Woodside Energy, Australia’s leading oil and natural gas producer, finds itself at a crossroads as it grapples with the dual challenge of reducing greenhouse gas emissions while maintaining energy production. The company has adopted a carbon credit strategy to offset its emissions, aligning with its decarbonization goals and aspirations towards achieving net zero status.
In 2024, Woodside retired a significant 1.3 million carbon credits, nearly doubling the amount from the previous year. The company manages a diverse portfolio of over 20 million credits sourced from various programs including the Australian Carbon Credit Unit (ACCU) scheme, Gold Standard, and Verra. This strategic use of carbon credits plays a pivotal role in Woodside’s approach to addressing Scope 1 and 2 emissions, as highlighted in its 2024 Annual Report.
Some investors have called for Woodside to reduce its reliance on carbon offsets. However, the company maintains that carbon credits are crucial for tackling emissions that are challenging to abate. Woodside emphasizes prioritizing direct emission reductions over offsets, with executive pay tied to gross Scope 1 and 2 reductions, ensuring a focus on abatement measures as the primary solution.
Woodside’s net zero roadmap is centered around three key areas: decarbonizing assets, improving energy efficiency, and investing in lower-carbon solutions. The company has set ambitious emission reduction targets, aiming to cut net equity Scope 1 and 2 emissions by 15% by 2025 and 30% by 2030, using 2016-2020 as a baseline. This involves utilizing carbon capture and storage (CCS) at key sites, enhancing efficiency, and integrating more renewable energy into operations.
Furthermore, Woodside plans to invest $5 billion in new energy products and lower-carbon services by 2030 to reduce 5 million metric tons per year (Mtpa) of CO2 equivalent. The company’s focus on hydrogen, ammonia, and renewable energy projects aims to assist customers in decarbonizing their supply chains. Woodside is also committed to enhancing operational efficiency by launching emissions reduction projects to achieve a 15% efficiency gain in LNG operations by 2030.
Despite operational challenges, Woodside remains dedicated to emission reduction efforts. The company is actively exploring partnerships to develop large-scale CCS projects and collaborating with renewable energy providers to incorporate clean energy into its supply chain. Woodside’s commitment to sustainability is further evident through its carbon offset initiatives and reforestation projects, which aim to generate around 10 million carbon credits by 2035 to offset emissions from fossil fuel production.
While carbon credits offer a temporary solution for offsetting emissions, concerns about their long-term sustainability persist. Some corporations have scaled back on offsets due to doubts over credibility and effectiveness, resulting in a 4% decline in voluntary carbon credit issuance in 2024. Woodside, however, remains steadfast in its offset strategy, recognizing the importance of balancing offsets with direct emission reductions to address existing technological limitations.
Woodside’s proactive approach includes investing $500 million in research and development of technologies such as post-combustion carbon capture, hydrogen fueling, and electrification. The company has collaborated with industry and government stakeholders to establish a carbon storage hub aimed at capturing up to 10 million tons of CO2 annually by 2040. This initiative aligns with broader national efforts to transition towards a lower-carbon economy while ensuring Australia’s energy security.
The response to Woodside’s climate strategy has been mixed among investors, with some advocating for reduced reliance on carbon credits and a stronger emphasis on direct emission reductions. The company faced shareholder dissent at its 2023 annual meeting, reflecting concerns over its heavy reliance on offsets. However, other stakeholders support Woodside’s approach, provided it is executed effectively and in alignment with the company’s long-term sustainability goals.
