Browse LNG faces huge carbon offset buy

This article was first published in Australian Energy Daily © Peter Milne.

Woodside’s Browse LNG project may have to purchase more carbon offsets than the entire Emissions Reduction Fund has delivered to date due to upcoming changes in the safeguard mechanism applied to large emitters.

The possible commitment to offset 50 million tonnes of CO2 was detailed deep inside a near 700-page environmental impact statement the Perth-based company lodged in December for the US$20.5 billion project.

The Browse offset would dwarf the one million tonne offset commitment Woodside made in October that requires 5,000 hectares to be planted in WA and will take some sting out of the up to 285 million tonnes of carbon emissions Browse will emit over its life.

The offsets would cost US$2 billion if purchased at the carbon price of about US$40 a tonne that Woodside uses to test its investments.

The offsets would cover between 17% and 25% of the project’s emission, depending on the amount of CO2 in the reservoir and how long the fields produce for. The significant impost is well short of the 100% offset called for by the WA Environmental Protection Authority in March 2019 but quickly rebuffed by industry and the WA government.

A Woodside spokesperson said the cost of complying with the safeguard mechanism was factored in and Browse remained a compelling investment.

“The Browse resources are perfectly poised for progressing towards commercialisation,” the spokesperson said.

Progress on the project that will pump gas 900km from offshore the Kimberley to the existing North West Shelf Plant in the Pilbara is currently stalled until a deal is finalised between the Browse partners that own the gas and the NWS partners that control the LNG plant.

All facilities in Australia outside the power sector that emit more than the equivalent of 100,000 tonnes of CO2 a year have a baseline level of emissions set by the Clean Energy Regulator. Carbon credits have to be bought to offset any emissions above the baseline but that has rarely been required as the baselines have generally been set at the maximum expected emission level.

In a new approach starting as early as July, new or significantly expanded facilities will have a so-called benchmark baseline applied based on industry best practice.

“Woodside expects that best practice will be based on top 10% of comparable facilities,” the spokesperson said.

According to the environmental submission, Woodside expects the high amount of CO2 in the Browse reservoir to contribute to the project exceeding its likely benchmark baseline by 50 million tonnes.

Australian Energy Daily asked Woodside if it was confident it could secure such a large amount of offsets within Australia given the federal government does not allow international offsets to be used.

The Woodside spokesperson said the offsets may be secured by Woodside as the operator of the project, or by the individual joint venture partners.

“Offsetting opportunities that will be investigated include industry methods or land-based solutions for carbon sequestration, which may include indigenous fire management projects, environmental native tree planting, and human-induced land restoration,” the spokesperson said.

“These solutions offer potential co-benefits resulting from the additional ecosystem services provided when carbon is bio-sequestered, as well as social, economic and environmental benefits.”

Woodside owns 30.6% of Browse, Shell has 27%, BP 17.3%, PetroChina 10.7% and Japan Australia LNG - owned by Mitsui and Mitsubishi - owns 14.4%.

Main image: North West Shelf LNG plant near Karratha. Source: Woodside Energy Limited.