PERTH • A US$12 billion (S$16 billion) liquefied natural gas (LNG) investment in Australia leads a wave of projects betting that demand will rise as the world rejects more polluting alternatives like coal.
The development of the Scarborough field, Pluto onshore processing facility and a 430km subsea pipeline led by Woodside Petroleum will supply up to eight million tonnes of LNG annually for at least 20 years, with first cargoes expected from 2026.
It is a project that cuts straight to the role of natural gas, a key debate in the energy transition as nations aim to both curb greenhouse gas emissions and avoid the sort of supply crunches that triggered recent power shortages in Asia and record prices in Europe.
"One of the quickest ways for nations to reduce their emissions is to switch their energy system from coal to gas-fired," Woodside's CEO Meg O'Neill told Bloomberg Television in an interview yesterday. "We think the market for LNG will be very robust for decades."
Climate campaigners estimate the project's direct carbon dioxide emissions to be 4.4 million tonnes a year and that figure will swell to 56 million tonnes if it includes the burning of the gas by consumers, or so-called Scope 3 environmental impacts, the Australia Institute think-tank said in a June report.
Gas is still needed, and particularly in industrialising nations, said Mr Henning Gloystein, global director of energy and natural resources at Eurasia Group. Yet sanctioning new spending on the fuel will also stoke debate over net zero commitments. "Investing in the future extraction of hydrocarbons certainly locks in future emissions," he said.
Shares in Woodside, which aims to sell a stake in Scarborough and retain about a 50 per cent interest, advanced 3.5 per cent in Sydney trading yesterday, as BHP Group gained 4 per cent.
Australia's LNG boom in the past decade has seen companies from Chevron to Royal Dutch Shell pump about US$200 billion into mega-projects that transformed the nation into a key exporter. Now there is a rising challenge in the seaborne market from Qatar and the United States.
Emerging projects include Cheniere Energy's expansion of its Corpus Christi export plant in Texas, Venture Global LNG's Plaquemines project in Louisiana, Qatar's North Field South development and Novatek's Arctic LNG-1 in Russia, according to Wood Mackenzie senior analyst Daniel Toleman.
"Woodside is not the only LNG player looking to take advantage of rising prices and strong demand," said Mr Toleman. "Over the next 12 months, we expect several low-cost projects to move towards sanction."
The outlook for natural gas will depend on how quickly national climate pledges are put into action. Consumption of natural gas would be about 25 per cent higher by 2050, based on a continuation of existing policies, while demand would peak in 2025 and slowly decline if nations follow through on their promised commitments, according to the International Energy Agency.
Key LNG consumers including Japan and South Korea have flagged that they will need to curb imports in the decades ahead to meet targets to zero out emissions.
"Woodside is aggressively progressing the Scarborough project even while major trading partners such as Japan and Korea are taking active steps to decrease LNG demand, effectively ignoring stranded asset risk," said Mr Dan Gocher, a director at shareholder activist group Australasian Centre for Corporate Responsibility.
BHP and Global Infrastructure Partners, which this month agreed to buy a 49 per cent stake in the Pluto Train 2 part of the development, are backing the view that gas demand will remain firm as the world decarbonises.
The new Woodside project is likely to continue into the 2050s and add at least A$125 billion (S$123 billion) to gross domestic product, Australia's Resources Minister Keith Pitt said yesterday in a statement.
BLOOMBERG
