Woodside faces climate revolt with oil prices in the doldrums
Woodside Petroleum says low oil prices may persist for up to two years during the COVID-19 pandemic.
Woodside Petroleum says low oil prices may persist for up to two years during the COVID-19 pandemic, while a majority of shareholders have backed a resolution on Paris climate targets, underlining growing investor angst that big energy producers are not doing enough to address climate change concerns.
The energy producer, operator of the North West Shelf and Pluto LNG plants, said oil demand would probably improve in the third quarter of 2020 but it was unclear whether aviation fuel would return to pre-pandemic levels.
“What we’re planning for is low prices for at least through this year and into next year,” chief executive Peter Coleman told the company’s virtual annual general meeting on Thursday.
“I think you’ll see a gradual strengthening of prices as we go through the year and into next year and then hopefully by 2022 we’ll be back to normal as we can be in the pricing area.”
Brent oil prices have plummeted by up to 80 per cent since January to just $US15 a barrel during April, recovering in recent days to trade at $US24 a barrel.
A resolution requiring Woodside to lay out how emissions and projects meet Paris climate targets received 50.16 per cent of shareholder votes, while 42 per cent voted for a resolution on climate-related lobbying. Santos also suffered a large protest vote on climate at its AGM.
“This is a breakthrough moment for investor action on climate change in Australia,” Australasian Centre for Corporate Responsibility climate director Dan Gocher said. “Until Woodside explains how its business will align with the goals of the Paris agreement, the company will be in open conflict with the majority of its shareholders. This is an untenable position for the company.”
For the climate resolutions to proceed a request to change the constitution was first required but that failed to meet the high 75 per cent approval rate needed.
Big proxy advisory firms including ISS have supported an AGM resolution requiring Woodside to disclose interim targets for both direct and indirect emissions and questions over whether new gas projects can meet Paris climate targets.
About 20 per cent of votes were also cast against the company’s remuneration report.
Woodside chairman Richard Goyder earlier said its largest shareholders had raised climate change as a leading issue for the gas producer amid oil market and COVID-19 ructions, with the producer touting that its gas projects would replace higher polluting fuels like coal.
“The fact that global emissions growth is likely to slow this year due to the severe economic downturn is not in any way an excuse for inaction,” Mr Goyder said. “This is still a major challenge for the world. Our industry has a big role to play.”
The COVID-19 downturn may offer M&A opportunities, but Woodside said it would be wary of jumping into completely new sectors such as new energies and renewables, given market ructions. Global energy majors including Shell and BP are in the process of tilting their businesses away from fossil fuels to a wider array of energy sources.
“The big challenge is finding scale in this. If you think about the amount of capital we are able to deploy in the oil and gas industry, it is many, many billions of dollars that are required and you just don’t find projects of similar scale in some of these other energy sectors, particularly renewables,” Mr Coleman said.
“The renewables sector itself is very challenged as host governments globally withdraw subsidies for that sector and it’s also challenged by the rapid change in the efficiency of technology, particularly in the solar sector where investors in that area can find themselves with marginally higher cost plants very quickly.”
Woodside said it wanted to keep enough of its $7bn liquidity to maintain a buffer for the business as the market gradually recovers.
“We have a large investment commitment this year already and we just want to make sure we don’t draw down too heavily on the liquidity that we have available to us,” Mr Coleman said.
The producer said in March it would delay its major LNG projects Scarborough and Browse, and halve its 2020 spending to protect the company against a savage drop in oil prices and fallout from the pandemic. A final investment decision on Scarborough, initially due in June, will now be made in 2021 while a revised date for Browse is not set.