Woodside Energy Group Ltd (WDS) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for joining us today in Melbourne for a briefing on Woodside's sustainability strategy and performance, meeting energy demand sustainably. I would also like to welcome those joining us on the webcast today. So this morning, we're meeting on the land of the Wurundjeri people, of the Kulin Nation. Woodside acknowledges their continued connection to these lands and waters, and we pay our respects to elders, past and present. Our presentation today will cover the key information in Woodside's 2024 sustainability reporting and disclosures, including our 2024 climate update. Please take the time to read the disclaimers and other important information. And I remind you that today's presentation should be taken in conjunction with our full year disclosures, which include more detailed explanation of the assumptions, uncertainties and context that are relevant to the information presented today. All dollar figures are in U.S. dollars, unless otherwise indicated. And following Meg's presentation today, we'll have time for a question-and-answer session. So now let's start with some opening remarks from our Chair, Richard Goyder.

Good morning, and thank you for joining our briefing today on Woodside's sustainability strategy and performance. As we focus on delivering long-term value to Woodside stakeholders through the energy transition, conducting our business sustainably has never been more important. with global demand for reliable and affordable energy continuing to increase. We expect Woodside's next chapter of value creation to be built on the same foundations of operational excellence, financial discipline and world-class project execution that underpin our current success. But we can only derive full value from these foundations by conducting our business sustainably. This direct link between sustainability performance and shareholder value is one we will highlight throughout today's briefing. Our strong performance in areas such as climate, safety, cultural heritage and environment is not only important to Woodside's reputation and social license to operate. It is also essential for securing new business opportunities, managing operational and financial risks and delivering the strong governance that our stakeholders rightly expect. This is why climate is on our Sustainability Committee or Board agenda at every scheduled meeting and why other sustainability topics are discussed and reviewed on a regular basis as well. It's also why the Board under my leadership has continued to strengthen its strategic oversight and governance of Woodside's sustainability performance by introducing additional skills and experience to our Board through new director appointments and elevating the link between climate and safety performance and executive remuneration. The Board also monitors the development of sustainability reporting standards, offering transparent and detailed disclosures that anticipate evolving Australian and international requirements. We understand our investors' expectations for Woodside to respond effectively to the challenge of climate change while continuing to create and return shareholder value through the energy however it may unfold. This is a challenge that Woodside readily accepts. As Meg will outline today, we're focused on delivering our climate strategy for all our stakeholders, one that balances ambition with discipline and achievability and only sets targets where we have identified a pathway to meet them. We are responding to investor feedback through action, providing additional information on each of the key areas requested and further detail on progress towards our climate targets. You have my undertaking that our Board and management will continue to engage deeply and frequently with investors on this critical strategic topic. Today is a welcome opportunity for such engagement as we continue to evolve our approach and strive for further improvement across a range of sustainability areas. Thank you again for joining us, and I'll now hand over to Meg.

