Woodside’s Louisiana gas exposes Australia’s strategic energy error
Woodside Energy has pressed go on the Louisiana investment set to make it a “global LNG powerhouse”. Not bad for the oil and gas start-up named after a Victorian Bass Strait town seven decades ago.
Yet Woodside couldn’t get a timely pre-election regulatory rollover of its brownfield North West Shelf project that is left dangling and exposed to a new parliament where the Greens may have more say.
The West Australian government took four years to rule that the nation’s biggest-ever resources project could keep going from 2030 as it has for the past four decades. Then another two years to hear appeals. Now the feds want another six months.
The biggest challenge is that “you don’t know what is being requested to get to yes,” says Woodside chief executive Meg O’Neill in comparing this political knuckle-dragging to the Deep South American state’s welcome of its biggest-ever foreign investment.
The $US17.5 billion ($27 billion) investment in Louisiana LNG’s first three trains could make Woodside a bigger liquefied natural gas player than Exxon, Chevron and BP, says MST Marquee analyst Saul Kavonic.
Even amid Donald Trump’s peak uncertainty, that’s a serious bet on a forecast 50 per cent growth in global LNG demand over the next few decades.
The contrast reveals Australia’s strategic energy mistake. Australia’s big industry super funds rejected Woodside’s climate plan. It has been hounded into lower-yielding greener investment that leaves it open to shareholder activist attack. Environmental vandals conspired to damage O’Neill’s Perth house.
And federal Labor doesn’t seem to care that its six-year-old NW Shelf application is sitting in the public service in-tray. The Greens hope to force a minority Labor government to block it in the name of climate change.
Yet the world’s biggest carbon emitters – the US, China, India and Russia – still wouldn’t hit net zero by 2050. Australia still wouldn’t reach Labor’s ambitious 2030 targets for more renewables and lower carbon emissions.
Fossil fuels still account for 80 per cent of the world’s energy use. Replacing coal in Asia is the lowest-hanging fruit for cutting global emissions.
Yet taxpayer-funded environmental legal activists can delay fellow LNG producer Santos’ Barossa gas field in the Timor Sea by confecting Indigenous beliefs such as a Crocodile Man songline.
Australia’s self-loathing around its fossil fuel prosperity pushes up domestic electricity costs, mocking Anthony Albanese’s promised $275 cut to household power bills.
Its high-cost energy transition is closing down traditional processing industries and hurting new ones such as critical minerals.
“More gas – along with carbon capture and storage and possibly nuclear power – would shore up a grid based on solar and wind.
Peter Dutton’s Trump-like policy to divert gas exports to the domestic market risks making Australia an unreliable supplier to energy-poor Asian allies such as Japan and South Korea.
This is a national security error amid Xi Jinping’s geopolitical assertiveness and Trump’s America-first strategic ambiguity. Dutton’s plan even comes with a form of a tax on one of Australia’s biggest exports.
It’s been 15 years since Labor resources minister Martin Ferguson heralded Australia as an “energy superpower” based on Queensland’s emerging LNG export industry.
The investment case for extracting gas from Queensland coal seams to feed Gladstone’s new LNG trains was always based on selling it to Asia.
There would be no domestic gas shortages today if NSW governments had not smothered the Santos Narrabri project. Nor if Victorian Labor had not blocked onshore gas while subsidising brown coal-fired power stations to keep the lights on.
Victorian minister Lily D’Ambrosio blew up the technocrats’ attempts to develop a “capacity market” to encourage private investment in gas peaking plants that would back up unreliable solar and wind.
That’s even though the Australian Energy Market Operator forecasts that the grid will need to replace its current gas-fired capacity and then add another 60 per cent by 2050. Even the Clean Energy Council admits that more gas is needed to firm up solar and wind.
Albanese turned Ferguson’s “energy superpower” into a “renewable energy superpower”. But the PM doesn’t talk as much about this now, nor about his 2022 election promise of “hydrogen-ready highways”.
Snowy Hydro 2.0 has blown out from $2 billion to $12 billion. Offshore wind is too expensive and politically troublesome. Transmission lines have been hoisted on the environmentalists’ NIMBY petard.
Still dirty over Wayne Swan’s mining tax defeat, Jim Chalmers’ budget speeches don’t mention the booming iron ore, coal and LNG company tax that propped up his two temporary surpluses. Instead, he refers to “high prices for key exports”.
The green-left Australia Institute complains that gas exporters don’t pay royalties and are ATO-classified “systemic non-payers of tax”. But that was in 2019, when the ATO predicted that gas companies would work through the losses generated from the construction phase of their multibillion-dollar projects.
Now the ATO says oil and gas companies are “amongst the largest taxpayers in Australia”, generating $11.6 billion in tax in 2022-23. Chevron was the fourth-biggest taxpayer ($4.3 billion) ahead of Woodside (No. 7 with $2.7 billion) and Shell (No. 13 with $1.6 billion).
Similarly, 70 per cent of Australian gas comes from Commonwealth waters and is covered by the federal Petroleum Resources Rent Tax rather than state royalties. The budget forecasts $8.3 billion of PRRT in the five years to 2028-29.
Woodside’s Louisiana LNG will pay less company tax than on its Australian projects and seemingly no PRRT-style tax.
After the election, Australia needs to correct its strategic energy error. More gas – along with carbon capture and storage and possibly nuclear power – would shore up a grid based on solar and wind. And it would help energy-poor Asia reduce its carbon emissions in a transition that will stretch beyond 2050.
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)