Good morning, everybody. It's a pleasure to welcome you to Woodside's climate briefing presentation, "Thriving Through the Energy Transition: Here in Melbourne." I would also like to welcome those joining us on the webcast. Today we're meeting on the land of the Wurundjeri people of the Kulin Nation. We acknowledge their continued connection to these lands and waters, and we pay our respect to elders past and present, and honor their enduring traditions and culture. Our presentation today will cover some of the key information of our Climate Transition Action Plan and 2023 Progress Report. Please take the time to read the disclaimers, risks, and other important information. Let me remind you that today's presentation should be taken in conjunction with our Climate Transition Action Plan, which includes more detailed explanation of the assumptions, uncertainties, and context relevant to the information presented today. All dollar figures are in U.S.
dollars unless otherwise indicated. After the presentation, we'll have a question-and-answer session. Please submit your questions through the Slido app or the Slido website, and use the code you have been emailed for today's event. Let's start with some opening remarks from our chair, Richard Goyder.
Thank you for joining us at our climate briefing day. As Woodside shareholders, you have made your expectations clear as we navigate the energy transition. Our governance of climate change reflects its strategic importance to our company. We must not only seek to thrive through the energy transition but show how we will thrive. Our Climate Transition Action Plan is intended to do exactly that. We've listened and are acting on your feedback. A key request from investors has been to explain more about future demand for our products through the transition, and why we believe that Woodside's business will be competitive, and how we will achieve our Scope 1 and 2 emissions targets. In this session, Meg will talk about how Woodside is responding on these and other critical areas of climate performance and risk management.
I want to assure you that Meg and her team are fully aligned with the board's expectations on climate strategy. As part of a continuous review of board skills and composition, changes were made to enhance our board and committees in 2023. The intention is that Woodside's board is best placed to support our global operations, as well as our strategic growth opportunities through the energy transition. Accountability for our performance on emissions reduction and new energy projects is critical to our success. Therefore, from 2024, we're elevating the link between executive remuneration and progress in achieving these outcomes. Climate metrics will make up 15% of the total scorecard. Of this, 70% will be weighted to growth Scope 1 and 2 emissions performance, and 30% will be based on new energy project progress.
Going forward, we'll publish regular reports as we advance, with a vote on updated plans proposed three years from now or sooner, should we believe it's necessary. We'll continue to seek regular feedback from our shareholders. The board believes that Woodside has an important role to play in the transition and to deliver lasting value to our shareholders while doing so. Our Climate Transition Action Plan will be put to an advisory vote of shareholders at our AGM this year. It is a thorough and clear review of our plans, our progress, and our challenges. I believe it deserves the firm support of our shareholders. Today is an opportunity to continue our engagement with you, and I thank you again for joining us. I'll hand over to Meg, who'll take you through our plans.
Good morning, everyone. Thank you for joining us, whether you're here in person or online. We are presenting today from Melbourne, and I would like to begin by acknowledging the traditional custodians of this land, the Wurundjeri people of the Kulin Nation, and pay my respects to elders past, present, and emerging. I appreciate your interest in our company and our strategy. It is beyond doubt that the world must decarbonize. Responding to climate change is one of the most urgent challenges we face. The energy sector must respond with solutions. At Woodside, we are finding and progressing these solutions. Our Climate Transition Action Plan and 2023 Progress Report is the result of an intensive effort to identify, map, and action more. You'll notice our 2023 report is different to previous disclosures. That's thanks to you, our investors.
You've given us detailed feedback on the climate topics you'd like to hear more about from us, and we've listened carefully. My presentation today will be in this spirit. Transparency is central to building trust through the energy transition, and we are committed to earning and maintaining yours. Now, a key question we get from investors, and it's an understandable one, is why we are confident our business will be one that is resilient to the energy transition. The answer is Woodside exists as a business not only to be resilient but to thrive. Our strategy is underpinned by three priorities: providing energy, creating and returning value, and conducting our business sustainably. We are providing reliable, competitive supply to our customers now. We have firm conviction there will be sustained demand for our products and services into the future.
Examples highlighting the strength of this demand are our recent deals with LNG Japan and JERA. These two companies are buying equity in the Scarborough Energy Project. We are also in discussions with them for the sale of LNG, an indication that Scarborough will be well-positioned to create and return value for decades to come. We will be customer-led as we continue to create and return value. This is because we can only supply products profitably when we have customers who buy them. This goes for traditional and new energy. On conducting our business sustainably, we are on track to meet our 2025 and 2030 net equity Scope 1 and 2 targets. We have also announced a complementary Scope 3 target. These are all key topics to highlight as we explain why our strategy is designed for the energy transition.
The energy transition has clearly begun and needs to succeed, but there is no single or certain pathway through it. It's why diversification and adaptability will be crucial to the success of energy businesses. The diagram on the right of page 6 explains how we think about this. The arc across the top is a summary of our broad company strategy. It's focused on optimizing value and shareholder returns. Below are the key elements of our climate strategy, which are integrated into our company strategy. They are reducing our net equity Scope 1 and 2 emissions and investing in products and services for the transition. We know that the success of our strategy relies on meeting our climate goals. Our targets are critical, and we are on track to meet them.
Our first target is to reduce our net equity Scope 1 and 2 emissions 15% below our starting base by 2025. In 2023, we reduced our emissions to 12.5% below this, and we are on track to meet our target next year. We achieved this by designing and operating out emissions and using carbon credits as offsets. We aspire to achieve net zero equity Scope 1 and 2 emissions by 2050 or sooner. We have now completed asset decarbonization planning, identifying a pathway to achieving this goal with a clear emphasis on design out and operate out solutions. Already, work is planned to implement changes that will aim to avoid and reduce a total of 28 million tons of CO2 equivalent.