Well, good morning, everyone, and thank you for joining us, whether you're here in person or online. We are presenting today from Melbourne, and I would like to begin by acknowledging the traditional custodians of this land, the Wurundjeri people of the Kulin Nation and pay my respects to elders past and present. I appreciate your ongoing interest in Woodside and your valuable feedback as we seek to deliver sustained shareholder value through the energy transition. Following the release of our 2024 full year results in February and ahead of our 2025 AGM next month, today is another opportunity to engage with investors and provide an update on Woodside's strategy and performance. Today's briefing will focus on sustainability as a key driver of Woodside's overall business performance and our ability to generate enduring shareholder value. I'm joined today by our Executive Vice President, Sustainability, Policy and External Affairs, Tony Cudmore; Vice President, Climate and Sustainability, Peter Metcalfe; Vice President, Corporate HSE, Emma Doyle; Head of First Nations and Human Rights, Sharon Reynolds; and Head of Biodiversity and Science, Luke Smith. We will all be available for Q&A. As we position Woodside to capitalize on growing global demand for energy, we know our investors want to understand how we combine this growth with strong sustainability performance. In our 2024 annual report and website, we included a comprehensive update on Woodside's sustainability strategy and performance. As Richard mentioned, we have taken steps to improve these disclosures to meet our stakeholders' expectations and evolving standards. We know such transparency is essential to building trust through a complex and dynamic energy transition. Today's briefing is conducted in this spirit as we continue our frequent and substantive engagement with investors on these important strategic topics. First and foremost, Woodside's approach to sustainability, like all aspects of our business is framed by our strategy to thrive through the energy transition and deliver value for shareholders. Conducting our business sustainably is 1 of the 3 pillars underpinning our strategy and a prerequisite for our ability to deliver the other 2 strategic pillars: providing energy and creating and returning value, both today and well into the future. And Woodside is delivering on all 3 strategic pillars. Against a backdrop of market and geopolitical uncertainty and a complex energy transition, it is more important than ever that investors can rely on us to do what we say across all aspects of our business. As we expand Woodside's global footprint and seek to become a global LNG powerhouse, we strive to deliver strong performance across a range of safety, environmental, social and governance issues. A sustainable Woodside is one that continues to provide reliable, affordable energy that the world needs now and into the future. The scale of energy poverty in the world today remains significant with billions of people denied the modern living standards that we in Australia take for granted. International Energy Agency data shows that in 2022, about 2.3 billion people lacked access to clean cooking fuels and about 685 million remained without access to electricity. As this energy deficit is reduced in the years ahead with economic development and improved standards of living, the amount of additional energy required, particularly in the Asia Pacific region, will be significant. And even in advanced economies, new sources of intensive energy demand, such as data centers, powering artificial intelligence continue to emerge. So while the precise pathway of the global energy transition is uncertain, there is one thing we can bank on. Demand for reliable, affordable and increasingly lower carbon energy will continue to grow. When considering how Woodside's portfolio can best meet such demand, we have to take a considered view of current and future energy use and tailor our investment decisions accordingly. In particular, the high LNG weighting of Woodside's portfolio positions us well to capitalize on this demand as countries in our region seek energy security while meeting their climate goals. Global coal consumption, the biggest driver of global emissions, has not yet peaked, especially in Asia and developing markets. Independent analysis continues to highlight the sizable reductions in life cycle emissions that can be achieved from substituting LNG for higher emissions coal. This creates a significant opportunity for large-scale LNG projects like Scarborough and Louisiana LNG to support energy security and decarbonization in major energy markets. As a globally mobile energy source that can be plugged into existing networks and flexed to meet fluctuating demand, LNG can support renewables development in Asia by providing grid reliability and smoothing out volatility caused by periods of intermittence. Now a similar opportunity for domestic gas to support renewables exists within Australia, with national energy market data demonstrating a gas renewables mix can generate power at lower emissions intensity than a coal-dominated mix. As the Australian Energy Market Operator CEO said last month, and I quote, "flexible gas power generation will remain the ultimate backstop in a high renewable power system. Actions that seek to curtail new gas supply for either domestic Australian use or for LNG export risk significant unintended consequences by increasing the need for coal as a substitute for lower emissions gas. Such an outcome clearly does not support global climate goals.  As requested by investors, our 2024 climate update provides more granular detail of the evidence for ongoing demand for Woodside's LNG. Our confidence in such demand is based on our projects being cost competitive, geographically advantaged and assessed for resilience to the energy transition. For example, Scarborough is a very cost competitive and has a lower carbon intensity for delivery of LNG to Japan compared to other global projects. This is reinforced by major Japanese customers taking 25.1% equity in the Scarborough joint venture. We are seeing Asian buyers continuing to commit to long-term contracts for supply from Woodside's portfolio over durations that are well beyond Scarborough's payback period.  Since early last year, we have signed 4 new sale and purchase agreements totaling more than 24 million tonnes of LNG sales with customers in major Asian markets. The longest of these deals, a 15-year SPA signed last month with China Resources, will see Woodside LNG delivered into Asia until the early 2040s. Indeed, it's accurate to say we could contract more long-term supply from Scarborough if we wish to. However, we prefer to retain gas hub exposure for a premium LNG resource in what we expect to be an attractive price environment. Let me now speak about Woodside's sustainability performance in more detail.  Healthy challenge and robust debate is a critical aspect in identifying and managing risks to inform good decision-making and enable strong performance. Woodside's Sustainability Committee continuously challenged me and senior management to identify and manage sustainability risks relevant to Woodside's activities. The committee asked tough questions to deepen our understanding of risks, to improve our processes and to adjust our priorities. We identify the most relevant sustainability topics for our business and prioritize the material ones for further plans, actions and disclosures. And we regularly assess our sustainability performance with the Board.  Our company-wide corporate sustainability plan sets clear objectives and focus areas for us to track our performance across 4 key areas: climate, health, safety and well-being, First Nations cultural heritage and engagement and environment and biodiversity. When defining our targets and evaluating our performance, we complement Woodside's own expertise and experience by tapping into global knowledge and best practice through our participation in external organizations. We also focus on transparent disclosure of our sustainability performance, noting emerging mandatory reporting requirements and voluntary benchmarks. In 2024, we once again rated strongly across key global benchmarks such as S&P Global, MSCI and Sustainalytics. Now it's very clear that investors have strong expectations when it comes to ambition and action on climate change. We recognize the shareholder vote on our 2023 Climate Transition Action plan at last year's AGM, and we have reflected deeply on this outcome. In 2024, our Chair, Board and management team held more than 250 meetings with investors on climate-related matters. Our climate-related investor engagement document describes how we conducted these engagements, the themes raised by investors and the actions we are taking. We value this engagement. We are listening to this feedback, and we are responding through action.  We are transparently reporting on our progress and providing more detail in key areas requested by our investors. And I want to assure every investor that we take your concerns seriously and weigh them carefully. There's no silver bullet to addressing the challenge of global climate change, but we are determined to play a constructive role. And there are 2 points I would like to highlight about our approach. First, we believe our strategy remains resilient to an uncertain energy transition and a volatile international environment, supporting ongoing shareholder value. And second, our focus is on delivery. As Richard highlighted, our approach balances ambition with discipline and achievability. We only set targets where we have identified a pathway to meet them.  As a result, Woodside's climate targets have stood the test of time, and we have not had to walk back from our commitments. As outlined in our 2024 climate update, we are making good progress toward the targets we have set. As we grow and diversify Woodside's value-accretive global portfolio, we are delivering on our emissions reduction targets. We are on track to meet our 2025 and 2030 targets for net equity Scope 1 and 2 emissions -- sorry, for net equity Scope 1 and 2 emissions reduction. And we are now 14% below our starting base as of the end of 2024. Now we're doing this through a combination of designing out and operating out emissions at our facilities and the use of carbon offsets. We judge ourselves not only on progress towards future performance, but also on current performance. And as these charts show, Woodside outperforms industry benchmarks in both gross equity Scope 1 and 2 emissions intensity and Scope 1, 2 and 3 life cycle emissions intensity. This is a testament to Woodside's resource quality, our gas-weighted portfolio, operational excellence and our team's execution of asset decarbonization plans. And even with the impact of Sangomar start-up in 2024, we are well below industry benchmarks. Indeed, our current level of carbon intensity is comparable to goals and targets announced by some industry peers for 2030. We are also showing global leadership as a member of the flagship United Nations Environment Program Methane Initiative, OGMP 2.0, with our methane emissions performance ahead of industry benchmarks and targets. Now building on this current performance, we remain focused on opportunities to progressively reduce Woodside's net equity Scope 1 and 2 emissions in the coming years. Responding to requests from some of our large shareholders, Woodside's 2024 climate update provides further detail on our evaluation of large-scale abatement beyond 2030 towards our aspiration of net zero by 2050. As we have disclosed, a range of emissions reduction opportunities have solutions identified in the $80 per ton range, and those are being progressed. Other emissions can potentially be abated through identifying technologies, including things like carbon capture and storage, albeit requiring further engineering and with an estimated cost range of USD 200 to USD 500 per ton of CO2 equivalent. The remaining emissions are not feasible to be eliminated, and therefore, carbon credits are the only viable option. This demonstrates the good work already underway across Woodside to decarbonize our assets. We also continue to progress CCS opportunities and to manage carbon credit integrity. And as we consider emissions reduction targets for 2035 and beyond, we will continue to be guided by science. We will continue to align