Gas cap ‘a black mark’
Woodside weighs up investment future
WOODSIDE Energy would withhold new gas investment on Australia’s east coast and the Albanese government would suffer a “black mark” if it proceeds with an intervention aimed at cutting prices in the domestic market.
A price cap of $11-$13 per gigajoule has been proposed to tame soaring domestic tariffs but Woodside said the move might see it freeze future investment on the east coast.
“I think we would struggle to see new investments be competitive with those sorts of price levels,” Woodside chief executive Meg O’neill said in reference to the price caps.
“And that goes for investments within the Bass Strait joint venture as well as things like LNG import facilities. I don’t want to say that that’s not feasible, but the economics become significantly affected with pricing constraints.”
The gas producer – which supplies 20 per cent of east coast domestic demand from Victoria’s Bass Strait – said a price cap would be a “black mark” against the Albanese government.
“If a government changes the rules – even for six or 12 months – what it says to us is that the government is likely to change the rules again,” Ms O’neill said.
“So it’s a black mark and it would make investing in Australia riskier than other jurisdictions.”
The Woodside chief also slammed a lack of consultation by the Albanese government with the gas industry.
“I think the fact that nobody knows how this would work would be a proof point that there’s not been adequate consultation,” Ms O’neill said.
Woodside said there was uncertainty over several decades of future supply from the Bass Strait.
“Even without significant new investment, it’s going to continue to produce for another 10 to 20 years. So we do expect to stay in it for the long haul. But it’ll be a question of how much additional work would we do if the price is capped.”
An LNG import plant proposed by Viva Energy at Victoria’s Geelong Port, which Woodside is slated to supply, may also be threatened if intervention goes ahead.
“With price caps, that means the economics are more challenged,” Ms O’neill said.
Elsewhere, Woodside on Thursday set a 4 per cent annual growth rate target from 2023 to 2027 and expects the fastest investment payback from its mainstay oil and gas business while expecting ongoing volatility from high energy prices.
The West Australian producer said production growth through to 2027 would be driven by its Sangomar oil project in Senegal and Scarborough gas development.
Oil will deliver an internal
rate of return at 15 per cent and payback within five years, gas at 12 per cent with a return at seven years while the emerging new energy unit – which includes hydrogen and ammonia – is further back with a 10 per cent return over a decade-long payback.