Emissions avoidance will be achieved by changes to the way we design our facilities, while emissions reductions are achieved through the way we operate them. Turning to Scope 3. In 2021, Woodside set a Scope 3 investment target, aiming to invest $5 billion in new energy products and lower carbon services by 2030. At the end of 2023, we had cumulatively spent more than $335 million towards this target, meaning expenditure was up 135% in 2023 compared to the prior year. In February, we announced a new complementary Scope 3 target to track the potential impact of our new energy products and lower carbon services on helping customers reduce their emissions. The new emissions abatement target is to take final investment decisions on new energy opportunities by 2030, with total abatement capacity of 5 million tons per annum of CO2 equivalent. Now, importantly, these targets are not a ceiling.
If customer demand accelerates, the opportunities available to us will grow too. Continuously assessing demand for our products through the energy transition is key to our strategy. Central to our strategy is our understanding of pathways consistent with the Paris Agreement. The temperature goals of the Paris Agreement are to limit the increase in the global average temperature to well below two degrees Celsius above pre-industrial levels, and to pursue efforts to limit the temperature increase to 1.5 degrees Celsius. These goals were reaffirmed by world leaders at the COP28 climate summit in December, with the importance of the 1.5-degree goal underscored and resolutions made to pursue it. Now, for some stakeholders, to be Paris-aligned means no new investment in oil and gas. But let's have a look at the science.
In its recent sixth assessment report, the United Nations Intergovernmental Panel on Climate Change reviewed and included 97 pathways that could achieve the 1.5 degree goal with limited or no overshoot. The levels of gas demand in those 97 pathways are shown in the gray area on the chart on page 8. You can see there is a very wide range. Many of you have asked me whether there is a need for new gas investments in order to meet these potential levels of demand in a world that limits warming to 1.5 degrees. The answer is, without investment, supply levels will fall as older gas fields deplete. The blue lines on the chart show estimates from the International Energy Agency. The pale blue line shows estimated decline in supply if investment stops.
The darker blue line shows the decline in supply if investment continues but is limited to gas projects that are operating or have been approved for construction already. This decline in supply is consistent with meeting demand in some 1.5-degree pathways but well below demand in others. Now, let me be clear. Woodside is not picking any one pathway and asserting it is certain. But equally, no new investment is not the only route to the world meeting its Paris goals. So coming back to why I believe the approach Woodside is taking is Paris-aligned. First, we have a pathway to meeting our aspiration to achieve net zero equity Scope 1 or 2 emissions by 2050 or sooner. It will be challenging, but the options are clear. Secondly, we stress-test the financial performance of our current portfolio, including our sanctioned projects like Scarborough, Sangomar, and Trion, against climate scenarios.
The portfolio continues to generate positive free cash flow in the decades ahead, even with pricing that reflects the IEA's Net Zero roadmap scenario. Third, we test our future investment opportunities for the relationship with the energy transition, including testing the impact of 1.5-degree pathways in the science. Now, let's take a look at why gas demand remains resilient in many climate pathways. For many decades, access to reliable energy has been key to economic growth. This will remain true through the energy transition. Now, the challenge is to fuel growth while reducing emissions. Gas can be part of this aim. This is because gas has many uses, including as a source of heat for industry and as a chemical feedstock. Some of these will be hard to abate. In addition, when used to generate electricity, gas typically produces half the life cycle emissions of coal.
Gas can also provide backup support for electricity grids powered by renewables and batteries. The chart on the right of page 9 looks at the energy mix of several Australian markets and shows how a gas-renewables mix can generate power at lower emissions intensity than a coal-dominated mix. Take South Australia. More than two-thirds of its power is generated by renewables, with gas almost making up the remaining third. Here in Victoria, it's a different story, with the grid mainly relying on brown coal at this time. Now, key numbers are at the top of the bars, each state's emissions intensity. As you can see, Victoria's is three times higher than South Australia's. This example underlines why gas is an attractive proposition for coal-dependent economies to decarbonize. Now, if we look at the fuel mix in key Asian customer markets on page 10, there is significant dependence on coal.
This represents an opportunity for a further shift towards gas to support decarbonization. To give context to an Australian audience, Japan's primary energy use is nearly three times more than Australia's. China uses more than 25 times as much energy as Australia. The opportunity for Woodside is significant. It also underscores one of Woodside's competitive advantages, and that is the proximity of our LNG operations to Asia. Other advantages include our world-class LNG plant reliability, which was 98% last year for our operated assets, and our strong customer relationships based on reliable, competitive supply. Now, as I touched on earlier, we have developed a transition case methodology to guide robust assessment of future investment opportunities. Our aim is to test that our investments are competitive through the transition. The transition case assesses financial attractiveness in a range of climate scenarios.
It also considers the impact of an opportunity on our portfolio's emissions intensity. Our capital allocation framework is a key feature of our transition case methodology. As you can see on page 3, for oil projects, we target an internal rate of return or IRR of more than 15% and payback within 5 years. For gas, the IRR target is greater than 12% and payback within 7 years. And for new energy, we aim for an IRR of 10% with payback over 10 years. Now, these rates of return and payback periods reflect the different risk-reward balance of the products. The risk-reward balance is affected by more than just climate change. But let's zoom in on how they each relate differently to the risks and opportunities of the energy transition. Oil has a typically faster payback period than gas.
So it is less exposed to the longer-term uncertainty of the transition. Take Trion. Its expected payback period is within four years of startup. And two-thirds of the resource is set to be produced within the first 10 years. LNG projects are typically longer-term investments with stable cash flows. And we expect sustained demand for LNG over a longer period in the transition for the reasons I have already spoken about. Now, new energy is an emerging market. Its lower IRR and longer payback period make sense for several reasons, including resource certainty. For example, if you compare a hydrogen project to an oil and gas field, you don't have to drill to know how much hydrogen you have. As long as you have power and water needed for electrolysis, you can create the hydrogen.
Regardless of the commodity, we must remain focused on the business case and shareholder value. Our transition case methodology supported Woodside's positive final investment decision on Trion. As you can see on page 14, we expect Trion's IRR to be more than 16% and to achieve payback in under four years. Trion also meets our demand resilience criteria because we expect continued demand for oil across a range of transition pathways in the relevant time frame of its production. With the addition of Trion, Woodside's portfolio will remain less carbon-intensive than the current industry average, including for Scope 3 emissions intensity. Trion is also an example of our commitment to avoiding emissions in the way we design projects. The video we're now going to show explains our approach to emissions avoidance and asset decarbonization. Our climate transition action plan is in action.