ourselves with national and international objectives, and we will only set targets where we have identified a pathway to achieve them. While continuing our strategic investments in new oil and gas projects, we are responsibly diversifying our portfolio to optimize Woodside's capacity to create shareholder value through an uncertain energy transition. This approach is also consistent with our Scope 3 investment and abatement targets. With our recent acquisition of Beaumont New Ammonia, we are well positioned. To date, we have invested USD 2.5 billion in new energy opportunities and Phase 1 of Beaumont has the potential to abate up to 1.6 million tonnes of CO2 equivalent per annum of customer emissions when the associated CCS facility is online. Now we are responsible stewards of our shareholders' capital, only investing in products and services that are in line with our capital allocation framework. Beaumont New Ammonia is now priority within Woodside's new energy portfolio. The project is targeting start-up later this year and targeting production of lower carbon ammonia from late 2026. As the following video highlights, Beaumont is a competitively advantaged project offering strong commercial and strategic rationale while representing a step change in progress towards Woodside Scope 3 targets. Let's watch the video. [Video playing] Turning to health, safety and well-being. Top priorities -- the top priority for me as Woodside CEO is that all of our people are safe at work and go home in the same condition in which they arrived. That includes having a respectful workplace in which discrimination, bullying, and harassment are not tolerated. Reliable incident-free operational performance goes hand in hand with our overall business performance and is critical for delivering sustained shareholder value. Our strategic safety framework focuses our efforts on protecting what matters most, our people. We have a comprehensive approach to improving safety through 4 key lenses, systems, habits, innovation, and practices. To provide some more detail in a couple of these areas, our focus on systems ensures a common set of policies, mandatory requirements, a hierarchy of controls, and safety expectations across our expanding global footprint. Our focus on innovation relates to the use of data and analytics to understand leading and lagging indicators. We also monitor technological advancements to put additional barriers between our people and hazards. A great example of this was the recent installation of the HaloGuard safety system technology on a drilling rig contracted to Woodside. The HaloGuard system combines a wearable alarm, real-time location transmitter, and machine vision system to track the position of personnel and equipment on the drill rig floor. If a person with a wearable device comes within a certain distance of moving equipment, they are notified by an alarm. And if necessary, the system will stop the equipment moving until the person has returned to a safer location. Our growing global business saw a large increase in the volume of hours worked in 2024. Now it's positive that during this period of increased exposure, we did not record any permanent injuries or Tier 1 process safety events. However, we continue to experience a number of recordable injuries and illnesses across our operations and the fatality of a contractor employee at the Beaumont New Ammonia site is a tragic reminder that there is more work to do. We are continually striving to do better. We are taking action to strengthen our safety culture through our field leadership program, which saw more than 1,200 employees and contractors trained during 2024. This program is fostering a culture of openness, learning, and continuous improvement across Woodside, increasing our confidence that risks are understood and controls are operating as intended. The outstanding safety record achieved at our Sangomar project and during delivery of the Pluto Train 2 modules shows what we are capable of and sets the required standard for Woodside going forward. The following video highlights the strong safety outcomes during delivery of Sangomar, leveraging the focus on culture and innovation I've just outlined. [Video playing] As a company with 40 years of operations on the Burrup Peninsula or Murujuga, Torres culturally and spiritually significant heritage sites, meaningful engagement with First Nations communities is fundamental for Woodside. By engaging traditional owners and custodians to help us understand, manage and protect cultural values, we believe that First Nations cultural heritage and industry can successfully coexist. We have an established track record of partnering with First Nations communities to create positive outcomes for both our business and the communities where we operate. Our approach is built around 4 themes: consultation and engagement, cultural heritage management, partnering for positive social and economic outcomes and reconciliation. To help illustrate a couple of these areas, our focus on meaningful and effective consultation helps Woodside avoid or minimize the potential impact of our operations on cultural heritage. This not only builds trust and informed awareness within First Nations communities about Woodside's approach and activities, it also supports timely approvals and reduces the risk of disruption to business activities, including through regulatory intervention. Our focus on positive social and economic outcomes recognizes that First Nations peoples make up a significant proportion of the population who live near our facilities. This creates the potential for local First Nations community members to contribute to our business as employees, contractors or suppliers. Economic participation is a pillar of Woodside's reconciliation action plan, and we strive to deliver benefits through our direct activities and through our contractors. For example, more than AUD 100 million has been committed to First Nations businesses across Australia through the Scarborough Energy Project. Woodside's recent performance demonstrates our commitment to continuous improvement in this area, providing a strong foundation for partnerships with First Nations communities as we grow our global business. Late last year, we awarded Woodside's largest ever traditional owner construction contract to Winyama Contracting Group for civil works on the Pluto Train 1 modifications project. We continue to consult with First Nations stakeholders to support major project approvals, managing effectively the changed regulatory landscape following recent Australian court decisions. Our Scarborough approvals are underpinned by effective consultation with 18 First Nations stakeholder groups since 2021. Woodside is committed to cultural heritage activities beyond our minimum legal requirements. We work together with the Nganjarli Traditional custodians to conduct independent inspections of Rock art and other cultural sites annually within our lease areas in Marujuga. We also support additional cultural heritage initiatives and research. These include the Desert to the Sea Australian Research Council projects and the Murujuga Rock Art Monitoring program. We maintain our strong support for the Murujuga World Heritage listing nomination for its unique and precious cultural and natural landscape. The following video outlines our approach to cultural heritage management on Murujuga highlighting how this has evolved overtime. [Video playing] Given the growing global footprints of our business and growing pressure on our natural environment Woodside's environmental performance and ability to manage our impacts is critical to the future success of our business. We take a systematic and risk-based approach to environmental management, underpinned by credible science. We focus on minimizing or avoiding impact and risks in a number of key identified areas such as emissions and air quality, discharge and waste management, water management and biodiversity and protected areas. As is common for our industry, hydrocarbon spill preparedness and response is a key focus area for Woodside, and our approach is based on international best practice. A key part of our work is strong external partnerships with government-funded research organizations to collect and analyze scientific knowledge about the environment. In particular, we are a long-standing industry leader in partnering with research institutions to understand the ocean environment offshore Western Australia where the majority of our projects are located. In this spirit of knowledge sharing and best practice, Woodside reports transparently on our incidents. In 2024, we reported 6 minor releases of hydrocarbons and hazardous non-hydrocarbon substances greater than 1 barrel in volume with none reaching a threshold of moderate impact to the natural environment. We recorded no penalties for noncompliance with environmental laws or regulations, and there was no net deforestation across our global business. Indeed, under Woodside's environment and biodiversity policy, we have evolved beyond a managing impacts approach to supporting measurable positive biodiversity outcomes in the regions where we operate. In Western Australia, collaborating with key stakeholders, we are implementing additional management measures on and around our carbon origination projects to support restoration of natural habitats. Globally, we are building local capability to provide for strong environmental management. For example, we support the establishment of a new waste Senegal including a high temperature incinerator and a water treatment plant to improve waste at our Sangomar project. And of course, we continue to invest in science to underpin our activities. The next video highlights the industry work we are undertaking in the area of whale research and management of underwater noise. [Video playing] I would like to finish by highlighting our significant economic and social contributions, which we regard as a core part of our sustainability performance. The data continues to demonstrate that when Woodside performs well, the economies and communities where we operate benefit significantly. With our business in a growth phase, we are injecting billions of dollars into local economies through the purchases -- through the purchase of goods and services, $7.9 billion globally in 2024 with $5.1 billion of this spent right here in Australia. Our Scarborough Energy project alone has spent more than AUD 3.6 billion with Western Australian companies since 2021. We create local jobs. For example, our Sangomar project generated more than 4,400 jobs for Senegalese people during the construction phase. Our strong financial performance also translates into billions of dollars of revenue for governments. On the most recent annual government figures, Woodside was among the top 5 taxpayers in Australia, and we've paid more than AUD 22 billion in taxes, royalties and levies to Australian governments since 2011. We also make significant social investments in the communities where we operate. Along with our joint venture partners, we have invested hundreds of millions of dollars into social and community infrastructure in Western Australia, including a further $115 million in community investments since 2022. Now, we've covered a lot of information today, and I appreciate your interest in these material sustainability topics for Woodside. To conclude, Woodside continues to demonstrate disciplined execution of our strategic goals, including in sustainability performance. We are delivering on our climate targets and focusing on our sustainability performance, and we will continue to do so because this underpins our ability to deliver sustained value through a complex and uncertain energy transition. Our performance is supported by strong governance and accountability at the Board and senior management levels of Woodside. And we will continue engaging with our investors as we focus on executing our growth strategy, progressing new opportunities for long-term value and delivering strong and consistent returns. With strong sustainability performance as a foundation, we are well-placed to meet growing global demand through the energy transition and to continue building a resilient cash-generative business that delivers enduring value for our shareholders. We will now open it up to questions and answers, and I'll hand over to Marcela to run the Q&A session. Thank you.

