Santos chief tells APPEA conference climate funding risk is real for gas giants
Strike Energy’s Stuart Nicholls has taken Andrew Forrest to task over claims new gas projects were ‘fossils’ for their high carbon emissions.
Australian oil and gas producers have warned the industry could suffer the same funding strike that has hobbled coal companies unless they rapidly step up action on climate change.
The opening day of the energy sector’s annual APPEA conference in Perth was dominated by questions over how producers plan to cut emissions and deal with concerns raised by shareholders and financiers over their greenhouse gas exposure.
The nation’s gas industry would increasingly face the same constraints put on coal suppliers unless it escalates its response, Santos said.
“We need to lead the charge on decarbonisation before we find ourselves in the same place as the coal industry. That’s what will happen if we think we can do nothing and just keep doing business as usual,” Santos chief executive Kevin Gallagher told media at the conference.
“Every single day banks are announcing they’re getting pressure from activist groups to not only not invest in coal but getting questioned about investing in future gas projects. We’ve got to be awake to that. That is happening.”
The industry found itself under attack on Tuesday from an unlikely source when Fortescue Metals Group founder Andrew Forrest blasted Santos and Woodside Petroleum for embarking on new gas projects, describing the duo as fossils for their high carbon emissions.
Strike Energy, whose high profile board includes former Fortescue boss Nev Power, questioned Mr Forrest’s attack and accused him of double standards given his plans to bankroll a major gas project in NSW.
“He’s bashing the industry so hard and then building an LNG import terminal on the east coast of Australia feels like a pretty hypocritical thing to do,” Strike managing director Stuart Nicholls told the conference.
Mr Gallagher said the tirade against Santos and Woodside may have been sparked by the magnate’s own changing business interests.
“Andrew is entitled to his views and Andrew is going to have views and they will change from time to time as Andrew‘s interests change from time to time. I’m not going to comment on the accuracy of those. That’s for Andrew to espouse,” Mr Gallagher said.
Major energy industry contractor Clough said one of its financial providers pulled the pin on a recent gas project due to it being a fossil fuel development.
“We all see shareholders taking a much more active role in projects. We’ve had recently one of our long-term bonding suppliers were unable to supply a bond to our business because it was a fossil fuel project. And it was a single gas plant,” Clough chief executive Peter Bennett told the conference.
“Moving away from that support is quite concerning to me. It is concerning that people are moving away from it without necessarily understanding the fundamentals of what that project is trying to do. It’s more based around this almost hysterical response and in a net zero energy future, fossil fuels still have a very critical role to play. We need to be able to communicate that.”
Woodside, preparing a decision on its $16bn Scarborough gas project offshore Western Australia later this year, said climate was now a major issue in conversations with investors and bankers.
“They’re keen to see us decarbonise – it’s a pressure all of us are feeling and there’s an intense desire to understand what are we doing. We’re feeling the same pressure from our shareholders that I think everyone in the whole room is feeling,” Woodside interim chief executive Meg O’Neill said.
Clough said more investors could walk away if the industry failed to respond and noted a move by activist shareholders that had joined the board of oil major ExxonMobil.
“I think that is part of the potential. Having people with that environmental activist background on your board isn’t necessarily a bad thing. We all need checks and balances from time to time.”
West Australian Premier Mark McGowan also acknowledged the rapid change.
“There has been a fundamental shift in attitudes and approaches to climate change, from Governments, regulators, investors and the public, in the run to net zero. It’s an irrevocable shift,” Mr McGowan told the conference. “Even in the last few weeks, we can see the pace of change accelerating and the pressures increasing.”
A landmark International Energy Agency report last month concluded no oil or gas fields should be opened up if the world was to reach net-zero emissions by 2050.
-The reporter travelled to Perth as a guest of APPEA
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