Woodside expects environmental lawsuits as the market frets about the Scarborough LNG project

The energy giant expects to be in the crosshairs of legal action from environmentalists, which analysts said could threaten production timetables and stoke concerns of gas shortages.

Woodside will be subjected to a spate of legal challenges to its plans to expand gas production in Australia, chief executive Meg O’Neill believes, and has urged the federal government to push a legislative change.

Australian gas companies, most notably Santos, have been dealt significant blows after the Environmental Defenders Office successfully won a series of legal challenges to block work on new projects.

Ms O’Neill said she expected the EDO to turn its attention to Woodside, which would threaten the gas giant’s $16.5bn Scarborough LNG project in Western Australia.

“What are seeing is that the EDO is going to challenge everything associated with the Barossa and Scarborough,” Ms O’Neill said.

Woodside Energy CEO Meg O'Neill. Picture: Nikki Short/NCA NewsWire

In September, a federal court said Woodside could not begin seismic work at its Scarborough project – a precursor to drilling wells for the project – after concluding the regulator, the National Offshore Petroleum Safety and Environmental Management Authority, was allowed to issue conditional approval.

Woodside said the ruling would not impact its target for first LNG cargo in 2026, and Ms O’Neill said the company has flexibility in the construction timetable of Scarborough. But analysts on Wednesday expressed their concern at the company’s investor day.

“I don’t think there is an analyst that isn’t worried about the prospect of delays at Scarborough,” said one investor.

Ms O’Neill last month urged a reform of how offshore drilling licences were granted, insisting global energy security was at risk if the federal government allowed the legal ambiguity to continue.

The Australian exclusively revealed that the government was considering loosening the amount of consultation that gas developers must undertake, but changes were unlikely until well into 2024.

It is understood changes being considered were legislative tweaks to remove the requirement that developers consult so widely that it includes people in neighbouring countries, sources have told The Australian.

Changes will be well received by the industry, but it is unlikely to help either Woodside or Santos – the two Australian companies pushing new developments.

So far, Woodside has escaped any major legal defeats at the hands of environmentalists.

Work on Santos’ $5.3bn Barossa gas project in the Timor Sea has been suspended since 2022 after the Federal Court found the oil giant failed to consult local Indigenous people adequately.

The company has submitted its environmental plan to NOPSEMA, but if it cannot resume drilling by December 3 then Santos could miss its first gas target of early 2025.

Santos had hoped to mitigate the impact by laying gas pipelines, but the EDO last week won a temporary injunction which prevented work happening. A full hearing will begin on November 13. If Woodside loses that case, many analysts expect Santos to miss its production target and incur significant financial losses.

Both the Barossa and Scarborough projects are expected to primarily service the offshore LNG market worth a record $92bn in 2022-23, but it could be used domestically.

Gas is a key source of energy for resource-poor countries such as Japan and South Korea, both of which have interest in Scarborough and the Barossa developments.

Australia’s perceived allowance of delays to LNG projects has stoked criticism from regional allies. Japan’s former ambassador, Shingo Yamagami, said Australia in March was “quiet quitting” LNG, and it had potentially dire consequences for the region.

WA is likely to increase its demand for gas, while Australia’s east coast – which is on course for a supply shortfall from 2025 – could be forced to import gas via a facility being constructed in NSW and proposed for South Australia.

Originally published as Woodside expects environmental lawsuits as the market frets about the Scarborough LNG project