Thank you. [Operator Instructions] I'll try to cover as many questions as possible today in the time we have. If there are any outstanding questions, the Woodside will follow up afterward, okay? So Meg, I suggest we start with one of the questions we got online, which is a question we'll be getting a lot in recent investor engagements, and that's associated with the fatality at the Beaumont New Ammonia construction plant. So why was that not included in the scorecard for 2024 outcomes? Can you comment on it?

Sure. Happy to. So when we announced the acquisition of the Beaumont New Ammonia project, we also announced that OCI was retaining control of the site and continuing to manage construction of the project under a construction management agreement. So construction of the facility will be completed by OCI, and that goes all the way through the commissioning and performance testing, at which point in time they then hand over accountability of sites to Woodside. Now, as everybody is aware, a few days after the transaction completed, there was a tragic fatality of a worker at the Beaumont New Ammonia site. But consistent with international standards for how responsibility for safety at work sites is managed with OCI retaining control of the sites and delivering that through the construction management agreement, the safety incidents and performance is for OCI's -- is OCI's responsibility. And perhaps as a bit of an analog, we're building the Scarborough floating production unit at a couple of construction yards in China. And again, we don't have control over those sites, responsibility for safety of workers at that site belongs to the contractors that control those facilities. So this is consistent with the standards that are followed by the International Association of Oil and Gas Producers.

