As Australia’s largest oil and natural gas producer, Woodside Energy faces growing pressure to reduce greenhouse gas (GHG) emissions while maintaining energy production. The company uses a carbon credit strategy to offset emissions. This supports its goals for decarbonization and reaching net zero.
In 2024, Woodside retired 1.3 million carbon credits. This was nearly double the amount from the year before. They also managed a portfolio of over 20 million credits. These credits came from several programs, like the Australian Carbon Credit Unit (ACCU) scheme, Gold Standard, and Verra.
Carbon Credits in Emission Reduction: A Shortcut or a Necessity?
Woodside uses carbon credits as a key component of its strategy to address Scope 1 and 2 emissions.
According to its 2024 Annual Report, the company offsets emissions that exceed its net reduction targets. Due to the high costs of big technologies like carbon capture and storage (CCS) or electrifying LNG facilities, carbon credits remain a good choice.
The company stated in the report that:
“The use of carbon credits as offsets remains an important part of Woodside’s approach to Scope 1 and 2 GHG emissions, due to the high potential cost of large scale abatement options. We both originate (i.e. invest in our own carbon projects) and acquire carbon credits, to maintain a diverse portfolio differentiated by underlying abatement method, geography and vintage.”
Some investors want Woodside to cut back on carbon offsets. However, Woodside believes carbon credits are essential for tackling hard-to-reduce emissions.
The company prioritizes direct emission reductions first, then uses credits for remaining emissions. Executive pay ties to gross Scope 1 and 2 reductions. Offsets don’t count. This approach ensures that abatement measures come first.
Net Zero Roadmap: Cutting Emissions While Powering Australia
Woodside’s net zero strategy focuses on three main areas:
- Decarbonizing assets,
- Improving energy efficiency, and
- Investing in lower-carbon solutions.
The oil company has set the following emission reduction targets:
Scope 1 and 2 Emissions: Reduce net equity emissions through direct abatement and offsets. The Australian oil giant aims to cut net equity Scope 1 and 2 emissions by 15% by 2025 and 30% by 2030, using 2016-2020 as a baseline. Woodside aims to do this by using carbon capture and storage (CCS) at key sites. They will boost efficiency and use more renewable energy in their operations.
Scope 3 Emissions: Invest $5 billion in new energy products and lower-carbon services by 2030. This will help reduce 5 million metric tons per year (Mtpa) of CO2 equivalent. The company is focusing on hydrogen, ammonia, and renewable energy projects. These efforts aim to help customers decarbonize their supply chains.
Operational Efficiency: Launch emissions reduction projects to achieve a 15% efficiency gain in LNG operations by 2030. This involves electrifying some processes, cutting methane leaks, and improving fuel use.
Woodside reported Scope 1 and 2 gross equity emissions of approximately 6.78 million tons of CO2 equivalent (mt CO2e) in 2024, up from 6.19 million tons in 2023. The increase was largely attributed to the start of production at the Sangomar oil and gas field in Senegal.
Yet, its net equity Scope 1 and 2 emissions have fallen from 5.53 to 5.44 mt CO2e as seen below.
The company is working hard to cut emissions. It aims to improve equipment efficiency and optimize processes at its LNG facilities. Additionally, Woodside is evaluating partnerships to develop large-scale CCS projects that could store millions of tons of CO2 annually. It is also working more with renewable energy providers. This will help add clean energy to its supply chain and support its net-zero goals.
Carbon Offset Initiatives and Reforestation Projects
In addition to purchasing credits, Woodside develops its own carbon offset projects. The company has implemented several large-scale reforestation and conservation initiatives.
- Australia: Planted 3.2 million biodiverse seedlings on 4,800 hectares in Western Australia. This brings the total to 8.9 million seedlings across 13,000 hectares.
- Paraguay: Funding the reforestation of 7,400 hectares in the Chaco region. This project aims to generate about 2.4 million carbon credits over 40 years.
- Senegal: They support mangrove restoration on 7,000 hectares in the Sine Saloum and Casamance regions. This project is expected to produce 1.8 million carbon credits over 40 years.
These projects boost biodiversity and store carbon for the long term. They also align with Woodside’s sustainability goals. The company estimates that its existing offset projects will generate around 10 million carbon credits by 2035, helping to balance emissions from fossil fuel production.
Challenges and the Future of Carbon Credits in Oil and Gas
While carbon credits offer a near-term solution for offsetting emissions, the long-term sustainability of this approach is debated. Some corporations have scaled back on offsets, citing concerns over credibility and effectiveness.
Voluntary carbon credit issuance declined by 4% in 2024 due to weaker demand. Woodside is still committed to its offset strategy. This is especially true for emissions that current technologies can’t yet eliminate.
The company sees the risks of offsets. And so, it wants to balance using them with cutting direct emissions. Technologies like post-combustion carbon capture, hydrogen fueling, and electrification are being studied. Their costs range from $200 to $500 per ton of CO2, making it hard to deploy them on a large scale right now.
Woodside has committed $500 million toward research and development of these technologies over the next decade.
Woodside has teamed up with industry and government groups to create a carbon storage hub. The goal is to capture up to 10 million tons of CO2 each year by 2040. This initiative aligns with broader national efforts to transition toward a lower-carbon economy while maintaining Australia’s energy security.
Industry and Investor Reactions to Woodside’s Carbon Strategy
Investor response to Woodside’s climate strategy has been mixed. Some shareholders want less reliance on carbon credits. They also urge a stronger focus on cutting emissions directly.
At Woodside’s 2023 annual meeting, almost 49% of shareholders rejected the company’s climate plan. This shows worries about its heavy reliance on offsets. However, others support the approach, provided it is complemented by clear abatement initiatives and cost-effective offset sourcing.
Regulatory bodies are also increasing scrutiny of carbon credit strategies. The Australian government is creating new rules for carbon credits. These rules will make sure that companies follow strict transparency and additionality standards. This may change how Woodside buys and uses offsets in the future.
Woodside Energy is weaving carbon credits into its sustainability strategy. They use offsets and also invest in emission reduction technologies. With 1.3 million credits retired in 2024 and over 20 million in its portfolio, the company remains committed to managing its carbon footprint.
However, as industry standards evolve and scrutiny on offsets increases, Woodside’s long-term success will depend on its ability to scale direct abatement efforts alongside its reliance on carbon credits.