At Woodside, our priority is to avoid emissions in the way we design our facilities and reduce emissions through the way we operate our facilities. This has included designing out millions of tons of CO2 equivalent at our Pluto Train 2, Scarborough, and Trion projects. At Pluto in Karratha, we know how important the natural gas we produce is to our customers, where it helps support their energy security and decarbonization goals.
It's here at Pluto that we have modified the LNG plant to receive lower carbon power from the proposed Woodside solar project. This involved laying kilometers of cables that will make our site ready for grid connection this year. We expect to import 50 MW of solar power from 2026, reducing up to 150 kilotons of CO2 emissions per equivalent each year.
As well as designing out emissions, we are operating out emissions. And at Pluto, we have proactively addressed extreme ambient temperature impacts on equipment reliability. Shading for HVAC condensers, cooling water management, improvements in speed drives, evaporative misting sprays, and critical sparing all contributed to significant emissions reduction. Large-scale abatement at Pluto goes even further. Integration of technologies, including hydrogen fueling as well as post-combustion carbon capture, could also reduce emissions further on site.
Another example of how we abate our emissions is the work we've done modifying the interconnecting power cables between our substations here at Karratha Gas Plant, allowing us to increase the utilization of the highest efficiency generators on site.
We are focused on delivering results. Reducing our net equity Scope 1 and 2 emissions form the targets I'm setting my team. I look forward to reporting back as we make further progress.
At Woodside, we are focused on reducing emissions and have been for years. Liz has just taken you through a number of examples. But I know there's been significant interest in Woodside's use of offsets relative to our overall emissions performance. To put this in context, I'd like to talk about our gross emissions performance, which is before the use of offsets. We estimate our avoided emissions by comparisons to benchmarks. In our climate transition action plan, we have provided two credible benchmarks that estimate the global average emissions intensity of oil and gas operations. These estimates are from Wood Mackenzie and the International Energy Agency. In 2023, our underlying Scope 1 and 2 performance, our gross emissions intensity, was lower and better than comparable energy portfolios based on these benchmarks.
This is because of the intrinsic characteristics of our oil and gas resources, the design of our facilities, our 2016-2020 energy efficiency target, and the implementation of asset decarbonization plans. All these factors have contributed to avoiding emissions. And they are depicted on the chart on the right in the light gray. Now, these are hard to measure because they didn't happen. But they are the consequence of our hard work and the quality of our assets and resources. Woodside is also achieving lower methane emissions intensity than the oil and gas industry average. We aspire to achieve net equity Scope 1 sorry, net zero equity Scope 1 and 2 emissions by 2050 or sooner. To this end, we have completed asset decarbonization planning across our operated portfolio.
Already, we have incorporated design features into our Scarborough, Pluto Train 2, and Trion projects that would avoid an estimated 16 million tons of CO2 equivalent between now and 2050. We are at work on around a further 70 opportunities at existing assets that we estimate could avoid roughly 12 million tons of CO2 equivalent. These opportunities could have a combined cost of around $200 million. We are also considering large-scale abatement options to retrofit LNG facilities that we estimate would cost more than our $80 a ton internal long-term cost of carbon. These projects would use existing technology but be challenging to deploy cost-effectively at existing facilities. So we are fine-tuning the concepts with cost reduction in mind. Our strategy gives us the flexibility to invest in projects that deliver the biggest emissions reduction we can for every dollar we spend.
In addition to our work in driving down our emissions, we also used carbon credits to offset emissions and help us achieve our 2023 net zero reduction. Offsets remain an important part of the global toolkit to abate carbon and achieve the world's net zero goals and for us to achieve our targets. At Woodside, we have a high-quality carbon credit portfolio. Carbon credits are assessed against criteria designed to ensure abatement is demonstrably additional and has a high likelihood of permanence. We source credits issued by established standards bodies. We independently verify them. Our approach to portfolio creation is informed by frameworks, including the Oxford Principles for Net Zero Aligned Offsetting. We aim for geographical diversity in our carbon credit portfolio generated from projects here in Australia and overseas. Our current portfolio is sourced from the Australian Carbon Credit Scheme, Verra, and Gold Standard.
We have another video now looking at opportunities that could help our customers avoid or reduce their Scope 1 and 2 emissions and therefore reduce the overall lifecycle emissions intensity of our portfolio.
Woodside provides the energy our customers need to heat and cool homes, keep lights on, and enable industry. Our customers' emissions matter to us. The emissions that are created inside our value chain but outside our operations are called Scope 3 emissions. Scope 3 emissions matter to Woodside because they are the Scope 1 emissions of our customers and suppliers. A key component of Woodside's strategy is to work with potential customers to develop demand for new sources of energy. We're also working with existing customers to support their decarbonization aspirations. Our new energy projects and carbon capture and storage, or CCS, opportunities are at different stages of maturity and are continually being assessed. We're progressing new energy opportunities in hydrogen and ammonia and renewables around the world and using our subsurface engineering and commercial expertise to progress carbon capture and storage, or CCS, opportunities.
We're offering this portfolio of potential opportunities to our customers who are seeking bespoke solutions for their own needs at their own scale and pace. Our offering might include ammonia for power generation, or CCS for carbon management, or a combination of both. Let's take a deep dive into CCS. This service is important to many of our customers who rely on gas and want to reduce their emissions. CCS involves capturing CO2 from industrial activities that would otherwise be released into the atmosphere. The carbon dioxide is compressed and transported to be stored in underground geologic formations for safe, secure, and permanent storage. Near Karratha, Western Australia, the Woodside-operated Angel joint venture is proposing a multi-user CCS project. The opportunity would have an initial focus on aggregating emissions from industries in the Pilbara where many hard-to-abate activities are concentrated.
Commercial discussions are progressing with respect to strategic partners and foundation customers. This is just one example of how we're working together to provide the low-cost and lower-carbon energy the world needs.
