Battle lines drawn over LNG plans

The Scarborough gasfields appear set to be at the heart of a development versus environment showdown that will have major political implications.

Woodside Petroleum’s upgrade of the Scarborough gasfields was good news for Western Australia’s LNG industry, but it may have hastened what could be a bruising showdown between elected and unelected government officials.

In one corner of government are Premier Mark McGowan and other pro-development ministers, urging Woodside and its partners in Scarborough to make a quick decision on spending $16 billion on a new LNG project.

In another corner is the Environmental Protection Authority, which has already flagged its acceptance of the state’s obligations under the Paris climate change agreement, which requires all carbon dioxide emissions to be offset in some way.

It’s not stretching the point to say that the two positions, at a time of a heightening debate about climate change, are incompatible.

For Mr McGowan and his ministerial colleagues, the problem is likely to be as delicate as the pro-and-anti coal dilemma that dogged former federal Labor leader Bill Shorten during this year’s election.

What happens with Scarborough could also be the start of a bigger argument because after Scarborough comes the much larger Browse LNG proposal, with both bumping into what looks like the start of a national environmental campaign to stop the projects.

While gas is a fossil fuel, it produces significantly less carbon pollution when burned than other hydrocarbons. This means gas can be seen as a half-way house on the road to a future dominated by renewable forms of energy such as wind and solar.

But problems arise for gas because of the EPA’s acceptance of the need to adopt the full measure of the Paris agreement, which require the offsetting of all emissions. It is this position that could add greatly to the cost of developing Scarborough and the expansion of the onshore processing facilities at the Pluto plant near Karratha.

Woodside’s recent announcement about the amount of gas in the three fields that make up the Scarborough complex was important because until now doubts lingered about whether there were sufficient reserves to justify development.

Any uncertainty disappeared when Woodside said it had recalculated estimates to achieve a 52 per cent increase, which lifted the volume of gas to a world-class 11.1 trillion cubic feet.

Potentially, that amount of gas is enough to push ahead with an investment in a floating production vessel, which would sit above the gasfields located west of Exmouth, plus a 430-kilometre pipeline to the Pluto plant.

Woodside chief executive Peter Coleman said the increased estimated resource in the Scarborough gasfields underscored their potential to meet growing demand for gas in Asia as well supplying WA’s domestic market.

“By unlocking the huge potential of the Scarborough gas resource we’ve strengthened the case for development and extended the expected cash flow from Scarborough for years,” he said.

That’s the good news for Woodside and the WA economy and matches the position of Mr McGowan, who is keen to see greater investment and job creation in the resources sector (which is why he attended a major LNG conference in China earlier this year).

The Shanghai LNG event came three weeks after the EPA made its most damaging foray so far into the LNG industry when its chairman, Tom Hatton, laid down a set of recommendations that included a requirement that all projects emitting more than 100,000 tonnes of greenhouse gases a year would have to fully offset those emissions by planting trees or buying carbon credits.

Dr Hatton’s views, which appear to be in line with Australia’s obligations under the Paris agreement, have already led to a clash with Mr McGowan and his government, and raised doubts about whether WA will host any new LNG projects.

The Conservation Council of Western Australia has been quick to weigh in on Woodside’s Scarborough upgrade, describing the state’s LNG industry as a ‘runaway train’ that would crash Australia’s carbon targets.

In a statement, the council said LNG production was the biggest and fastest-growing pollution source in WA, and while the report received limited coverage in this state, it has been given full page treatment in Sydney including a report in The Sydney Morning Herald under the headline: ‘Runaway train: How WA’s LNG plants steamroll national climate fight’.

For Mr McGowan and Woodside, the challenge of shepherding the Scarborough LNG project through the state’s environmental watchdog has just been made more delicate by inference that WA is becoming a national climate problem, a damaging claim as bushfires cause heavy property damage in Queensland and NSW and the loss of several lives.

The next moves in this increasingly tricky puzzle of matching demand for a relatively low polluting fuel, which is wanted in Asia and would boost the WA economy while also meeting international environmental requirements, will be made by the EPA, which so far has not changed its views on a full carbon offset plan before making its recommendation.

Woodside also has work to do in aligning the interests of other oil and gas companies with stakes in Scarborough and Browse, especially BHP, which needs to make a decision about whether to increase its Scarborough exposure from 25 per cent to 35 per cent.

While the corporate shuffle is under way, there is also a need to ensure that WA’s LNG projects can compete with a long line of international rivals, a job made harder by a global gas glut.

And as if that’s not enough for Woodside and Mr McGowan to consider, there’s a fresh report on the way from the EPA into carbon emissions, expanding on the original document that caused so much friction at a government and corporate level earlier this year.

The EPA’s position was expected before Christmas but has been pushed into the New Year to allow consideration of public submissions on the original policy and how strict the rules should be, and how any environmental regulations will fit in a resources-rich state that also wants to have net zero emissions by the year 2050.

It’s stating the obvious but the resource upgrade of Scarborough has set the scene for a monumental environment versus development debate next year, just in time for the 2021 state election, which will force the Liberal opposition to take a side on a very divisive issue.