In order to stay relevant, LNG must be seen as a significant contributor to reducing greenhouse gas emissions, says Woodside Energy chief executive Peter Coleman
I want to talk about climate change and the role the LNG industry plays in the global response. Within the industry, there is clear understanding of our role: LNG can displace higher emissions fuels, enable transitions to renewables and extend energy access.
But we need to show those outside the industry why a lower carbon world needs LNG.
This process is not just about ensuring we secure markets. Itís about ensuring we are seen as a significant contributor to reducing greenhouse gas emissions. Unless we act now, we run the risk of losing relevance. And once we lose relevance, we lose investors. We lose access to the people we might want to recruit to work for us, too, if they donít believe in the importance of what we, in the LNG sector, are doing.
We should not be comforted by our demand forecasts, as coal producers may have been comforted by similar forecasts 10 years ago. Forecasts can change as attitudes change. We have to work hard to make sure people fully understand the contribution LNG makes to reducing the global greenhouse gas footprint and improving air quality.
And nowhere is this more evident than in China, where the commitment to switch to cleaner energy has created opportunities for gas and renewables.
Indeed, the Reserve Bank of Australia noted recently ďAs China transitions away from coal, natural gas is expected to account for a larger share of its energy mix, and Australia is well placed to help meet this increase in demandĒ.
Our product is part of the solution. This does not excuse us from the need to reduce emissions, and here are some means for achieving that aim.
- We can engage in emissions reduction by developing new markets for LNG to displace higher-emissions fuels. This, of course, includes displacing coal in terrestrial energy markets but also finding new uses for our product in the transport sector, where LNG can displace heavy fuel oil in ships, and oil or diesel in trucks and trains.
- And we need to improve our own operations, increasing energy efficiency, reducing methane emissions across the natural gas value chain and investing in biosequestration.
- We can also advocate for global action, underpinned by national commitments. That global action should include recognition of international offsets to drive the most efficient abatement. We must ensure that policy responses to this global challenge are effective at a global level.
- I know Iím not alone in thinking carbon pricing implemented internationally would be the most effective mechanism for achieving the emissions reductions that are needed. This includes through coal-to-gas switching, which has the potential to be even more significant as new LNG markets open up in Asia.
These issues are front-of-mind for Woodside as we pursue growth plans in northwest Australia that would significantly increase our LNG production and shore up our future as a major global supplier for decades to come. We have done the math. And I am not just referring to the global LNG supply gap we see emerging from the early 2020s. I am also referring to the prospects for our product in an increasingly carbon-constrained world.
LNG is part of that world. It is part of that world because of the contribution it makes to both reducing emissions and combating energy poverty Ė and because it represents a path that is sustainable both environmentally and economically. By this I mean that, to be sustainable, environmental efforts cannot be in conflict with jobs and prosperity. They must co-exist. To set them up as being in conflict is to doom emissions reduction efforts to failure. This is particularly acute in resource-rich countries like Australia, where we have learnt through a decade of climate policy paralysis that society will not support policies if they are perceived to threaten living standards.
So, industries like ours that support employment and investment in the communities where we operate have to be part of the solution. Itís an opportunity and a responsibility. Our industry needs to show it is committed to effective action on climate change. We can do this in our own operations and value chain. And by partnering with national governments to support genuine global action that delivers on the goals of the Paris Agreement.
Peter Coleman is CEO and managing director Woodside Energy Ltd. Mr Coleman presented these remarks at LNG2019, Shanghai on 3 April 2019.