Woodside Energy cuts billions from project pipeline with monumental step to abandon Scope 3 targets

Woodside Energy has cut billions from its project pipeline, announcing it will abandon ambitious clean energy goals.

The Perth-headquartered oil and gas giant on Tuesday said it was walking away from Scope 3 targets, which include emissions arising downstream along the supply chain, as it delivered its first half results.

With the dramatic decision, Woodside drops its target to invest $US5 billion ($7b) in emerging new energy markets by 2030, announced in 2021 by Ms Westcott’s predecessor, Meg O’Neill.

“We have taken the disciplined decision to retire our Scope 3 investment and emissions abatement targets,” chief executive Liz Westcott told a conference call.

“These targets were established in a different market context and based on a different expected pace of the energy transition.

“Retiring the target is recognising that we don’t see line of sight to having commercial, value-accretive projects to meet that commitment by 2030.

“We continue to be interested in new energy opportunities, but we are being very disciplined with where we put our money.”

Ms Westcott told The West Australian Woodside’s aspiration of net zero by 2050 or sooner was unchanged, but LNG demand was “going to be sustained” for the time being.

“When we talk to customers, they remain interested in new energy as a part of their future energy portfolio, but the pace at which they look to introduce it is definitely slowing,” she said.

“Our ambition in new energy is still there.

“We still see a role for Woodside moving forward in products like liquid ammonia, liquid hydrogen, CCS (carbon capture and storage) — but what we’re reflecting is the pace at which these investments will happen is now slower.

“Hence, the target for 2030 is no longer appropriate.”

Woodside also revealed it is selling down its Beaumont green ammonia project in Texas, bought for $US2.35b just two years ago, as it chases annual savings of $US350 million ($489m) from 2028 under a strategic review announced in April.

The purchase was driven by Ms O’Neill, now BP’s boss, who described the acquisition as “a material step” towards delivering the Scope 3 targets.

But after only taking operational control of the project in March, when Ms Westcott officially took the helm, Woodside has the project in its sights as it aims for a leaner company.

“We are focused on improving our business effectiveness to keep our business resilient through the cycle,” she told the conference call.

“The structured review ... has identified opportunities to improve business effectiveness and leverage efficiencies as key assets move from project delivery into operations, and others enter later life production.

“We are building a simpler organisation that can make decisions faster, allocate resources more effectively, and deliver services as they are needed across our global portfolio.”

Ms Westcott did not rule out divesting Beaumont entirely.

“The review is going to look at a wide range of possible outcomes, and we’ll keep the market updated as we get to our conclusions,” she told The West.

The chief executive also did not rule out job losses with the Scope 3 abandonment.

“As we review all of our portfolios, we’ll be working through the details of that,” she said.

“Teams are starting to do that work today and thinking about how to refine our portfolio as we move forward.”

MST Marquee head of energy research Saul Kavonic said Woodside was following a global sector trend “returning to focus on simply being oil and gas companies”.

“Peak ESG (environmental, social and governance) is now behind us and investors no longer want to accept lower returns in pursuit of green targets,” Mr Kavonic said.

“Woodside is following investor wishes in this regard.

“Woodside will continue to Scope 1 and 2 targets, however, in line with Government policy.”

In another major development, Ms Westcott also revealed that the Albanese Government’s contentious domestic gas reservation proposal may scupper four new wells off Victoria.

After taking operatorship of the Gippsland Basin assets from ExxonMobil in July, Ms Westcott said Woodside was assessing whether to proceed with plans to unlock up to 200 petajoules of potential Bass Strait gas.

“Technical maturity and final details of the Australian Government’s proposed domestic gas reservation scheme will influence whether we progress this opportunity to a final investment decision,” she said.

“We need to think about the long-term returns that we will gain from those investments.

“We are talking, you know, near $1b to make an investment in Bass Strait additional returns, and so we need line of sight for the investment framework, if you like, the regulatory space ... all capital needs to compete.”

Woodside booked a 27 per cent surge in half-year net profit to $US1.67b, up from $US1.32b a year ago, as prices jumped due to the global oil crisis fuelled by the US war with Iran in the Middle East.

That was despite lower production, after cyclone-related impacts and the biggest ever planned maintenance turnaround at its Pluto LNG facility near Karratha, to prepare to process gas from the Scarborough field.

That $12.5b project is 98 per cent complete and on track for first LNG cargo in the December quarter.

The Scope 3 decision comes as the Federal Government is reportedly considering softening mandates on corporate emissions audits.

Corporate reporting of these indirect emissions is scheduled to kick in from July 1 next year, with comprehensive audits of climate reports following in 2030, but that may be pushed back and become a more limited review.

Environmentalists were up in arms, with clean energy finance advocacy organisation Market Forces saying investors including AustralianSuper “must respond with fire and fury”.