15 November 2021
Australia’s oil and gas exploration and production companies are being challenged by shareholders over the incompatibility of their expansions plans with global climate goals.
With a number of these companies having held their AGMs recently, a recurring theme to shareholder questioning has been the International Energy Agency’s finding that, if we are to reach net zero emissions by 2050 and have just a 50% chance of limiting warming to 1.5°C, there is no room to develop new oil and gas fields.
Yet, invariably, Australia’s oil and gas companies are continuing to pour shareholders’ money into exploration and development of new oil and gas fields.
Surfers not stoked on Beach
One new proposed project that has drawn particularly strong opposition is Beach Energy’s plan to drill for oil and gas in the Otway Basin, off the coast of Victoria’s iconic Surf Coast and Great Ocean Road.
In 2020, Beach Energy faced a Market Forces-coordinated resolution calling on the company to cut oil and gas production in line with the Paris climate goals. Yet Beach continues to press ahead with its plans to almost double production by 2024.
When Beach was asked at its 2021 AGM if the company was reviewing its growth strategy to align with the IEA’s Net Zero by 2050 scenario, company Chair Glenn Davis claimed Beach was ‘already aligned’, based on its operational emission reduction targets. However, this fails to recognise the emissions generated when Beach’s fossil fuel products are burned by customers. It is the global shift away from oil and gas to avoid these emissions that poses existential risks to fossil fuel producers.
Hesta failing to bring Cooper Energy into line
Last year, 10% of Cooper’s shareholders took the extraordinary step of calling on the company to wind up production in a timeframe consistent with the Paris climate goals. Despite the increasing weight on climate science confirming there is no room for new gas if we are to meet the Paris goals, at its 2021 AGM Cooper still refused to commit to not pursuing new gas projects.
Meanwhile, one of the company’s biggest investors, Hesta, has been trying to position itself as a climate leader. However, Cooper Chair John Conde confirmed Hesta had not been living up to its claims, having failed to demand Cooper align its production and capital expenditure plans with the IEA’s net zero by 2050 scenario.
Central Petroleum’s short-sighted ‘short answer’
Central Petroleum has said its strategy is clear: explore and develop new oil and gas resources and bring them to market. The company was asked if the board had reviewed this strategy in light of the International Energy Agency’s conclusion that there is no need for any new oil and gas fields, beyond those already in development, in the pathway to net zero emissions by 2050.
Company boards are ultimately responsible for ensuring company strategy does not expose shareholders to unnecessary and unmanaged risk. So the company’s revelation that the board had not even considered the IEA’s findings in relation to Central’s business suggests wilful ignorance.
An oil phase down on the Horizon?
Horizon Oil provided one of the most sensible responses of the AGM season so far, when it was asked by a shareholder to commit to no longer allocating capital to new exploration and development projects, and instead focus on maximising revenue from existing projects and returning capital to shareholders.
While not going so far as to commit to no new greenfield development projects, the company said it was not its intention to undertake exploration in new areas.