Ten tales of Woodside’s merry men: Mark, Bill and Ben

ANALYSIS

In May 2017, two months after Mark McGowan became WA Premier, Woodside chief executive Peter Coleman presented his growth vision to investors. Gas from distant Browse would flow to the North West Shelf plant, Pluto LNG would be expanded, and the Scarborough field developed.

The reception was cautious, for Browse in particular, with one analyst commenting the plan was "smacking of desperation rather than strategy."

It was a challenging agenda, but, as the AFR noted, "at least the Western Australian government is on side."

Four years on, Coleman is gone, Browse is dead, and Scarborough and Pluto have been continually delayed. But through it all, there was one constant: the WA Labor Government kept backing Woodside.

Here are ten short tales of how much effort and focus the WA Government has devoted to just one company. A company that is desperate to get its last big carbon-intensive project up before the green investment tide leaves it stranded without any other options.

1 - Promises forgotten

Sometimes it is what you don't do that counts.

The then opposition's 2017 platform said WA Labor would "monitor, publicly advertise and appropriately regulate greenhouse gas emissions, particularly in high emitting industries."

If there was any monitoring, it has not been advertised.

Independent public information is the most important tool to sort hype from fact.

The less data in the public realm, the freer companies are to spin without accountability. And for a proponent of LNG projects with millions of tonnes of emissions a year, nothing is more critical than an uninterrupted green spin cycle.

The only attempt to fulfil Labor's promise to regulate high emitting industries came from others (see #2 below). Labor's only role was to follow orders and destroy it as quickly as possible.

2- The week McGowan did what he was told

On March 7 2019, halfway through Premier Mark McGowan's first term, the WA Environmental Protection Authority proposed that all new large projects offset all of their carbon emissions.

If global emissions have to go to net-zero, the logical first step was to stop adding to the problem.

The new guidelines would apply to all projects in the EPA's system, including the assessment of Woodside's Browse to North Shelf plan that had started just six weeks before.

Industry opposition was instant and frenzied, led by Woodside's Coleman and Kerry Stokes' The West Australian.

The next day's ABC headline "Mark McGowan attacks EPA guidelines" summarised how quickly and unequivocally the Government had sided with industry.

A week later, the supposedly independent EPA capitulated, withdrawing the proposal for "further consultation."

There could have been legitimate problems with the EPA proposal that the Government need to address. But in caving to industry demands completely, the McGowan Government looked subservient.

Woodside's Coleman said "the McGowan Government deserves credit for acting quickly."

3- The Minister for Petroleum launches a climate policy

Woodside was not clear of the EPA yet.

When the regulator pulled back in March 2019, it said it "does not resile from the need to reduce WA's greenhouse gas emissions." It was not the complete surrender Woodside may have wanted.

In May, the EPA started 12 weeks of consultation for its second attempt to control carbon emissions to be released in December as a draft.

Industry's complaint in March that it had insufficient involvement in policy development would not wash this time.

In August 2019, halfway through the EPA's policy development process, the Minister for Mines, Petroleum and Energy Bill Johnston announced an emissions policy for major projects.

The policy adopted an "aspiration of net zero by 2050," not a target, and allowed proponents to propose their own targets and timeframes.

The Government described it as a "sensible and balanced approach to end uncertainty for the industry."

In contrast, the AFR headlined it as "WA moves to muzzle emissions watchdog."

The move was widely seen as an attempt to pre-empt the EPA's new policy by laying down an expectation of empty unenforceable words.

It was never explained why a climate policy came from the Minister for Petroleum, not the then Minister for Environment Stephen Dawson.

4 – Woodside subsidized to sell LNG to ships but fails

In May 2020 Premier Mark McGowan announced that any LNG-powered vessel coming into the Pilbara would save $20,000 in port fees if it bought its fuel there. At the same time the Pilbara Ports Authority awarded Woodside a license to sell LNG to ships in the giant iron ore ports of Dampier and Port Hedland.

In short, the sales pitch to big iron ore was if you buy LNG from Woodside the WA taxpayer will halve your port fee.

BHP went elsewhere. In December 2020 it agreed to buy LNG from Shell in Singapore for five new LNG-fuelled carriers that will start carrying iron ore to China in 2022.

Even with a subsidy, Woodside failed to beat a competitor that required an extra stop on the voyage and has to buy in LNG from elsewhere.

Observers are left to wonder if a less well-connected but perhaps more capable company won the LNG bunkering license Australian iron ore could have been moved with Australian LNG loaded by Australian workers.

5 – Onshore gas for WA only, except for powerful friends

McGowan banned the export outside WA of gas from the growing onshore sector in August 2020 to ensure the State had enough of the fuel for its future.

However, there was one exception that destroyed the logic of the policy.

The Waitsia gas project in the Perth basin – WA's largest onshore gas discovery in decades – was allowed to ship its gas overseas.

The winners? The main players in the week that killed the EPA emissions policy.

Woodside will get a tolling fee for turning the gas from Waitsia into LNG at its NWS plant and less competition in the WA gas market for its own gas.

Kerry Stokes, the proprietor of The West Australian and owner of a substantial stake in Waitsia, gets access to a market no one else does.

