Why has Australia approved the North West Shelf gas project beyond 2050?
Last week, Australia drew investor attention by extending the life of a major LNG plant beyond 2050, what is behind the move?
In 1989, the LNG carrier Northwest Sanderling left Karratha in Western Australia for Japan’s Sodegaura terminal. Onboard was the first ever LNG cargo of the North West Shelf (NWS) gas processing plant. The plant, the world’s largest oil and gas project at the time of its construction, is now one of Australia’s largest LNG projects - currently operated by Woodside Energy.
Regulatory approval for the NWS and the Karratha gas plant was set to expire in 2030. In one of its first major decisions following re-election just weeks ago, the Albanese government has announced that it will extend its approval for the project’s operating life for a further 40 years, well beyond 2050.
The decision, whilst welcomed by Woodside, seems against the run of play - given the Albanese administration’s enthusiastic embrace of Australia’s energy transition thus far.
The decision
The announcement was made on 28th May by Murray Watt - Australia’s minister for the environment and water.
“Following the consideration of rigorous scientific and other advice including submissions from a wide cross-section of the community, I have today made a proposed decision to approve this development”, said minister Watt.
In addition, the minister’s statement says the proposed decision will be “subject to strict conditions, particularly relating to the impact of air emissions levels from the operation of an expanded onshore Karratha gas plant”.
Following the minister’s proposed decision, Woodside was offered 10 days to comment before a final decision is to be made. Woodside, in a statement released the same day, welcomed minister Watt’s decision. In addition to jobs and tax revenue, Woodside claims the approval also contributes to energy security.
“This nationally significant infrastructure has supplied reliable and affordable energy to Western Australia for 40 years and international customers for 35 years and will be able to continue its contribution to energy security”, said Liz Westcott - Woodside’s executive vice president and chief operating officer for Australia.
The optics
To its critics, the move enables a significant expansion of Woodside’s LNG portfolio.
“For the Karratha gas plant to stay operational for another 40 years, Woodside will almost certainly need to move forward with its Browse LNG project”, warns Rohan Bowater, co-founder and lead oil and gas analyst at Accela Research.
“This gas field is estimated to produce 11.4 million tonnes of LNG and LPG per year, which would expand Woodside’s current production by an amount the size of Santos’ entire portfolio”, he adds.
“The main reason Woodside wants the extension of the North West Shelf is to develop its Browse project. Something it has been trying, and failing, to do for over 50 years”, said Alex Hillman, lead analyst at the Australasian Centre for Corporate Responsibility (ACCR).
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The approval also comes at the heels of a final investment decision by Woodside on the Louisiana LNG project. Woodside’s aim is to operate over 5% of the world’s LNG supply in the 2030s. A plan, Bowater notes, will result in Woodside's LNG holdings exceeding the scale of BP’s current portfolio.
Additionally, Woodside also has net zero targets in place including a net zero by 2050 objective and a 30% emissions reduction target by 2030. A rapidly expanding LNG portfolio has consequences for their viability.
“The company claims these projects won’t affect its ability to meet its 30% emissions reduction by 2030 target. We read this as meaning it will drastically increase its use of offsets”, Bowater says.
Investor discontent
At the recently concluded annual general meeting, investor discontent with the Woodside’s climate risk governance was evident. Nearly 20% of shareholders voted against the election of Ann Pickard – the chair of Woodside’s sustainability committee.
“Woodside and its partners have spent well over US$2.3bn already on Browse. If Woodside was carefully stewarding its investors’ capital, it would have stopped working on this financial black hole of a project a long time ago”, says Hillman.
It is now up to investors to do what Australia’s new government and the company itself seem unwilling to do – constrain Woodside’s fossil fuel expansion.
If Hillman is right, the NWS approval could incentivise investors to amplify their message from the 2025 AGM. “Investors will have to step up and play a vital role in restraining this company from making more poor decisions”, he adds.
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