Woodside Petroleum has received federal government approval to extend its North West Shelf venture for an additional 40 years, allowing operations to continue until 2070. This landmark change marks a significant shift in the Australian government’s appreciation for the need of a measured transition to renewable energy. Meanwhile, they remain heavily reliant on gas to meet short-term energy needs. That extension is huge. The North West Shelf project would be enough to meet another 15 percent of Australia’s gas reserves.
Further demonstrating the lucrative and far-reaching financial impact of the project, in 2023 Woodside paid $890 million in Petroleum Resources Rent Tax (PRRT). The company received large credits under the PRRT system in earlier years. That’s up from $91 million in 2022 and $313 million in 2021. This financial framework underpins Woodside’s current operating model and future growth strategy.
Meg O’Neill, Woodside’s Chief Executive Officer, said she was pleased to see the Environment Minister Murray Watt’s proposed approval. She pointed out the transformational nature of the project both for the firm and for Australia’s energy future. The North West Shelf has been the bedrock of Australia’s gas industry ever since it started delivering gas in 1963.
Expansion into the Browse Basin
In addition to the North West Shelf extension, Woodside has been actively trying to advance its Browse Basin project, one of Australia’s largest untapped gas fields. Second, the Browse Basin project is the key. It is designed to provide gas to the North West Shelf project on an un-contracted basis, which would increase its production. Woodside has faced adamant criticism for every inch of delay in the process to get approval moving on this critical project. These delays worry advocates, like Sen.
Josh Runciman, lead gas analyst for Australia, Institute for Energy Economics and Financial Analysis. He pointed out the uncertainties of the Browse Basin project. He noted that “the amount of gas that will actually flow from the North West Shelf extension into the domestic market is a key question here.” He noted that Woodside has been failing on its domestic reservation commitments. To put a finer point on it, he added, “They’re still nowhere close to that 15 percent goal.”
The federal government has understood these delays, and the federal government has understood that ramping up sufficient renewable energy supplies will take time. Murray Watt stated, “We need to manage the pace of the energy transition,” indicating that while progress is essential, it must be balanced with existing energy needs.
The Future of Gas in Australia
While the federal government has made noises about a transition to renewables, Australia’s dependence on gas is still large, especially in Western Australia. The state requires gas companies such as Woodside to reserve a certain share of their output for the domestic market. This regulatory framework is designed to promote energy security for local consumers.
Woodside has extended the life of the North West Shelf project. This extension will be of limited consequence to electricity supply in Western Australia, due to the fact that Western Australia acts independently from the National Electricity Market. As a result, new discoveries in this area mostly support regional markets without directly shifting national energy patterns.
As global LNG prices face downward trends, Shikha Chaturvedi noted that “we see a downward global LNG price trajectory with increased volatility.” This observation casts doubt on Woodside’s long-term plan in a speedy, cut-throat market. Runciman elaborated on this competitive landscape, stating, “When you look at declining markets, generally, companies will compete until it’s last man standing,” suggesting that Woodside’s recent moves may reflect a strategic response to market pressures.
