Approval of the North West Shelf project extension
On Friday, an extension to operate until 2070 was formally granted to Woodside for Australia’s largest gas project, the North West Shelf (NWS) by Minister for the Environment and Water, Murray Watt. Notably, this includes cutting gas emissions below their current levels, in some cases by 60% by 2030.
Although NWS’s current gas fields are already in rapid decline, the approval is critical for Woodside’s Browse offshore gas development that plans to use NWS’s Karratha Gas Plant for onshore gas processing and Liquified Natural Gas (LNG) export.
In this alert, we review the impact of Woodside’s North West Shelf project extension approval on Australia’s Safeguard Mechanism.
Current expectations within our Carbon Market Outlook
Within our Carbon Market Outlook (CMO), we currently anticipate LNG production and emissions at NWS to decline over 90 per cent over the next several years, in-line with the deterioration of its historic gas-field production.
This reduction in gas production and emissions is forecast to reverse, however, once Browse commences, currently assumed from FY32, and begins to backfill some of the NWS’s LNG production trains.
We expect Browse’s large gas reserves, continuing demand for Australian LNG, and NWS’s large LNG production capacity to see production continue to grow another 60% in the decade after 2035.
Under business-as-usual (BAU) this would be expected to result in a corresponding increase in emissions and carbon credit demand, however, carbon capture and storage (CCS) investments (along with other emissions reductions) are forecast to flatten reported emissions as LNG production grows.
Key sources of greenhouse gas (GHG) emissions are from gas turbine compressors used to liquefy natural gas, reservoir CO2 brought up and separated from the hydrocarbon products, and the gas turbines used to generate on site electricity. Although some emission reductions could be achieved though operational and efficiency investments, we expect the project to be heavily dependent on carbon credits for almost all of its abatement over the next decade.
As noted, these assumptions are currently built into our CMO. As a result, Friday’s announcement has no impact on our expectations for market development.
To view our emissions and liability forecast for NWS and Browse, including expected abatement uptake, click here to access our Company Analyser (extended subscription).
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Kind Regards,
The RepuTex Team
Australian Energy Markets
