GOT GAS: Japan smiling on Aussie gas win as Scarborough gets the green light

ACF drops court challenge to halt Woodside’s Scarborough gas project
Project now clear to supply the Pluto LNG plant with first cargoes expected in 2026
Japan still keen on gas as it flags use of CCS to reduce emissions

The Australian Conservation Foundation’s decision earlier this week to abandon its litigation against Woodside Energy Group’s (ASX:WDS) Scarborough gas project has removed the only remaining hurdle in its way to providing gas feedstock for LNG exports from 2026.

In its statement, the ACF said it had chosen to abandon the case as it was unlikely to succeed, claiming that Australian laws favour fossil fuel interests as there is no explicit requirement for climate damage to be considered under the Environment Protection and Biodiversity Conservation Act.

This contrasts with accusations from the industry that “green lawfare” – environmental legislation used like a weapon – was being wielded to halt and delay new gas developments.

What is clear is that with the ACF litigation now abandoned, Scarborough can progress towards gas production to underpin the 5Mtpa Train 2 at WDS’ Pluto LNG project as well as supply gas to fuel 3Mtpa of LNG production at Train 1.

As of June 30, the project is 67% complete and on track to deliver the first LNG cargo in 2026.

Gas for Asia

Importantly for WDS, the greater volumes of LNG will come as demand for gas in Asia continues to climb.

While decarbonisation remains very much on the cards for more developed Asian economies, this is tempered by their high energy demands which means that gas and coal aren’t going away anytime soon.

Rather, as Japan so clearly outlined during a recent meeting of energy ministers from nine South East Asian nations, Japan and Australia, it is very much in favour of using carbon capture and storage to enable it to continue using fossil fuels – at least in the short term.

This is despite CCS being largely unproven on the commercial scale – as demonstrated by the continued underperformance of the Gorgon CCS project.

It does mean however that Japanese companies which have been instrumental in financing Australian gas projects will likely continue doing so if the opportunity presents itself. Japan’s JERA notably took a 15.1% stake in Scarborough earlier this year in a US$1.4bn selldown by Woodside.

This is also very much in line with the Japanese Government’s policies, which seek to secure long-term supplies of fossil fuels.

Along with demand from China and South East Asia, this likely means that gas will remain a large part of the energy mix in the region where it will either be used to meet growing demand or displace the use of coal, which would at least have some impact on carbon emissions.

This is not news that will be welcomed by the green lobby, but it certainly will be welcome news for the gas industry, if it can get approvals in place.