Given that the market knew it was coming, today’s decision by Australian Conservation Foundation (ACF) to launched proceedings in the Federal Court to put a halt to Woodside’s (ASX: WDS) $12bn Scarborough project did little to derail the oil and gas giant’s share price, which surprisingly was up 2.49% only minutes from the close.
For the uninitiated, Scarborough will produce gas to feed an expansion of the Pluto LNG export plant near Karratha, the country’s biggest new resources project for almost a decade.
The ACF want’s an injunction placed on the Scarborough project until fears over potential impacts on the Great Barrier Reef can be properly assessed.
Woodside expects the Scarborough project to produce as much as 8m tonnes of liquified gas annually and emit around 1.4bn tonnes of greenhouse gases during its operation.
For context, these emissions equate to more than the annual pollution from 15 coal fired power stations.
According to the Environmental Defenders Office (EDO), which is representing ACF, total emissions from the (Scarborough) project would exceed twice all emissions from Australia’s energy sector in 2020.
Without getting lost in the minutiae, the conservationists want the Scarborough project assessed under the federal Environmental Production and Biodiversity Conservation Act (EPBC Act), instead of the regulations it’s currently governed by – the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA).
While Scarborough has already been approved by a range of regulators, including NOPSEMA – due to gas emissions being mostly burned overseas – the ACF argues that the exemption is voided when projects significantly impact on World or National Heritage sites like the Great Barrier Reef.
Assuming the ACF is successful, the new federal environment minister, Tanya Plibersek, will be charged with assessing the Scarborough project under the EPBC Act.
A win by the ACF could also create a yardstick by which new fossil fuel projects must be assessed for climate damage. By comparison, under federal law, a blanket approval currently applies to all offshore gas and oil projects.
Lending support to the ACF’s legal claims is new modelling by Greenpeace Australia which shows how a spill event could devastate Western Australia’s coastal ecosystems.
Woodside CEO Meg O’Neill has vowed to defend the Scarborough project and insists the company has already met the necessary environmental approvals.
“The Scarborough Project is underway and proceeding to schedule after receiving all primary environmental approvals,” O’Neill said.
“The project will deliver significant local and national benefits in the form of employment, tax revenue and reliable gas supply in the energy transition for decades to come.”
Given that alternative sources of gas are required to avoid increased use of more emissions-hungry coal, Credit Suisse energy analyst Saul Kavonic believes ACF’s challenge looks somewhat tenuous.
In light of global supply issues, Kavonic suspects an attack on Scarborough - the lowest-carbon new LNG project globally – could be seen as an attack on any new LNG developments at a time when more LNG supply is needed to avoid a coal resurgence.
In summary, Kavonic doubts the legal action to have any significant impact on the project schedule for Scarborough, or its prospects for marketing LNG.
“LNG buyers are very focused on securing LNG volumes in a post-Ukraine world, with these kinds of legal challenges unlikely to factor much into buyer behaviour compared to political risks in other supply jurisdictions,” he noted.
Woodside share price over 12 months.
Up 36.98% over the last year, Woodside's share price year-to-date has jumped from $21.99 early January as high as $35.26, before bouncing back to $31.97.
Consensus on Woodside is Moderate Buy.
Based on Morningstar's fair value of $33.53 the stock appears to be undervalued.
Based on the seven brokers that cover Woodside (as reported on by FN Arena) the stock is currently trading with 4.7% upside to the target price of $33.48.
Get the latest news and media direct to your inbox