As Shaun mentioned in the video, we will be customer-led when it comes to hydrogen production and CCS. World leaders at COP28 called for an acceleration of both these technologies. Looking at hydrogen on page 20, demand is expected to build in the coming decades. But progress in securing hydrogen offtake has been slower than originally anticipated. We will continue to maintain discipline in our investment approach. And we'll make positive final investment decisions on hydrogen opportunities when we are confident they are compatible with our capital allocation framework. So we are working with potential customers to develop demand. We have a number of hydrogen opportunities in our portfolio, including H2OK. In 2023, we took a positive final investment decision on the H2 refueler at H2 Perth, a hydrogen production, storage, and refueling station targeting the domestic trucking industry.
This project is smaller in scale, with initial production expected to be 0.2 tons per day of hydrogen. It is really intended to stimulate demand and demonstrate capability. The demand outlook is similar when we look at CCS on page 21. It builds in future decades. Our most mature operated carbon capture and storage opportunity is Angel CCS. Angel has the potential to store carbon from our operations as well as helping Australian and international customers decarbonize. As we assess new opportunities, we will be commercially minded, focusing on progressing projects that are compatible with our capital allocation framework. Scope 3 emissions make up the bulk of our emissions profile. In 2023, we estimate our equity Scope 3 greenhouse gas emissions totaled more than 70 million tons per annum of CO2 equivalent.
New energy products like hydrogen and lower-carbon services like CCS can help our customers avoid or reduce their Scope 1 and 2 emissions and therefore reduce the overall lifecycle emissions intensity of our portfolio. Our Scope 3 targets will help us track progress towards the potential abatement impact. Before I close, I would like to highlight page nine of our Climate Transition Action Plan and 2023 Progress Reports. This page directs you to the content that investors asked us to include in our disclosures. We are pleased to have shared this information on topics including progress against our target, our approach to using offsets, and our Scope 3 emission sources. As Richard said at the start of the session, accountability is critical to our success.
For this reason, the board has made changes to its composition and committees to best support our global operations, our climate strategy, and growth opportunities through the energy transition. In addition, our executive team's performance-based pay is linked to the delivery of our climate strategy. In particular, the 2024 executive scorecard will include targets for Woodside's gross Scope 1 and 2 emissions performance, meaning before the use of offsets. And similar metrics will apply for employee remuneration so everybody in the company has common alignment. We've also reviewed our industry association membership to include an assessment of whether an association's activities support the goals of the Paris Agreement. We've covered a lot of information here today.
The key messages I'd like to leave you with are: 1) We strongly believe there will be sustained demand for our products through the transition; 2) We are progressing new energy products and lower-carbon services; and 3) We are on track to meet our net equity Scope 1 and 2 targets. We will keep listening and responding to you as we provide the energy solutions our customers need and as the world strives to meet its climate goals. We'll now open up for questions and answers. I have a few members of my executive leadership team with me here today: Graham Tiver, our Chief Financial Officer; Liz Westcott, Executive Vice President, Australian Operations; Shaun Gregory, Executive Vice President, New Energy; and Tony Cudmore, Executive Vice President, Strategy and Climate. I'll now hand over to Marcela to run the Q&A session.
OK. Thank you, Meg. For those in the room, please just raise your hand. We can welcome your questions. Those joining us through the webcast, please submit your questions via the Slido app or the Slido website and use the links and the codes provided by email. We'll try to go through as many questions as possible. Then the IR team will follow up on any remaining questions afterwards. With that, let me check. Is there any question in the room?
Let's use the microphone so the folks online can hear, please.
Thanks, Meg. So my question is the market skepticism about CCS, which I think is global skepticism. It's not just Australia. How much research have you done on the Gorgon CCS, given that you're very confident about Angel? And do you think there's significant difference between what you're doing versus what Gorgon's doing?
Yeah. Look, let me give some high-level comments. And then I'll invite Shaun to give some specific comments on the Gorgon project. First and foremost, CO2 sequestration has been used for decades. It started being used in the United States for enhanced oil recovery. So the industry has tremendous experience injecting CO2 in subsurface formations. In Norway, at the Sleipner Field, there is a 10-year operational history of CO2 sequestration offshore. So the technology is proven. In Australia, Gorgon has had some challenges. And let me invite Shaun to speak to what we know about Gorgon and why Angel is different.
Yeah. Thanks, Meg. So I think one of the advantages of the Angel joint venture is we have Chevron as a joint venture partner. And they've been really open and transparent about their lessons learned on Gorgon. I think one of the things that differentiates Angel to Gorgon is it's a much simpler CCS project. It's injecting into a depleted gas field that we have known well. It was Angel produced for like 10 years. And so we understand that reservoir really well. And it's empty now. And it's a much simpler design. And I think that's one of the key lessons that Chevron has shared on Gorgon. They've been very open with us. I think the other thing with Gorgon is to respect that, actually, it's operating today. And millions of tons per year of CO2 are being sequestered. So it's not at design capacity, which they're working on.
But it's certainly successful from sequestering CO2.
Thanks, Shaun.
OK. Thanks, Shaun. Any other question in the room? Rob?
Good morning. Rob Koh from Morgan Stanley. Thank you very much for the preso this morning. I wonder if you could just talk to two things. Firstly, what your company's efforts are for a just transition, which is part of the action plan. And then also, I just want to understand what the company will do when it comes to difficult choices. Say you've got your $5 billion investment target. But this gentleman here isn't going to let the company invest that money poorly. And have you got sufficient pipeline of opportunities such that you're super confident in $5 billion? Just any dynamic on that, please?
Excellent. Thanks for the question, Rob, or the two questions. So from just transition, we recognize the importance of a just transition for customers, employees, the communities where we operate, and who benefit from our operations. And we acknowledge that energy transition will change the way we conduct our business. Now, for a transition to be just, it will require collaboration between all stakeholders, so governments, industries, and communities. And we are involved in a number of international partnerships to understand where we might improve our approach on this front. But perhaps at a high level, Rob, if you think about just transition as it impacts the communities where we employ people, our anticipation and our goal is to continue operating in Karratha for many decades to come.
