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Woodside’s Browse returns in focus amid carbon price adjustment

Woodside has defended projected returns from Browse after doubling its carbon price assumptions for the project.

Woodside Petroleum has defended its $US20.5bn ($29bn) Browse gas project amid concern its use of a steeper carbon price could damage the projected returns from the mooted West Australian development.

The producer doubled the carbon price assumption it uses to model oil and gas projects to $US80 a tonne, from $US40, in anticipation that a greater focus on meeting Paris climate targets could see a more onerous carbon regime put in place.

Consultancy Wood Mackenzie described the carbon price adjustment as potentially bigger news than its $6.3bn hit from writedowns and charges revealed on Tuesday.

“This is a big jump for an independent,” WoodMac analyst Obo Idornigie said. “Woodside is now in the ballpark with targets set by European majors such as BP ($US100 a tonne from 2040) and Shell ($US85 a tonne by 2050), although it did not state when the revised pricing will be effective. Nonetheless, it will likely adversely affect the projected returns of high-carbon pre-final investment decision assets such as Browse.”

However, Woodside said Browse still stacked up even under the higher carbon price model noting an Australian safeguard mechanism in place that sets a baseline standard linked to historical emissions.

“That baseline is because we’re a trade-exposed industry and we need to remain competitive,” Woodside chief executive Peter Coleman said.

“Whatever is above our baseline assumptions makes an impact and it’s important, but it’s not a large enough impact to move the project.”

Woodside plans to make a final investment decision on Browse in 2023, prompting analysts to question whether it risks the high emissions project potentially becoming marginal or even stranded should it start producing later in the decade.

Two of Woodside’s partners in Browse, BP and Shell, are also shifting their focus away from gas developments amid a fast-moving transition away from fossil fuels due to climate change.

perry williams

Perry Williams
Perry WilliamsBusiness Editor

Perry Williams is The Australian’s Business Editor. He was previously a senior reporter covering energy and has also worked at Bloomberg and the Australian Financial Review as resources editor and deputy companies editor.

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Original URL: https://www.theaustralian.com.au/business/mining-energy/woodsides-browse-returns-in-focus-amid-carbon-price-adjustment/news-story/1ae5bcc968499e4cdce3b264caaf5c07