Pressure on NAB over energy policy as Woodside gas deal looms

NAB will announce its much-anticipated oil and gas policy on Tuesday, ahead of a big debt deal involving the Woodside Scarborough gas project.

Woodside chief executive Meg O’Neill.

National Australia Bank will unveil its much-anticipated oil and gas policy at its annual result on Tuesday, as the bank works on a debt package to help Global Infrastructure Partners buy an interest in the emissions-intensive $16bn Scarborough gas project in Western Australia.

US-based GIP, which teamed up with IFM Investors on the $23.6bn takeover of Sydney Airport, is the frontrunner to invest in the Pluto-2 LNG processing infrastructure.

Market sources said GIP was close to inking a deal to acquire a 49 per cent interest in the Woodside project for $US3.5bn ($4.7bn), including debt.

NAB is believed to be the arranger of the debt, with well over a dozen other banks said to be involved.

Some lenders have given themselves wriggle room to fund fossil fuel projects by distinguishing between extensions to existing projects and new projects.

However, any move by NAB, or other local banks, to participate in a Scarborough debt package would provoke a backlash from environmental groups.

Earlier this year, Woodside chief executive Meg O’Neill rebuffed a storm of protest about the project’s emissions footprint. Responding to claims by environmental groups that its impact on the climate would be worse than the Adani coal mine, Ms O’Neill said the low content of carbon dioxide in the gas from the offshore field made it attractive for LNG.

“Scarborough is a resource very well suited to our times,” she said. “Successful LNG producers will need to be low-cost and low-carbon.

“The Scarborough reservoir contains almost no carbon dioxide, which makes it particularly attractive in a decarbonising world.”

The Conservation Council of WA has taken a different view, saying Scarborough undermines global action on climate change and places world heritage at risk.

It described the project as “the most polluting fossil fuel project currently proposed in Australia”, which would result in annual carbon pollution equal to more than 15 coal-fired power stations.

“The direct pollution from this project would increase WA’s total emissions by almost 5 per cent, or 4.4 million tonnes per year,” the CCWA said.

NAB committed to a review of its oil and gas financing in November last year, saying it would be completed by September 2021.

The bank said it would take into account the International Energy Agency’s “Net Zero by 2050” report.

NAB’s executive leadership team met to consider the report, which was the world’s first comprehensive study of how to transition to a net zero energy system by 2050 while ensuring stable and affordable energy supplies. Importantly, the IEA concluded that, to reach net zero, there could be no further investment in new fossil fuel supply projects.

In the lead-up to the COP26 climate conference in Glasgow, opposition in Europe to gas as a transition fuel – a concept strongly supported by Australia – appeared strong.

Since then resistance has weakened, with a proposal to bring both nuclear power and natural gas into the European Union’s green finance taxonomy reportedly circulating in Brussels.

The paper lays out detailed technical criteria for gas to qualify as a transitional activity under the EU’s sustainable finance rules.

It came after declarations by European Commission president Ursula von der Leyen that the EU executive would soon table proposals on gas and nuclear as part of the bloc’s green finance rule book.

“We need more renewables; they are cheaper, carbon-free and homegrown,” Ms von der Leyen wrote on Twitter.

“We also need a stable source, nuclear, and during the transition, gas. This is why we will come forward with our taxonomy proposal,” she added.

Activist group Market Forces has said “inconsistent, unclear and overlapping disclosure” meant it was difficult to compare fossil fuel exposure between the banks, or establish a clear trend for any particular bank.

“Regardless of their disclosures, it’s obvious the banks are nowhere near aligned with their climate commitments,” campaigns director Jack Bertolus said.

“Despite the IEA concluding net zero by 2050 means there’s no room for new fossil fuel supply projects, the banks have been pumping billions of dollars into projects that expand the fossil fuel industry.

“It’s pretty simple: if Whitehaven, Santos, Woodside, New Hope and others expanding the fossil fuel industry are in your lending portfolio, then your portfolio isn’t aligned with net zero or the Paris Agreement.”