Inside the backlash facing Australia’s biggest energy company

On a narrow peninsula near the Western Australian town of Karratha, construction workers are more than halfway through building what will become the country’s biggest fossil fuel development in a decade.

Woodside Energy says its plan to extract vast stores of gas from the Scarborough field 375 kilometres off the coast from here, and enlarge a giant processing plant to liquify that gas and ship it to Asia, will be a boon for the Australian economy. Because gas releases fewer emissions than coal when it’s burned to produce electricity, the company says the $16.5 billion project will also help Asian nations decarbonise and benefit the climate.

Woodside, the largest Australian oil and gas company, is doubling the size of its Pluto gas plant near Karratha to process gas from the $16.5 billion Scarborough field.Credit: Woodside

It’s an idea that goes right to the heart of Woodside chairman Richard Goyder’s enduring confidence that the ASX-listed oil and gas giant he leads is set to prosper in the coming decades.

He and his board are charting a path forward that includes working harder to lower emissions from Woodside’s operations and investing in “new energy” technologies such as hydrogen. But, for the most part, they are betting big that oil and especially gas are going to remain critically important, even as electric cars and renewable energy continue to grow and warnings intensify about fossil fuel emissions dangerously heating the planet.

In just over a week from now, Goyder will find out if his shareholders agree – or if he will be on the receiving end of a major investor uprising against an emissions-intensive company deemed out of step with necessary climate efforts.

“One of the things we’ve recognised is our investors are not interested in static; they want action,” Woodside chief executive Meg O’Neill says.

Perth-based Woodside, Australia’s biggest energy producer, is facing an important test. At its annual meeting set for April 24, investors will have their say on its so-called climate transition and action plan – a document detailing the outlook for its business model and how it intends to adapt to a world of hastening efforts to meet the Paris Agreement’s goal of limiting global warming to 1.5 degrees.

“A thorough and clear review of our plans, our progress and our challenges,” is how Goyder pitched it last month, adding that he believed it “deserves the firm support of our shareholders”.

Many of those shareholders, though, do not seem so convinced. As the ballot looms, the company is coming under fire from a growing number of powerful critics, including institutional investors and proxy advisers, who say the climate targets are too weak, and point to its ongoing lack of “tangible plans” to tackle the vast carbon footprint of the customers of its fuels around the world.

There are calls, too, for Goyder — one of Australia’s best-known businessmen whose other chairmanships include Qantas and the AFL Commission — to be personally held to account for the board’s perceived failure to adequately respond to long-running climate concerns. The last time Woodside put its climate report to an advisory vote in 2022, it suffered an extraordinary rebuke as 49 per cent of investors refused to endorse it – the biggest backlash ever recorded at a so-called “say on climate” shareholder vote globally.

In an ominous sign for the board, three of the four biggest proxy houses that guide investors on how to vote – CGI Glass Lewis, Institutional Shareholder Service (ISS) and the Australian Council of Superannuation Investors (ACSI) – say they do not believe Woodside’s climate plan has been improved enough since then, and are now recommending rejecting it once again.

CGI Glass Lewis goes even further, saying shareholders should remove Goyder as chairman when voting on his re-election.

Some have signalled their voting intentions already.

“In our view, Woodside Energy does not reflect a sufficient level of action to meet Paris Agreement commitments,” says the head of sustainable investing at Allianz Global Investors, Matt Christensen. “We view the board as ultimately accountable for the development of a transition plan, and consequently, we will not be able to support the re-election of the chair of the board, Mr Richard Goyder.”

Woodside's Karratha gas plant.Credit: Aaron Bunch

Most of the criticism levelled at Woodside’s climate strategy comes down to a few key issues that raise important questions about whether the company is doing enough to decarbonise and diversify revenue away from purely fossil fuels.

Woodside is on track to hit its near-term targets of lowering its emissions footprint by 15 per cent by 2025 and 30 per cent by 2030, including the use of carbon offsets generated by programs such as tree-planting to make up for emissions it does not reduce from its assets. So far, however, it has only set an “aspiration” rather than a hard target to be a net-zero emitter by 2050.

Initiatives to address its Scope 3 emissions – the greenhouse gases released when customers burn or process the products it sells – have also fallen short of some investors’ expectations. A new target to greenlight investments in lower-carbon products or carbon capture technologies that could abate five million tonnes of emissions a year by 2030 has been welcomed as a positive step. But there are concerns these will be difficult to commercialise, and Woodside is yet to set a “tangible plan” to reduce its vast Scope 3 footprint, estimated at 72.8 million tonnes in 2023.