Thank you, Meg. Any questions in the room?

Tom Allen here from UBS. Just a couple of questions, Meg, about your Beaumont New Ammonia project. Green premiums for commodities have seen a little bit of a setback over the last 3 to 4 months. Do you see any change in your ability to access a green premium for your Beaumont New Ammonia project? And how might project economics change if you weren't able to access that green premium going forward?

Yes. Thanks for the question, Tom. And obviously, that was a key focus when we announced the acquisition was what's the market and what's the strength of the market. We continue to be very engaged with prospective customers all around the world, particularly in Asia and Europe, for the lower-carbon ammonia product that we expect to start producing in 2026. And whilst there has been a slowdown in some of the contract for difference processes in places like Japan and Korea, for example, we do continue to have quite active discussions with potential customers in those locations. We have active discussions with customers in Europe. And as we indicated when we announced the transaction, one of the things that gives us confidence around the price that we expect to obtain for the ammonia from Beaumont is the European carbon border adjustment mechanism. Europe has burdened its own industry for 20 years with an emissions tax. So all of the European manufacturers of ammonia have been paying an emissions tax for 20 years. The carbon border adjustment mechanism is a tool to level the playing field for those European manufacturers who are carrying a heavier cost than their international competitors. And so when we look at even recent changes to the CBAM, the recent changes have provided exemptions for small businesses, but again, for large emitters and large facilities that are producing commodities like ammonia. CBAM is still intact. The European emission trading scheme is still intact. So we do have great confidence that we will be able to attract the sort of price levels that underpin the investment. But it's also worth noting, Tom, that as we communicated and we refined in our communications at full year, we expect this asset to be cash generative starting this year. And when we look at the ongoing operating costs and you compare that to today's ammonia prices, we do expect this asset will continue to meet our capital allocation framework.

Okay. Great. And just a follow-up, just to confirm your appetite for further investment in ammonia type projects. So the construction, I understand that the project is ready to export gray ammonia from the middle of this year. Has the broader capital burden on the business impacted your appetite to continue to meet your $5 billion in new energy investment by 2030?

Yes. Thanks, Tom. So as we -- as I communicated with the Beaumont New ammonia acquisition, as of end of '24, we've now invested $2.5 billion in lower carbon products and services, so our new energy strategy. We're very much focused on ensuring that we get the ammonia that we are going to produce the first 1.1 million tonnes per annum marketed and get appropriate contracts in place for the long-term value generation from this opportunity. As such, we've slowed down some of the other opportunities we were pursuing. Again, I think it's essential for us to demonstrate to our shareholders that we are able to demonstrate value from the investment that we're making. We have the opportunity with the Beaumont New ammonia site to build a second LNG -- sorry, a second ammonia line. So that would produce another 1.1 million tonnes. So we have that ability to expand within our toolkit today. And the focus very much is on demonstrating profitability from Beaumont New ammonia.

Thanks, Meg. Still on Beaumont New ammonia, we have a couple more questions coming online. I'll try to combine them from Rob Koh from Morgan Stanley and Henry Meyer from Goldman Sachs. Both are asking around the CCS plans with ExxonMobil. What is the time line and update? And what is the contingency in case that is either delayed or somehow impacted?

Sure. So those of you who have been following the Beaumont New ammonia story would understand that what we've acquired is the ammonia synthesis loop. So the part of the plant, the ammonia production facility that makes ammonia from feedstock of hydrogen and nitrogen. We have a contract with Linde to build a facility that will provide that nitrogen and hydrogen. Linde also has the responsibility to capture the CO2 that is generated in the production of hydrogen. And as we noted in the video, it will capture 95% of the CO2 that's generated in that process. Linde then has a contract with ExxonMobil for the CCS and the sequestration. And ExxonMobil has responsibility for getting all of the necessary permits to sequester the CO2. When we look at the 3 parties, as I said, we expect to start producing ammonia at the site without CCS later this year. And we do expect the Linde facility and the ExxonMobil facility to be online in the second half of 2026. Everything we're getting from ExxonMobil suggests that they are on track to meet that schedule.

Thank you, Meg. Any questions in the room?

Thanks Meg. In terms of the coal-to-gas switching story in Asia, do you have any comfort or any insights from counterparties or from the market to show that gas going into Asia is replacing coal? Or to what extent is it additional energy and additional emissions given some of the energy deficits in those markets? And a further follow-up to that around energy security, are you seeing those Asian markets moving more towards a preference for domestic supply chains for security reasons? And how does that impact the overall view of the strategy?

