it would take” to achieve net zero by 2050. 

Beyond CCS, Woodside struck a deal with Singapore infrastructure firm Keppel to power its data centres with hydrogen in October this year. Earlier this year, it acquired a “clean” ammonia project from OCI Group in Beaumont, Texas, for US$2.3 billion. The facility uses gas as a feedstock and is able to capture 95 per cent of the emissions from the plant, O’Neill said. The company intends to spend US$5 billion on carbon capture technology by 2030, which O’Neill says will abate or avoid 5 million tonnes of emissions per year.

In this interview, O’Neill, who has overseen the rebranding of Woodside Petroleum to Woodside Energy during her six and a half years with the company since joining from ExxonMobil, talks about how expanded oil and gas production stacks up with global climate goals, shareholder activism, and why the company is not investing in renewable energy.

A recent International Energy Agency report said there is too much investment in new coal, oil and gas, and too little in energy efficiency and methane emissions reduction. From Woodside’s perspective, where are the opportunities for emissions reduction in oil and gas?

Our methane emissions intensity is less than 0.1 per cent of our total produced hydrocarbons. So we are already beating the target that many others in the industry have set. We recently signed a partnership with Japan Organisation for Metals and Energy Security to work with the Japanese Government on methane emissions reduction through the liquefied natural gas (LNG) value chain.

We have done technical work to understand what is required to decarbonise existing LNG facilities, because as we look at our asset life cycle, those that will be online in the 2040s largely will be the big LNG plants. That’s where the bulk of our emissions will come from. It is going to be an important conversation we will have with the leadership team and we will engage shareholders on it. Is it going to be the most effective use of shareholder capital [to decarbonise Woodside’s gas plants] or are there other things we can do? To avoid the emissions will cost US$200 to US$400 per tonne. It’s not cheap.

But hasn’t there been shareholder appetite for a faster decarbonisation?

It’s a mixed bag. There are a number of our shareholders who want us to be a really high-quality, cost-efficient, low emissions intensity oil and gas company. There are other shareholders who want us to do more on climate.

As management, our job is to take a look at a range of scenarios around how the world might approach the energy transition, and to make decisions that will ensure Woodside is resilient regardless of the pathway that the world ends up on.

We have seen a number of oil and gas companies, for instance Shell and more recently BP, relaxing their climate targets. What do you make of this backsliding? 

Woodside’s strategy has been to not put anything out that we are not serious about achieving. We don’t put out targets to try to placate certain stakeholders. That’s why we have we’ve got a bit of focus focus from some activists as we’ve not promised things that we don’t have line of sight to deliver.

The plus of that is not having to walk back any over-promises that we might have made a few years ago. I’m confident that our strategy around driving the energy transition, balancing investment in oil, gas and new energy is an approach that will serve the company, our shareholders and the planet. 

What are your thoughts on the pace of the energy transition at the moment, particularly in Asia Pacific, and how we can stay on track with the goals of the Paris Agreement?

One of the things that has become clear over the past few years is that, beyond energy transition, governments also need to think about energy security and energy affordability. 

We saw that in 2022 when Russia invaded Ukraine and energy prices around the world spiked because of the supply disruptions in Europe. Governments have taken a step back to work towards a more balanced approach – to ensure reliable and affordable energy, while also working on decarbonisation. Each nation will have their own net zero targets, with differing dates, as they try to reduce or limit greenhouse gas warming  to less than 2°C and aspire to 1.5°C. 

Is it getting more difficult for Woodside to attract and retain talent, given a growing environmental consciousness particularly among young people? How does the energy transition affect your appeal as an employer?

In Australia, we are one of several major corporations that runs a graduate intake programme, and it continues to be orders of magnitude oversubscribed. We continue to be successful in attracting new talent coming out of university. 

Our attrition rate is sub-five per cent, so we continue to do a good job of retaining staff. We are a global company. In places like the US, Mexico and Senegal we are seen as an employer of choice. We offer our employees in those nations a chance to do something that’s really revolutionary and important for national prosperity.