So the transition for us is really to continue to be able to invest in Karratha, invest in those local communities, and continue to provide meaningful work, high-paying jobs to people that live in that remote part of Western Australia. On the question of the $5 billion, you've absolutely highlighted tension within the business, that we need to make sure that any investment we take meets our capital allocation framework and will deliver value to our shareholders. And it's fascinating, Rob. So there are shareholders who would say, we shouldn't mess around with this stuff at all. And then there are shareholders who would say, please just take an investment decision so you can demonstrate your "doing something." We're taking a path that I think is the best path for Woodside shareholders, which is to be fiscally disciplined while continuing to progress these opportunities. H2OK is the most advanced project.
We were ready. We're technically ready to take an investment decision. Because we were unable to secure sufficient customer offtake, we paused that decision. The reason we were unable to secure offtake was because of some complexities around how the IRA is being implemented. We're engaged in consultation with the U.S. government on levers they can pull to make those tax credits more accessible, which will bring prices down, which will bring customers to the table. It's a balance. Again, we've got sufficient opportunity space in our pipeline to spend the $5 billion. We will be disciplined about making sure we can sell those products to customers at a profit.
Thanks, Meg. Next, one in the room. And then we do one online.
Sure. Yep.
Thanks very much. Tom Allen from UBS. Just following on the last question, Meg, recognizing there are some commercial challenges that the H2OK project is facing, just to give more credibility and weight to that $5 billion investment target by 2030, are you able to provide some guidance apportioning out that $5 billion to specific projects and just confirming whether or not the Angel and Bonaparte CCS projects are still in desktop work only or if there's genuine field work that's occurring at the moment?
Sure. Thanks for the question. In the Climate Transition Action Plan, we've got detail on each of our hydrogen projects and each of our CCS projects that talk to the state of maturity. H2OK is the most advanced we have ordered long lead items there. We have contracts in hand for water supply, for power. That is by far the most advanced project. The other projects are in the technical evaluation stage. Let me invite Shaun to talk about where we're going with the hydrogen and CCS projects.
Thanks. So to answer your question, Angel made its concept select gate last year. So it's in pre-feed. It won't enter feed until there's better customer certainty around CO2. So the goals are to complete the engineering design to enter feed and secure the customers sufficient to provide confidence that you'll get to that 5 million tons of the planned capacity. Bonaparte is a much earlier stage. There's technical testing that needs to be done on that reservoir. And there's an operator in there; they're planning to drill in the next 12 months to test that reservoir. That's kind of not needed on Angel due to our prior knowledge. The other hydrogen projects, again, most of the conversation on the hydrogen projects currently is with customers. And it's not just customers in end use, but also the supply chain, so shipping, storage, offloading, and then end use.
So a good example is recent agreements that we made with both JERA and LNG Japan. Both include engagements on new energy for that whole supply chain. So technically, we're making sure we balance that technical engineering progress with the commercial, with the customers. And so they both have to go in kind of at the same time.
Thanks, Shaun.
Thanks, Shaun. So let's take the first question from the line from Dale Koenders with Barrenjoey. Can you please provide a breakdown of what was delivered from the $335 million spent since 2021? Or is this largely purchasing offsets, staffing, and desktop studies?
The $335 million is capital spend. It does not actually include any of those things that Deo has called out. The new energy organization is part of our G&A costs, offsets, because the offsets are largely used in the existing business. Those are charged against the existing business. The $335 million is capital investment. It includes investment in some partner companies who we believe have technologies that will be advantageous for the transition and for our CCUS activities and long lead items for H2OK. As you would have seen from the presentation today, we have electrolyzers being manufactured. As I said, we are well advanced with the technical work for this project. We have made financial commitments for the critical path activities.
We are cautiously optimistic that we'll get clarity from the U.S. government on the production tax credit and be able to take an investment decision this year.
Thanks, Meg. Perhaps another one from the line. And then we go back to the room. A question from Fiona Manning with Australian Council of Superannuation Investors. So, Meg, cognizant of uncertainty, what do you envisage the business will look like in, say, 10 years' time in terms of split of revenue from oil, LNG, hydrogen, and CCS?
Yeah. That's an excellent question, Fiona. It gets to the uncertainty that we talked about in the beginning of the presentation. There are a number of different ways that the world might progress through the transition in a way that is consistent with the Paris alignment. Now, when we look at the business today, one thing that's important to note, we have a very large business. For an investment in a new product such as hydrogen, ammonia, or CCS, it's going to take time for those to generate a significant portion of our revenue stream. While we've set ourselves the target of $5 billion investment, which equates to 5 million tons of CO2 abated or avoided for our customers, by 2030, it will still be a reasonably modest portion of our business, just given the size of the existing portfolio of oil and gas today.
Thanks, Meg. Perhaps another question in the room? No? OK. We'll go back to the questions on the webcast then. Next question is from James Byrne with Citibank. He says, on slide 5, diversification is highlighted as a strategy. Oops. As a strategy. But in five years' time, Scarborough is 75% of 2P. With no new growth projects, what will you do to diversify?
Look, I disagree with the premise of the question. We do concur that Scarborough is an incredibly important asset for Woodside. In many ways, it is the Pluto of the 2030s. So again, it will be a significant portion of our business. We'll have a 75% equity stake once the LNG Japan and JERA sell-downs are completed. So it will be an important asset. It will generate a significant cash flow stream for us. That said, we do have other opportunities in the hopper. We've talked in other settings about some of the gas development opportunities that we have in our portfolio today. That includes fields like Calypso, Browse, and Sunrise. And we've talked extensively today about the hydrogen and CCS projects that we have in our portfolio.
So again, part of what we're doing with our new energy strategy is to diversify our business and to build what I would describe as a third pillar of revenue for Woodside.
Next question in the room, please.
Sorry.
If you just wait a moment for the mic.
Good day. Martin Lawrence from Ownership Matters. I had two questions, one of which is technical in relation to offsets. The first one is, I think the carrying value of the offsets on your balance sheet at the end of FY23 was $123 million. Just curious how that relates to the 20 million ton portfolio and the cost numbers you've put around that. The second one is, in your own integrity activities, looking at the offsets that you are thinking of investing in, how many times or what proportion of offsets that have been certified by these third parties have you said, well, actually, that doesn't meet our requirements. And we're not going to proceed with that?