Yes. Well, first off, trying to definitively prove that our cargo of LNG displaced coal that would have otherwise been burned is a very difficult strategy to prove. What I can point out, though, is what's happening in Australia. And in Australia, we've had, particularly in states like Victoria and New South Wales, there's been a multiyear opposition to development of gas resources. The outcome has been extending the life of coal-fired power stations. So whilst I can't prove it in Asia, I can prove it in Australia, where we're continuing to keep coal-fired infrastructure online longer because we have missed the mark with supporting continued investment in natural gas. Now in Asia, one of the things that we see is there are nations that are blessed with natural resources and there are nations that are not. And some of our key customer markets, places like Japan and Korea, unfortunately, have very few natural resources that can be brought into the energy mix. It's not very conducive for solar given their northern latitudes. It's not very conducive for wind. The land mass is very limited. Our population density is very high. So those nations are very strategic about their energy procurement, and they are looking to make sure that they diversify the type of energy as well as the source of energy. And that you would have seen recent comments from representatives of both Japanese government and Korean government, reinforcing the importance of Australian LNG to help those nations meet their energy demand needs. Now if you contrast it with China, we would see that in China, there's quite a bit of renewable development. There's also a tremendous amount of coal development as China thinks about diversifying their energy mix and making sure that they strike a balance that works for their nation when it comes to energy security as well as air quality and emissions.

Thanks, Meg. Any other question in the room? Great. Let me get one online then. The one on our climate emissions targets made from Fiona Manning from ACSI. What impact will Louisiana LNG have on climate strategy? Any changes to targets of this line?

Short answer is no impact. So when we announced our emissions reduction targets, which would have been in I guess, '21-ish, we announced that when we completed the BHP Petroleum merger, we would reset our baseline. But that decision is made subsequent to that, we would, by and large, not have the intention of reducing baseline. So the target of reducing net equity Scope 1 and 2 emissions by 30% by 2030 relative to the initial starting point, that commitment still holds. Aspiration of net zero 2050 still holds. I think it's worth noting that one of the things that really appealed to us about Louisiana LNG was all of the work that Tellurian had done on emissions intensity. And you'll recall, and I think there was a slide in the Tellurian announcement that showed the emissions intensity of Louisiana LNG when compared to our existing facilities here in Australia, and it is markedly lower emissions per ton of LNG produced than our existing facility. So it will have the positive effect of bringing down our average emissions intensity. And as the slide we presented today showed, we're still well below industry benchmarks. So the investment we're making in Louisiana continues to improve the portfolio quality, which is already quite a high standard, but no change to our emissions targets.

Okay. Thank you, Meg. We have a question online here from [Indiscernible]. The question is on H2OK. Can we please have an update on customer demand for H2OK? What advocacy, including with industry associations have you conducted to support green or blue hydrogen and ammonia since the last update?

Yes. As I said in the questions around Beaumont New ammonia, our focus very much is on monetizing Beaumont New ammonia and securing attractive offtake contracts, both in the short term when we start up the plant later this year as well as in the longer term when we start up the low-carbon ammonia production. As such, we continue to have discussions with potential customers around H2OK. But to be really frank with the audience, those are going slowly. And it's one of the things that we've seen. It's been more challenging than we'd anticipated in finding homes and finding customers who are willing to sign binding offtake agreements for low-carbon hydrogen in the U.S. So we continue to review where H2OK fits into our strategy. But again, to demonstrate to our shareholders that Beaumont New ammonia is delivering value, we're very focused on the marketing effort associated with that plant.

Thanks, Meg. Any more questions in the room?

Hugh Morgan from Yarra Capital. Meg, I had a question around carbon capture and storage opportunities in the portfolio. If I look at Slide 13, it looks as though it's a relatively thin wedge that's economic today, but I would presume that there's some much bigger opportunities across the West and maybe Bastrop New. Could you perhaps talk to how you're thinking about that technology? And from a technology perspective, what needs to be unlocked to increase the size of that.

Yes, great question. Look, let me first and foremost say for everyone here that carbon capture and sequestration works. I know there's a debate around the effectiveness of the technology. It's been used for probably 50-plus years in the United States. It's been used offshore in Norway for 20-plus years. So it is a technology that is going to be an incredibly important part of the world's approach to tackling climate change. We've got to be able to permanently sequester CO2 if we're going to reduce the CO2 in the atmosphere. So it's an incredibly important tool in the toolkit. And the opportunities we've been looking at are in a couple of areas. For Browse, we've, as communicated to the market, recognize that we need to have CCS from day 1 to manage the CO2 that comes out of the reservoirs when we produce the field and appropriate environmental referrals have been submitted for that aspect of the project. We have work underway looking at both Angel, which is a depleted gas field in the Northwest as well as Bass Strait, which has a number of depleted reservoirs right here offshore Victoria. And we've been doing some exploration drilling up in the Bonaparte looking at the use of large-scale saline aquifers as a source of CO2 sequestration. So we're doing what I would describe as early-stage technical and commercial work. The challenge with CCS is probably twofold. One is scale. So to ensure that the cost per ton sequestered is competitive, you have to sequester a lot of tonnes. And so making sure we're able to aggregate a number of different emissions streams to drive that cost down is an important part of the work that our commercial teams are working on. And then the second challenge that we're all facing is who pays for it and what is the appetite to fund this? Within Australia, we've got the safeguard mechanism that's ratcheting up as time goes by, and that will provide an incentive. But again, I'd perhaps also note that stability of policy is important to help investors make decisions around should they be investing in a CCS opportunity or contracting CCS, if there's a question mark around what will the safeguard mechanism look like over time. So there's a bit of uncertainty as well in the regulatory space. That again, feeds into the cost calculation. So we're advancing the technical work. As you would have seen on the slide that showed our work on large-scale abatements. CCS is part of that large-scale abatement that we're looking at, particularly at the Pluto site. But as I said in the speech, the current decarbonization cost for those technologies is USD 200 to USD 500 per tonne. So we need to get those costs down before that becomes a sensible decision for our shareholders.