It seems that Woodside’s employer brand appeal is impressive, given the intense public pressure the company has been under in recent times, for instance for greenwashing emissions reduction claims and for climate goals not deemed ambitious enough?

I think we have been really clear about not greenwashing.

We are very clear about what we intend to do, and very focused on doing what we have said we intend to do – and we are not making false promises.

We are very disciplined in our approach to our climate related commitments and we spend a lot of time with our employees talking about what we are doing and helping them understand why they should be really proud to work for the company they are working for. We literally are keeping homes warm in Japan and Korea in the bitter winter nights – and I’m proud of that. 

Wind and solar couldn’t do that. In Korea, the days are very short in the winter. The solar intensity is poor when it’s cold. And when it’s cold, it’s often still. You’ve got to have a continually available fuel to keep homes warm. And natural gas – if you compare it to the alternatives – is the lowest emissions intensity source of thermal energy.

A blue ammonia and hydrogen facility in Beaumont, Texas, under construction. Woodside acquired the facility from fertiliser maker OCI Group in September 2024. Image: Woodside Energy

Not all renewables are intermittent, for instance hydroelectric power or geothermal energy. Does Woodside have any plans to move into renewables?

Given the size of Woodside – we are about 5,000 employees – we have to be very focused on where we have capability and skills. So we’ve focused our new energy strategy on hydrogen, ammonia and CCS. We believe those are technologies that we have the ability to scale. 

We recently acquired an ammonia plant in Beaumont, Texas from OCI Global [the 1.1 million tonne ammonia and hydrogen project was acquired by Woodside for US$2.35 billion in September]. In some ways it’s a conventional ammonia plant, but with the carbon dioxide that’s produced from hydrogen production being sequestered. We’ve got contracts with Linde and ExxonMobil to sequester the carbon coming out of that project – about 95 per cent of the CO2 created in the plant will be sequestered.

Carbon capture, use and storage has received criticism for being an expensive and ineffective climate solution. What do you say to those claims?

First off, it’s very effective.

The world’s been injecting CO2 into underground formations for decades, starting in the US, but also in Norway, which has been running an offshore CCS project for 20 years now.

In an Australian context, Gorgon [Chevron’s CCUS facility located at a liquefied natural gas plant in Western Australia which is the world’s largest] has sequestered a total of 10 million tonnes as of earlier this year. [Note: The US$3.2 billion project has faced criticism for repeatedly missing carbon removal targets.]

The technology works. If you go back to the science of the IPCC, it’s very clear that there is no pathway to net zero without CCS at scale.  

We are firm believers that this is an essential technology. When it comes to cost, I think the world is starting to realise that all of these lower carbon alternatives come with a higher cost. That’s a bit of the challenge that I think is affecting the pace of the energy transition.

Governments are grappling with keeping energy affordable, especially for working class families who are already struggling with inflation. That’s the balance that all of us are trying to find in the energy transition.

But the cost of renewables has come down dramatically, and in many parts of the world are now cheaper than fossil fuels…

Renewables are an important part of the energy transition. What I think is important to keep an eye on, though, is to make sure that these are firmed renewables [clean energy sources that deliver a consistant output, ensuring a reliable supply of electricity].

People want power 24/7; industry needs power 24/7. Building solar farms and wind farms is fine. But you’ve got to have something to manage the impact on the grid and ensure that you have the power that the customer wants when the customer wants it. That’s also a subtlety (of the energy transition) that many governments are starting to realise.

Indonesia is one country where there has been a lot of talk of the need to upgrade the grid to enable renewables additions…

Australia’s got the same kind of scenario. Looking at Australia, you’d think it’s got fantastic solar intensity, great wind intensity, and in many jurisdictions, quite a bit of land that’s unoccupied. But there are still struggles with things like getting transmission permitted and working through the community consultation. So there’s quite a bit of enabling infrastructure that’s going to be required for the transition to happen. And there’s an important role for governments to play in that space.

This interview has been edited for clarity and brevity.