Let me invite Shaun up for those questions.
Yeah. On the first one, I'll have to get back to you on that. It will reflect the historical purchasing, which obviously, we got in early in 2018. And so the costs back in those days were lower than they are in the market today. But I don't have the exact numbers to kind of verify you. On the other one, yeah, not a quantitative answer. We screen out a fair few of those offsets. We kind of now know the kind of type of offset that won't make it through those quality hurdles. The team, again, being built since 2018, have a lot of experience on what's going to make it. And you see us in our disclosures now, over time, we're more and more focused in sort of the emission-based sequestration emissions. They're the ones that are going to meet all the quality hurdles.
It's just how many of those can you get in the market? How many can we originate? And at what cost? And staying cost disciplined still in building that portfolio.
Thanks, Shaun. Perhaps another question from the webcast. Next question is from Mark Wiseman with Macquarie. Could you talk detail on the 35 million tons CO2 equivalent abatement at LNG facilities, the ones that cost more than $80 per ton? Can any of these additional costs be passed through to LNG customers?
Yeah. That's really an excellent question, Mark. The answer right now is no. LNG buyers are not discriminating based on carbon intensity at the source. There have been some LNG cargoes sold over the past, call it, 5 years that have carried with them sufficient offsets to abate, either in the generation of the LNG or full life cycle. The reality is, LNG buyers are very price-sensitive animals. You can imagine they're in a competitive landscape as well for market share. Right now, they are not paying for additional costs associated with lower carbon intensity LNG. What does that mean for us? It means that we've got work to do to try to figure out, how do we cut the cost of those abatement opportunities?
Our technology team is working with a number of providers to figure out, how do we bring down the costs of those decarbonization opportunities? We outlined some in the presentation today. And the Climate Transition Action Plan provides a bit more detail on the sorts of technologies we're looking at. But that's absolutely the challenge that we're facing today. To decarbonize an old facility is not inexpensive. But we have a pathway. We know what technology is. We need to be maturing. And we've got teams that are working on it.
Thanks, Meg. Any questions from the room? Yeah. Next one there. And then one in the back.
Thank you. Rob Coe from Morgan Stanley again. This question I asked online. It's marked as anonymous. So you can get rid of it from the queue. Can you talk to asset planning? I know you've got your Australian head of ops in the room. In two dimensions, one is ability to repurpose existing equipment for new energy. Then secondly, how you're thinking about acute physical climate risks.
From the repurposing perspective, Rob, unfortunately, there's not a ton of utility. An LNG train, and those of you who have been with us for a while would have been with us through discussion around, why do we have to build a new train for Scarborough? And the answer is, the gas quality is quite different from Pluto or Northwest Shelf. So LNG facilities are pretty bespoke designs for the feed gas that is going through them. Now, that said, Rob, we do have sites that are advantageous. We have docks. We have jetties. We have some of those facilities. And so there certainly is opportunity. And if we look at the Angel CCS opportunity, we would envision using the same offloading facilities that we use today for LNG or hydrocarbon to import CO2 from customers.
So there is a bit around the physical site infrastructure, power gen, those sorts of things would be common. LNG trains are fairly bespoke. On the physical risk question, let me invite Liz Westcott to talk about that. This is something our operations team deal with day in, day out. In fact, we're working through cyclone prep today.
Yeah. Thanks, Rob, for the question. Physical risks, I guess, with climate, particularly up in the Karratha area, are very relevant for that team. High heat is part of the design criteria. Some of the decarbonization efforts we've done are sort of putting misting sprays. You saw it in the video. Really trying to address the heat impact it does have on our facilities. The goal there is to increase the reliability. Because one of the best ways we can reduce emissions is to stay online. It's the upsets that often trigger a lot of the emissions. Reliability has been a real focus. Same with the cyclone preparation. It's a well-established activity up north around how to manage for cyclones, how to prepare for cyclones. I guess the prevalence of cyclones is always quite variable.
As part of climate risk, it's mainly the heat, I guess, that most people have been focusing on in terms of the physical risks. So it's something we're well-versed in using.
Thanks, Liz. There was another question from Ed in the back.
Thank you, Ed John from ACSI. It was a great presentation. I'm just interested in a lot more detail around that 2040-2050 trajectory. But no doubt you've had a lot of questions asking for more detail, almost a waterfall chart on those abatement projects. And so my first question is, when do you expect to be able to provide more detail, even if it is a forward-looking question on those, again, bar charts for the 2030 and 2040 period? And then also an associated question about, what should we read into the $80 per ton price test that you've added into those?
Let me speak to the second question first. $80 per ton is what we use internally to challenge our teams to open the aperture on emissions reduction projects. And you'll be aware, in Australia, the carbon price is Aussie what is it, Shaun? AUD 30?
Yeah. Capped at $75.
It's capped at AUD 75. So $80 is well in excess of the Australian market's cap and well above where we're trading today. And again, that was done deliberately to really encourage our teams to think more aggressively about what can be done to decarbonize. Now, it's not a ceiling. The Pluto solar project, for example, that first phase of decarbonization doesn't meet that threshold. But we recognize that if we get the infrastructure up to bring that solar power into Pluto, then we have other opportunities to decarbonize. There's other industry on the Burrup between Perdaman, Yara, and the Karratha gas plants to try to share the unit cost of that development. So again, $80 is what we use for the economic assessment to challenge the teams. Above it, it's a signal that we need to do a bit more work.
In terms of the granularity around the pathway from 2030 to 2050, it's worth noting that there is some natural field decline that happens over that period. And if you recall from our investor briefing day last year, the reason we're very focused on decarbonization at Pluto site is, in the asset portfolio we have today, Pluto is going to have the biggest site emissions come the 2040s. So absolutely, our focus is on that asset because that is the one that has the longest lifespan. And from a dollars per ton perspective, the dollars per ton will be more effectively invested at Pluto than trying to chase down emissions reductions on the FPSOs, for example. Now, we've outlined, and this was in more detail in the investor briefing day and in the Climate Transition Action Plan, some of the technologies we're looking at.