Thanks, Meg. I think we have another question in the room there.

I was hoping just to change topics, if that's okay. Yes, just interested to understand a little bit better like incidents of psychosocial kind of safety like bully and harassment. And I think how Woodside is sort of thinking about the main hazards, what the sort of management strategy is sort of looking forward and what the level of sort of complaints or reported incidents are like today?

Let me invite Emma Doyle, who is our Vice President for Corporate HSE to speak to that topic. Why don't you come on stage, Emma, so the cameras can get you.

Thank you. That's a really good question. I think the -- it's a focus for lots of companies at the moment. And even the regulators are starting to work through their guidelines and understand how things will actually work in a pragmatic way. So we have a well-being framework and a really important part of that is protect from harm, and that's the piece that we're working really strongly on now. So we used to Safe Work Australia. There's the work conditions. So how much job control you have, how much -- what's the environment that you work in. And then there's the behavioral ones, so the discrimination, bullying and harassment. And then there's some other ones around do I feel fulfilled in my job. So we have a plan to do a risk assessment. We'll look at how effective our controls are and then put an action plan in place that...

Can you talk about the respective work that's been done...

Yes, true. And it's actually been -- it hasn't snuck up. It's been happening over since 2015. So in 2015 was the first WA had a Parliamentary Inquiry into the health of the FIFO workforce. And then there was another Parliamentary Inquiry in 2022, I think, and that was into sexual harassment, and that was following the respected work Australian Human Rights Commission. So we've been involved in all of that. We've taken that 6-segment framework, and we've been working through the leadership piece, the culture piece. The risk assessment piece is getting a lot of our attention now. And we've spent the last couple of years working on our response piece as well. But mostly, we want to get into the prevention space so that we're not having to respond.

Any more questions in the room? Okay. So I'll go back online. We have another question. There was a second question from Rob Koh. So Rob, I didn't forget you. I was just waiting to go back to it. Meg, can you please outline what Woodside does to educate its people about climate change and combat misinformation around that topic?

Yes, it's a great question, and it's something we've been working very intensively on for the past few years. Let me invite Tony Cudmore, who's our EVP Sustainability Policy and External Affairs. So a lot of the employee communication falls in Tony's shop. I'll invite Tony to make some comments.

And thanks, Rob. Look, I think an issue like climate change and the energy transition, facts, data and science are absolutely fundamental. So we place a high priority internally in the company and ensuring that we are taking that exact approach with our workforce. One thing I'd like to highlight is we have at Woodside a great tradition of employee initiative groups, interest groups where employees themselves help support really important conversations across a range of issues inside the company and also then ultimately to share with community as well. One of those is called the Woodside Climate Action Network, WECAN, Woodside Energy Climate Action Network. And that group is an employee-led company-sponsored activity that is aligned generally each year with the COPS, the International Council of the Parties conferences to ensure that we're raising literacy inside the company and also bringing it to bear externally. Another thing I'd note is that we place a high premium to on that factual empirical information externally. So we have a section of our website devoted to facts and information on climate and many other issues. You can go to it's the Woodside fact checker as well as ensuring that all of our communications are designed to be clear, high integrity, high quality, factually based. So we try and take that approach inside and outside the company to ensure that this issue and every other issue we deal with is dealt with at that level.

Thank you, Tony. Any more questions in the room?

I was just interested, I know the focus has largely been on transition risk, which is entirely appropriate. But thinking about physical risk, particularly with the research showing we're heading over 2 degrees and wondering how you're thinking about not just sort of infrastructure risk, but beyond that, the intersection with other things like water stress and how Woodside is working through that?

Sure. So let me talk to physical risk, and then I'll ask Luke Smith, who's our Head of Environment and Biodiversity to come talk about water and how we think about water. But from a physical risk perspective, we operate in jurisdictions that have always had exposure to severe weather. So offshore the Northwest of Australia, we're cyclone exposed. And in the U.S. and Mexican Gulf, we're hurricane exposed. So we do tremendous work before we start any project to do appropriate technical engineering and design work to ensure that our physical assets are robust to those severe weather events. And that's been part of our design strategy since the 1970s. And as new data comes in, as we learn more and we do quite a bit of data collection ourselves to understand what are we seeing, what are the wave heights look like, what does the wins look like to make sure we're constantly updating our standards, regularly checking that our facilities meet those standards and are appropriate to continue operating in those conditions if sea state or wind state conditions were to change. So from a physical risk perspective, I'm very confident that Woodside has managed those risks appropriately. But let me invite Luke to talk a bit about water and how we think about water.

Good morning, everyone. Yes, water is an interesting one for us so our traditional business has not been that water intensive. I think as we transition as a company and look at things like new energy, we are really starting to look at where is the stress points within our business. And when we are actually even looking at DD within new opportunities, what's the water issue around there? How much water would a project use and what's the scarcity? I think one of the things as we are being challenged by resource use and other uses of those resources, how do we make sure that we're not going to come in conflict with other users and particularly things around water. So our focus is very much on what are we doing now and even in our office around water, but what are we going to do in these new opportunities and how do we manage that conflict. And it's a little bit around where is the water coming from, who else uses it and how can we minimize our own use. The other one just on that is also waste as we go into decommissioning, we're looking at how can we recycle our waste. So 2 really key areas for Woodside moving forward is that real water and waste management.

