Australian petroleum exploration and production major Woodside Energy Group (ASX: WDS) and its partners may have to pay a carbon bill of up to A$63 billion (US $42 billion) from their gas fields by 2050 following the latest Safeguard Mechanism reforms, as reported by Renew Economy.
The estimate, which is just A$1 billion short of the company’s market capitalization, is from a new report from Climate Energy Finance (CEF).
Australia’s Safeguard Mechanism, requiring the country’s largest greenhouse gas (GHG) emitters to keep their net emissions below a certain limit, was amended last month and the new rules will come into force as of July this year.
According to the reformed Safeguard Mechanism, Woodside will have to cut Scope 1 emissions from its two existing LNG processing facilities for the North-West Shelf (NWS) and Pluto projects by 4.9% every year, while its two proposed gas fields will have to be net zero from the beginning.
“We project that the cumulative liability of Woodside and partners’ Burrup Hub project to 2050 is between A$28 billion to A$63 billion (nominal, not NPV), with Woodside’s share approximately 40%. Most costly are the ageing NWS facilities and the planned Browse expansion,” Tim Buckley, CEF director and author of the report, said.
“This is a clear commercial signal for Woodside to invest in decarbonization,” he added.
The lower projection is based on an opening carbon price of A$45 per ton (/t). Thus, the existing operations will cost Woodside A$18 million in 2024 and even more in the following years, reaching a cumulative A$19 billion by 2050. New facilities will account for an additional A$9 billion.
The higher projection is based on a carbon price of A$75/t, with existing facilities generating an invoice starting at A$31 million next year and reaching a total of A$36 billion in 2050. In this scenario, the costs associated with new facilities will be some A$26 billion by 2050.
Meanwhile, there has been growing dissatisfaction among Woodside’s shareholders over its climate track record, and last year 49% of shareholders voted against the group’s climate report, Renew Economy said.
Ahead of the upcoming annual general meeting on April 28th, proxy advisors are reported to be pitching for no votes against the reelection of directors Ian Macfarlane, Larry Archibald and Goh Swee Chen, and the remuneration report.
Investors want the board to bring new directors with energy transition and climate science experience, and to provide an energy transition action strategy to deliver on Scope 1-3 net zero emissions by 2050, CEF said in its report.
According to Climate Analytics, Woodside’s Scope 3 emissions will account for 1% of global emissions by 2050.