Some of those technologies don't go together. So for example, post-combustion carbon capture and using hydrogen for fueling, we would not do both of those. We have technical work that we need to do to progress and figure out which of those options is more cost-effective. So that's why we're not able to give you an exact pathway of what will we do because we are still working on it. And it's probably also important to note, Ed, that the costs of those options are in the $200-$500 a ton range right now. And one of the things we need to get our arms around is, is that a best use of our shareholders' investment? Or can we invest the shareholder dollars in something else that has a more significant impact on climate change?
Those are the sorts of questions that we're going to be grappling with as we work our way forward in time.
Another question in the room with Kate?
Thanks so much. And thanks for the presentation today. This is Kate from IGCC. I wanted to welcome the Updated Industry Association review that was published this year. And just a question on that. So noting how important supportive policy settings will be to meeting the Paris Agreement goals, can you speak a little bit to your split of advocacy for enabling policy settings for, say, new energy and low carbon services versus prolonged kind of gas in the global energy mix?
Look, the question about the role of gas, I think, is best addressed on, is it, slide 14, the one that shows Asia energy mix?
Yeah.
The slide that we had that showed Asian energy mix. And perhaps we can bring that up. China's overall energy use is 25 times Australia's. 60+% of their energy today is coal. We have got if the world is serious about climate change, we have got to tackle the emissions from coal in China. Now, there's two levers to do that. A lever of technology that's available today is gas displacing coal. So same power output, half the lifecycle emissions intensity. An alternative that our new energy team has been working on is using ammonia to co-fire in a coal-fired power station. Now, we've been talking to a number of Japanese utilities who are relatively advanced and continuing to do work on this front to understand what kinds of blends would be feasible and what sorts of modifications would be required at some of their existing coal-fired power stations.
So you see, even Japan and Korea have almost 30% of their power gen coming from coal. Some of these coal-fired power stations are quite new. The operators of those facilities are trying to figure out how to tackle emissions intensity. There's two products that we think will be incredibly important through the 2040s. That's LNG, again, to displace coal, and ammonia as a blend in the coal-fired power stations. Now, what's probably not shown or illustrated on this chart is demand growth potential. I want to speak to what we're seeing out of Singapore. Singapore has passed a law saying, no new data center investment without bringing green molecules. Many of the companies that are growing their business by investing in technologies like AI, which requires the build-out of further data centers, also have very ambitious emissions reduction targets.
We see that as a key target market for some of our new energy projects. We've signed an agreement with Keppel Data Centres in Singapore, as an example, to supply them with liquid hydrogen starting in 2030 in fairly material quantities. Now, we're working through all of the technologies associated with that, the production, the transportation, and then on their side, the receiving and use. But I do feel optimistic that there's a demand center growth that's not even represented in these charts because these are snapshots from 2023 about where markets might move for some of the new energy products.
Great. Thanks, Meg. Perhaps another one from the line. We have a question, again, from Fiona Hick with AXI. The question is, there are no changes to Woodside's incumbent set of climate targets strategies from the 2022 AGM. What gives you confidence of greater support this time?
Well, look, with all respect, Fiona, one of the things that I think is quite different is the work that has gone on over the last year to really engage with our investors, to understand your areas of concern. It's described on page 9 of the Climate Transition Action Plan of all of the things that we heard from investors, including AXI, among others, about what they wanted to understand about Woodside's business. I think we have changed quite materially in how we are articulating our strategy and evolving our strategy. The Scope 3 complementary abatement target, I think, is a fantastic example. A lot of you were saying, well, you've said you want to spend $5 billion. But what does that mean for climate change? Well, we've said now, well, that would be 5 million tons per annum of emissions avoided. Great outcome for the planet.
You've said you want more detail on Scope 1 and 2 and how we're going to achieve that. Again, we've done great work with the asset decarbonization plans and have mapped out that pathway. You've asked about a whole host of other things around industry association reviews, Scope 3 maturity, the level of detail of our various hydrogen new energy and CCS projects. We've provided that. I do think there's actually a tremendous step up in the amount of information that we've provided. I can tell you the lived experience in the business is, we're very much focused on how climate change affects all of the decisions that we make.
From the operators that spoke on Liz's video about the choices they're making, about the decisions they're making on how to operate facilities, on steps that they can take to be more emissions efficient, from the decisions that people are making in the projects organization on how to avoid emissions and again, you don't really see those in the charts because it's like a traffic accident that never happened because they dropped the speed limit. There's emissions that have not happened because we changed design. And then the great work that the new energy team is doing to advance opportunities and to adjust as market conditions demand. And I think the journey we've been on that went from ammonia to liquid hydrogen to including CCS in our portfolio, we've got a much broader toolkit of options for our customers today than we did two or three years ago.
Great. Thanks, Meg. Any more questions in the room? No? Then perhaps we go to the next one on the webcast. Question from Dale Koenders with Barrenjoey. Meg, can one thrive through the energy transition by accepting lower returns on capital reinvested in new energy projects with higher uncertainty in emerging tech?
Dale, I think I spoke to that a bit when I was talking about the capital allocation framework. If you think about oil and gas investments, you have commodity price uncertainty. The price that you're going to sell your product for is inherently uncertain. The other big dimension of uncertainty is on the upstream side, is the resource risk. When we take FID on a development, there is always inherent uncertainty in how much we will actually produce from that field. Now, hydrogen is quite different. It is more of a manufacturing facility. Once we get a hydrogen plant up and running, it is just going to produce at steady state. Now, I'm sure our engineers, once they get their hands on it, will fine-tune and be able to squeeze more and more throughput year in, year out, as they've demonstrated for our LNG plants.
At the end of the day, it ends up being a risk-reward balance. We think the way we've got our capital allocation framework set actually, in some ways, normalizes between the three commodities because the risk profile is quite different.
Great. Thanks, Meg. Next question on the webcast from Su-Ling Stubbs with Fidelity. So committed that 50% of the 70 projects will be implemented by 2025 and then the remaining by 2030, how will we, as investors, be able to assess this progress?