The Premier's reasoning was the "exceptional economic circumstances created by the COVID-19 pandemic."

6 – Cash for Woodside's favourite customer

The day after Waitsia escaped the gas export ban to Woodside's advantage, another business partner of the LNG giant received a State Government boost.

Infrastructure required for the Perdaman urea plant that will take a large chunk of gas from Woodside's Scarborough project received $35 million of support.

And why is Perdaman a Woodside favourite?

Many doubt the small company will get the finance it needs to build the $4.6 billion project. However, in the meantime, it represents additional jobs and investment linked to Scarborough that Woodside can point to when it seeks support for the project.

7 – Playing along with a Woodside PR stunt

In November 2020, Woodside had to present its much delayed and doubted expansion plans to investment analysis who advise their customers whether to pour more money into the company or dump and run.

Woodside's spin kings had one problem – there was no good news. Everything was on hold.

The solution? Fast track the award of a government approval that was never in any doubt and portray it as progress.

The Federal and WA Government's dutifully signed off the production licences for Scarborough that were not needed until the project was sanctioned.

Woodside chief executive Peter Coleman said the licences demonstrated "the strong commitment from both joint venture participants and the State and Federal Governments to taking the project forward."

It actually demonstrated diddly-squat, except Government officials wasted time on nonsense work to give a private company a bureaucratic fig leaf to cover its lack of real progress.

Fortunately for taxpayers, this favour had no dollars attached. However, somewhere a company with a real and immediate need for Government assistance did not get it because games were being played.

8 – A toothless climate policy

WA's long-awaited climate policy was released in November 2020. There was nothing new to reduce the enormous existing emissions from heavy industry such as LNG plants.

Little mitigation and lots of adaptation.

It was like a bushfire policy that ignored fighting fires and concentrated on fireproof homes.

9 – The great $2.3 billion Pluto domestic gas con

The WA Government approved a Woodside proposal to build a pipeline between its North West Shelf and Pluto LNG plants on January 29 2021. This was just a few working days before the Government entered pre-election caretaker mode when it could no longer make non-urgent decisions.

Why the fuss over a bit of pipe? There are two things to understand.

First, that pipe can make Woodside a lot of money, but Woodside could not build it without approval from the Government.

There is growing spare capacity in the NWS LNG plant. Woodside wants to transfer gas from Pluto to NWS, which would otherwise stay in the ground for years, and use it to produce LNG. Woodside estimated the deal would accelerate $US1.8 billion ($2.3 billion) of revenue.

Secondly, Woodside has not delivered on a 15-year-old deal to supply gas from Pluto to the domestic market. Unlike later projects, Pluto had no domestic gas obligation for the first five years of production, courtesy of Labor premier Alan Carpenter in 2006.

However, for the past four years, Pluto should have been delivering about 115 terajoules a day of gas to the WA market.

To fulfil its obligation, Woodside built a pipeline that carries just 25 terajoules a day of gas and built a facility to load trucks with LNG that has been unreliable and only shipped a handful of loads.

Remember, the McGowan Government banned the export of onshore gas because it was concerned about future supply.

It now had the perfect opportunity to pressure Woodside to fully deliver on its Pluto gas commitment by linking it to approval for the pipeline that would unlock $2.3 billion of revenue.

And what did the State Government achieve? Just an extra 46 petajoules of gas from 2025. This is a little over one year's worth of the gas supply that Pluto should have delivered constantly since 2017.

Given the Government's power with the pipeline approvals, the outcome would be marked failed in any introductory negotiation class.

10 – And the best is yet to come

After four years of help and not delivering on its Pluto domestic gas commitment, Woodside still wants more from WA Labor in its second term.

Despite the best efforts of Woodside and the McGowan Government, the EPA did eventually implement a greenhouse gas policy with teeth. Instead of offsetting all emissions from day one, project emissions have to trend down in roughly a straight line to net-zero by 2050.

In September 2020, the EPA's conditions were imposed on two projects: the Kerry Stokes-linked Waitsia's gas field and a power station for Andrew Forrest's FMG. Last week the Wesfarmers-backed Covalent lithium refinery joined the list.

Three of the most prominent corporate players in the State have now invested in large projects that must continually cut their emissions to zero by 2050.

The greenhouse gas management plan for the Pluto LNG plant is now under review by the EPA as part of the approval proves to expand the project to two LNG trains.

Consistency would require that Pluto be treated like other investors: cut emissions over the next three decades to be net-zero by 2050.

The Scarborough to Pluto project is expected to have just a marginal financial return. Woodside is only doggedly pursuing it as it has no plan B.

The fading local LNG giant will fight any imposition of additional costs, despite its "net-zero by 2050 aspiration."

Other approvals for the Scarborough project are under challenge by the Conservation Council of WA in the Supreme Court. Woodside may well want a Government intervention here as well.

If Woodside succeeds in getting special treatment, Premier Mark McGowan should be asked why this one company gets so much from his Government.

Main image: Graphic by Boiling Cold. Source: Ben Wyatt and Woodside building pictures: Woodside Energy Limited, Mark McGowan and Bill Johnston pictures: WA Parliament.