Home > 13% of Santos shareholders demand oil and gas wind up plan

13% of Santos shareholders demand oil and gas wind up plan

15 April 2021

15 April 2021

At today’s Santos annual general meeting, 13% of the company’s shareholders voted against the company’s management and for a Market Forces-coordinated shareholder resolution calling on the company to wind up oil and gas production in line with the climate goals of the Paris Agreement.

Speaking after the AGM, Market Forces Asset Management Campaigner Will van de Pol said:

“Today’s record level of support for a resolution calling for the wind up of fossil fuel production demonstrates considerable investor opposition to Santos’ growth plans, which are in direct contradiction to the declines in these sectors that must occur in order to meet the Paris climate goals.

“However, the majority of big investors who last year supported calls for Paris-aligned scope 3 emission reduction targets and capital expenditure plans have failed to recognise that these actions would require Santos to manage down oil and gas production.

“Santos’ massive oil and gas expansion plans are a bet on the failure of the Paris Agreement, with shareholders’ capital, employees’ livelihoods, and environmental remediation at stake.”

“With today’s vote almost doubling the previous record set for a fossil fuel wind up resolution, all coal, oil and gas producers must take note: investors are increasingly willing to demand drastic action to align with global climate goals.”

Read Market Forces’ investor briefing in support of today’s resolution

Betting on climate action failure

The shareholder resolution was required as Santos’ current plans to significantly increase oil and gas production are inconsistent with the action required to meet the climate goals of the Paris Agreement. This means the company is not only actively undermining global efforts to rein in global warming, it is betting shareholder capital against the rapid transition away from fossil fuels required to meet Paris.

Analysis of the carbon budget required to limit warming in line with the Paris Agreement’s 1.5°C goal
shows oil and gas production must fall respectively by 4% and 3% annually from 2020 to 2030. Yet Santos’ plans involve increasing production by 9% each year over a similar time frame, including by spending US$4.5 billion on growth projects over the next five years.

In support of these plans, Santos cites a global LNG forecast where (in 2035) demand is 19% above that projected in a 2.7°C warming scenario (the International Energy Agency’s STEPS) demand and 46% higher than in a 1.65°C scenario (IEA Sustainable Development Scenario).

When asked about the contradiction between these LNG forecasts and Santos’ claimed support for the Paris goals, Chair Keith Spence failed to provide an explanation.

As an example of the scale of capital being put at risk by Santos’ expansion plans, the company recently made a final investment decision on the US$3.6 billion Barossa gas project.

Many countries around the world are moving to implement carbon pricing policies in order to bring down emissions in line with the Paris goals, and the International Energy Agency projects these carbon prices reaching US$63/tonne in 2025 and US$140 by 2040 in its Sustainable Development Scenario, which gives just a 50% chance of limiting warming to 1.65°C and even then relies on unrealistic carbon capture and storage assumptions.

When asked if the Barossa Project has been supported by an analysis of carbon prices similar to those under the IEA’s SDS, Spence said the carbon price Santos used for screening the Barossa investment decision would not be publicised.

Along with many questions over its climate change impacts and response, Santos was also challenged by Traditional Owners and farmers over local environmental and social damage caused by the company’s dirty operations.