Yeah, it's a great question, Suling. We are committed to transparently reporting our emissions. You will see data on our emissions progress as time passes between now and then. As we noted, the spend is estimated at about $200 million. Some of that will be capital. Some of that will be operating expense. It may not be really obvious in the P&L. But at the end of the day, it'll be visible in our emissions. It gets to this whole point of, we're trying to take steps with those 70 or so projects to avoid future emissions. That'll be the key test for us, is what the emissions numbers are.
Thank you, Meg. Any questions in the room? No? Perhaps we have time for another couple. And then the IR team will follow up on any outstanding questions afterwards. Next question is from Anonymous. So how does the new abatement target compare to expected gross emissions across all scopes over the period to 2030? It's heavily caveated. What's the contingency?
Yeah. I think it probably is worth noting, as we've shown on the slides, that the slides need to be read in conjunction with the footnotes. The footnotes are numerous. Again, this is important for us to be really disciplined and precise in our language. For our new energy and CCS investments, those do depend on a market being available. I think you, our shareholders, would not be supportive if we took forward a major investment and had no customer, if we built a hydrogen plant and there was nobody there to take it. Now, perhaps at a small scale, we might do some piloting. Certainly, for anything that approaches $1 billion, we want to make sure we have customers lined up. That's for hydrogen as well as for CCS. We do need to make sure that we've got that coherence.
And that's why we've got some of the footnotes that we have. Now, again, to give our investors confidence, we are also doing a lot of work to stimulate demand. And the H2 Refueller, I think, is a fantastic example. So when we first started working on that project, it was with a consortium of three trucking companies. As the work has matured with some of those companies, one of them has fallen away because they've said, actually, our truck is too hard to convert. We've continued to knock on doors. And we've got a new company in who said, actually, we've got a commitment. We will figure out how to get a truck to work on hydrogen. So we are doing work to try to build demand.
The new energy team has people, teams out in the U.S., in Europe, in Asia, and in Australia, again, doing things to try to stimulate that demand because we recognize it's not just going to evolve organically. We need to be working with customers to figure out, how do we help them grow their businesses?
Thank you, Meg. Any final questions in the room? Yeah, we have a couple here. And then I think we will wrap up.
Thank you. Hi, Meg. It just occurred to me, I mean, you've been talking hydrogen and CCS. Is there a plan B? If you can't get customer support for hydrogen, what is the plan B? And is it CCS?
I think it's important that we have multiple tools in the toolkit. But they need to be tools that work for Woodside. For example, and nobody's asked it here today. But occasionally, we get the question about, why aren't we doing plain vanilla solar or wind? And the answer is, first off, we think the margins are pretty skinny. So we don't think our shareholders would want that. If our shareholders wanted skinny solar returns, they'd go invest in a solar company. And we don't think it matches our capabilities. So the things that we do really well, we design and operate large-scale, hazardous facilities like LNG plants. Hydrogen and ammonia very much tick that same box. We are very good at extracting oil and gas from the subsurface.
We've got all sorts of great capability to understand how to map that, how to drill wells safely, how to operate in this challenging subsurface environment. CCS is an immediately transferable skill. We think we do need to have these types of tools in the toolkit. If you go to the demand charts that we presented today, I do have conviction that demand for both of those products and services will increase over time. I think we're at a point where people are realizing that this is more complicated than first advertised. Probably three years ago, everybody was like, green hydrogen, it's going to save the world. And it's super easy. People were quoting numbers that were not credible. As work has matured and people have a better understanding of, what does it mean to produce these products? What does it mean to consume these products?
There's a bit of sobriety. But I do absolutely have confidence that we will get there because it's imperative for the world to achieve net zero, for the world to achieve the goals of Paris. We've got to be able to come up with not just low-carbon electrons but also low-carbon molecules. And that is the game that we are focused on.
Thank you, Meg. Last question in the room from Kate in the middle here.
Thanks again. I was just thinking about your conversation earlier around the broad mix of skills and competencies. Was wondering if you could talk to, I suppose, the additional skills and experience that you might be looking to bring on over the next five years or so, noting that there's quite a big challenge up to 2030 and beyond to deliver your strategy?
Well, look, in some ways, that is a question that the chair would be better placed to answer. But let me speak to what has gone on over the past, call it, year and a half. So following our merger with BHP Petroleum, we became a much bigger company, a global footprint. We have a secondary listing in the United States. So we are subject to SEC reporting requirements. And our ability to fund the energy transition, of course, is higher. And our commitment is higher. So with the merger, we said, when the merger completes, that was what triggered the $5 billion target. We've done board renewal.
We've brought three new directors on in that period, one really with a lot of expertise in U.S. financial markets, again, to make sure that we've got the right mindset around compliance, SEC, and SOX reporting, one from TotalEnergies, who many in the market would point to as a company that is leading the way for an oil and gas company that is working to transition. And the third one, who just started, is coming to us from SLB, where he led their technology group and then later their new energy business. And so he is the architect of that company's thinking on, how do they evolve to participate in a lower-carbon future? So we've been bringing skills and capabilities that better reflect the footprint of Woodside, our geographic diversity, our global nature, and the imperative for us to thrive through the energy transition.
Now, if you want questions about where the board might continue to evolve, those would probably be best placed to the chair.
Great. Thank you, Meg.
Well, look.
Thanks. Yeah.
Yeah. Look, let me just thank everyone for attending today. This is a very important conversation for us. We've heard from many investors that they wanted to really be able to understand and explore our climate strategy in greater depth. Perhaps if I go back to where we started, our business strategy is a climate strategy. Thriving through the energy transition is all about being prepared, being resilient, being able to continue to deliver value to our shareholders as the world tackles this all-important challenge of climate change. So thank you for your interest. I'll hand back to Marcela.
OK. Thank you very much. Yes, thanks, everyone, for attending. If you have any further questions, please email us at investor@woodside.com. We hope we have managed to cover as many as possible today. We do value the opportunities to connect with our shareholders and everyone interested in our business. And we hope you found the session valuable too. We look forward to seeing you at our annual general meeting on the 24th of April. Thank you.