Woodside and Santos pushed to disclose multibillion-dollar clean up ‘time bomb’

Woodside and Santos face shareholder votes to reveal the cost to decommission their facilities as activists broaden their assault on the oil and gas industry beyond emissions and the warming climate.

The Australasian Centre for Corporate Responsibility (ACCR) has filed shareholder resolutions with Australia’s two largest petroleum companies for them to disclose audited cost estimates to decommission each of their facilities.

A 2021 federal government-backed study estimated the industry must spend $56 billion by 2050 to decommission assets in Australian waters, with half the work starting this decade.

ACCR climate and environment director Dan Gocher said these costs were a “time bomb” for the industry.

“Investors must demand greater transparency on when infrastructure will reach end of life and the major assumptions driving estimated provisions,” he said.

Mr Gocher said the actual cost to decommission facilities in Europe’s North Sea was found to be 76 per cent higher than the estimated cost.

Santos and Woodside record $US3.0 billion and $US2.1 billion respectively for decommissioning liabilities.

Woodside’s exposure to decommissioning will increase significantly if its shareholders approve the purchase of BHP’s petroleum assets that include two ageing and sprawling assets: a 50 per cent stake in ExxonMobil’s Gippsland operation and an additional one-sixth share of the North West Shelf LNG project operated by Woodside.

Santos also has significant obligations onshore from its decades of activity in the Cooper Basin and a share of declining oil production on WA’s Barrow Island. Its Bayu Undan platform in Timor Leste waters will likely cease production by 2023.

Both producers will release their 2021 annual reports this week. Any revisions to decommissioning obligations will be closely watched after a year when both the federal government made selling out of old assets more difficult and independent regulator NOPSEMA clamped down on continual delays to decommissioning.

The ACCR has also filed resolutions requesting Woodside and Santos to cease any advocacy incompatible with limiting global warming to 1.5 degrees “including advocacy relating to the development of new oil and gas fields.”

Meanwhile, Friends of the Earth-backed Market Forces has called on the companies to disclose how their capital spending aligns with global emissions reaching net-zero by 2050.

In 2021, Santos sanctioned the $US3.6 billion Barossa development to supply its Darwin LNG plant and Woodside approved a $US12 billion project to develop the Scarborough gas field off WA and expand its Pluto LNG plant.

Market Forces campaigner Will van de Pol said the companies’ expansion plans threaten to waste investor capital on projects that would be stranded by the transition to cleaner energy.

“Woodside and Santos have not only rejected investors’ demands for alignment with global climate goals, they’ve actually moved in the complete opposite direction,” he said.

Santos told the market it disclosed decommissioning provisions “transparently and accurately,” its advocacy was consistent with the Paris Agreement, and it was “well-placed to address the risks and seize the opportunities of the global transition to ever cleaner energy and fuels over coming decades.”

“New supply investment is essential to provide energy security and affordability for customers as the world moves to a low-carbon future,” the company said.

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