Woodside Petroleum

Woodside is a top performer on policy engagement as it publicly reviews the alignment of trade associations with its own climate ambitions, and it aims to use its position in associations to evolve the associations’ stance on climate change and policy. However, Woodside’s Executive Vice President Development sits on the board of the Australian Petroleum Production and Exploration Association (APPEA), which has demonstrated a climate-negative stance. Woodside can reinforce its leadership in policy engagement by consistently reviewing trade associations’ stance on climate change and policy and withdrawing from climate-negative associations.

Woodside plans to achieve net-zero emissions by 2050 or earlier. The company has set intermediate emissions reduction targets for 2025 and 2030, aiming to reduce absolute emissions by 15% and by 30% respectively compared to its gross average annual emissions between 2016 and 2020. However, Woodside needs to disclose the amount of emissions reduction that it achieves through offsets and avoided emissions, and create more focus on reducing emissions from its own activities. The company should also set a target covering its scope 1, 2 and 3 emissions to successfully drive emissions reduction throughout the life cycle of its oil and gas products.

Woodside has invested around AUD 40 million (around USD 28 million) to be used over the next seven years by the Monash Technology Precinct, a research institution supporting Australia’s low-carbon transition. However, the company still scores poorly on intangible investment because it does not disclose its overall research and development (R&D) expenditures. Disclosure of low-carbon, mitigation and carbon removal technologies coupled with total R&D expenditures shows whether companies are aligned with sectoral-level expectations. The sectoral expectation for oil and gas companies is that they should dedicate at least 77% of R&D expenditure to low-carbon solutions to be aligned with a 1.5°C scenario.

Woodside’s past and projected reductions in scope 1,2 and 3 emissions intensity indicate it is not on track to decarbonise at the rate required by its 1.5°C pathway. Woodside has slightly reduced the emissions intensity of its sold energy products by increasing the share of gas within its portfolio by around 5% between 2014 and 2019. However, with no indication of increasing proportions of low-carbon products, such as renewable power generation or energy efficiency services, in its sold product mix, the company remains out of line with the changes required to align with its 1.5°C pathway.

Woodside plans to be carbon neutral by 2050. The company has set emissions reduction targets for 2025 and 2030, aiming to reduce absolute emissions by 15% and 30% respectively compared to its gross average emissions between 2016 and 2020. The company is also committed to eliminating routine flaring from its oil assets by 2030.

Woodside plans to achieve its emissions reduction targets by adapting the design of plants, improving energy efficiency of operations and through large-scale carbon offsets. The company’s targets also rely on the development of blue and green hydrogen and carbon capture, use and storage (CCUS) projects.

Woodside focuses on developing new natural gas projects in Western Australia, for instance, the Scarborough offshore gas fields. The approval of these projects is scheduled to take place during the second half of 2021. These projects are a cause of concern for investors because of their environmental impact and resulting increase in the company’s scope 3 emissions.

Between 2014 and 2019, the company’s scope 1 and 2 emissions intensity has increased due to an increasing share of gas in the company’s fuel mix. Gas is more emissions intensive than oil in Australia, where the company operates.

Woodside needs to include scope 3 emissions within its emissions reduction targets if it is to reach carbon neutrality by 2050. The company intends to announce its approach to scope 3 emissions in the second half of 2021. The approach that the company decides to take will be crucial for the credibility of its low-carbon transition plan.