“On the contrary,” says ISS. “Its business plan is to continue the production of oil and gas without near-term, meaningful development of lower-carbon services.”

By some measures, the investor pressure roiling Woodside this year is coming at a most unusual time: the company has been making more money than ever before. Oil and gas prices soared to near-record levels after Russia’s invasion of Ukraine exacerbated a global energy crunch in 2022, delivering Woodside windfall profits, and market conditions remain elevated by historical standards today. However, as governments legislate against carbon emissions and the shift to cleaner energy continues, the warnings are growing louder that fossil fuel demand is likely to peak and start to decline by the end of the decade.

The speed of that decline is the biggest unknown. According to some forecasts of how the world will strive to meet the Paris Agreement’s goals, gas demand will remain robust because it will be an indispensable part of the energy mix – the vital “transition” fuel that’s cleaner than coal but can still be used to back up renewable energy during periods of low wind and sunlight.

Other possible pathways suggest the role of all fossil fuels will be limited, especially if Asian economies decide to decarbonise more aggressively. Modelling from the International Energy Agency in 2021 found no new oil and gas fields could be developed for the world to achieve the agreement’s ultimate aim of limiting temperature rises to 1.5 degrees.

“Woodside persists in a determination to bet shareholder money against the energy transition, without any sign it has a serious plan B,” says activist group the Australasian Centre for Corporate Responsibility’s executive director Brynn O’Brien.

“Despite four years of persistent investor feedback Woodside has once again failed to bring anything of substance to the table.”

Woodside’s boardroom is not the only one to find itself under threat over climate-related issues. As investors seek to reduce their exposure to the systemic risks of global warming, superannuation funds and other asset managers in Australia and across the world have begun voting more frequently against directors of high-emitting companies who they believe are not acting quickly enough to combat climate change. Shareholders at ExxonMobil voted to unseat three board members in 2021 and install nominees with greener credentials, while tech billionaire Mike Cannon-Brookes led a successful push in 2022 to overhaul the board of AGL, Australia’s biggest polluter.

Woodside is hoping investors will re-elect Goyder this year, as it considers him a highly capable and effective leader who provides “valuable insight, stewardship and strength to the board”. It is also pitching its updated climate transition plan as a material step forward.

Goyder and the chair of Woodside’s sustainability committee, Ann Pickard, this week released a letter they sent to CGI Glass Lewis, accusing the proxy adviser of relying too heavily on claims made by climate-focused activism groups, while also rejecting suggestions the board had failed to adequately engage with climate-concerned shareholders.

“As at the date of this letter, Woodside has held 132 investor meetings in 2024 at which climate matters were discussed either with the chair, CEO, CFO, senior executives and board members,” they said. “This is in addition to 113 engagements held in 2023, demonstrating the breadth of our commitment.”

Shareholders at ExxonMobil voted to unseat three board members in 2021.Credit: AP

Woodside is forging a different pathway through energy transition than some of its bigger European rivals such as BP and Shell, which have been expanding into renewable energy and developing Scope 3 emissions targets. Woodside and Adelaide-based Santos have limited their diversification push to technologies such as zero-emission hydrogen and carbon capture and storage – areas where they believe they have relevant experience and infrastructure to do well. So far, they are steering clear of renewables, which they say are unable to generate the returns that their shareholders expect.

While investors mull the future of gas in a carbon-constrained world, works are continuing on the Scarborough field off WA. Although the reservoir is relatively low in carbon dioxide, even the company’s own figures indicate it will generate 878 million tonnes of emissions – equivalent to nearly two years of Australia’s total emissions – over the life of the project once the end use of the gas is factored in.

But Woodside says its confidence in the project’s ability to create and return shareholder value is only growing stronger. In a demonstration of the enduring Asian appetite the company sees for its LNG, two of Japan’s biggest gas users have recently locked in deals to acquire 10 per cent equity stakes in the venture, and buy gas cargoes from it until at least 2036.

The $81 billion superannuation fund HESTA is among a number of investors saying they will vote against the climate plan but for Goyder’s re-election. This raises a question: if Goyder remains chair, but the board’s climate plan is roundly rejected, where does it go from here?

HESTA’s Debby Blakey wants to see the board’s capability bolstered. The time is right, she says, to consider adding new independent directors with different skills to better prepare it for the energy transition.

“Woodside’s board must build trust and confidence that decisions made now will drive long-term shareholder value and position the company well for the transition to a low-carbon future,” she says.

Read more:

• Investor heavyweights failing to boot directors on climate commitments
• LNG giants escape export clampdown this winter as supplies lift
• Australia’s fossil fuel giants set to take multibillion-dollar hit

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