Thanks, Luke. Look, it's perhaps worth giving a tangible example. So for the H2OK project, we entered a contract with the city of Ardmore to use greywater. So we're not competing with households or hospitals or the community. We're taking water that's gone through the water treatment facility and using that to make the hydrogen. And again, that's the lens, as Luke described, that we're applying to all of the new energy opportunities that we're looking at. Hydrogen is incredibly water-intensive. And so where you cite a hydrogen facility, this is one of the top considerations that we look at.

Thank you. Thanks, Luke. Thanks, Meg. Perhaps I go back online. There is one question on executive remuneration from Greg Liddell. So Woodside's executive remuneration structure incentivizes production growth. How does this conflict or not with prudent assessment of stranded asset risk? How is that thought through in the Board balancing physical risk and CSR executive compensation?

Sure. Well, let me speak to the stranded asset question first. So as those of you who are close students of Woodside would know, we've for multiple years now been doing stress testing and financial analysis to understand how robust is Woodside as a business in a scenario where the energy transition is accelerated and prices for commodities like oil and gas potentially come under pressure. You would see from those graphs that we have published to the market that we do remain resilient even in those scenarios where oil and gas prices drop dramatically. It's also worth noting that when we think about the energy transition, we know there's not one pathway that the world is going to follow. So we do a lot of review of the scenarios that are produced by bodies like the IPCC as well as independent third-party research houses as well as companies in our sector like BP and Shell that publish those global energy outlooks. So all of that research informs how we think about energy transition and the possible pathways it might progress down. As I said, we do financial resilience modeling, and that financial resilience modeling demonstrates that even in particularly onerous price environments where perhaps there's an incredibly rapid drop-off in demand for oil and gas and the price falls that we remain resilient. So from a stranded asset perspective, we are not worried about that as Woodside. Now when we think about the structure of the executive remuneration, you'll note it has multiple different dimensions. We look at the financial performance of the business. We look at the strength of the base business. And again, that includes things like the production that we have from the assets we've already invested in. There's a measure associated with growth. But it's also worth noting that last year, we split out safety and climate to have distinct focus on those 2 particularly critical areas of our business. And Executive Rem for safety and climate, 15% each, so it's 30% total. That's equivalent to the financial impact in the scorecard. So again, sustainability is at the heart of everything we do. And if you think about or if you're asking also about things like future investment decisions, we have been using for the last few years with some of our investments, a 6-point method for assessing transition risk and the quality of the investments that we're making. and the longevity of those investments through the uncertainty of the energy transition. And again, the investments that we've made recently, things like Trion, Beaumont New Ammonia, the pending decision on Louisiana LNG, all are assessed with that same lens of are these investments going to be robust through the energy transition and deliver the value that our shareholders expect.

Thank you, Meg. Any more questions in the room?

Thank you, Meg. My question might be a little bit related to what you just mentioned, but I would like to understand how you're seeing the threat from nuclear power, like tech giants are investing in nuclear, and we see debate about nuclear even in Australia. And your important market, Japan, they have very ambitious renewable target that might be missed, but the gap might be filled by nuclear for Japan. So it would be great if you could mention how you're seeing the threat from that.

Sure. Well, first and foremost, I think it's important to acknowledge that nuclear is an incredibly important part of the modern energy mix. In many countries around the world, it provides baseload power with close to 0 greenhouse gas emissions. So it is, I think, important to start by acknowledging the important role that nuclear plays in the energy mix. We have obviously been watching with great interest some of the work going on looking at different types of nuclear technologies and the work that's done on advanced nuclear technologies to improve the safety, to mitigate some of the risks that we saw actualized sadly in Fukushima in 2011. So we do see nuclear as continuing to play a role in the world's future energy mix. The reality is even in places like Japan, community sentiment is a bit mixed on nuclear. So we watch the evolution of nuclear very closely. As we think about the scenarios of how the world might evolve, it obviously factors in. And nuclear is technology that we watch. I would advocate that nuclear displacing coal would be a better outcome than nuclear displacing gas. But again, I think there's going to be a role for all of those commodities to help meet the world's future energy needs and tackle climate change.

Thank you, Meg. So perhaps we go back online. There is one question on carbon offsets. So that comes from Lia Broughton, ESG analyst from UBS. So Lia mentioned that in our climate update, we reported approximately 1.3 million offsets contributing substantially to the annual reduction in our emissions. And then once our growth projects are implemented all the way to 2030, versus our internal carbon price of $80 per ton, how do you expect the NOUs of offsets to decline or grow over time?

Look, perhaps we can pull up the slide that showed our decarbonization pathways. And as we talked about in the speech, the best point in time to tackle potential emissions is before you emit. So design out is an incredibly important pillar in our climate change strategy to make sure that when we design a facility that we're designing for as few emissions as possible. And we've got industry benchmark data that would show what others are doing. And we -- as we demonstrated in -- I think it was the previous chart, showed that compared to many others in our sector, we have very low emissions intensity. But I think this chart illustrates what we're doing pretty effectively. So when we look at the forward projection for emissions, and this includes things like Scarborough Energy Project, Trion, Beaumont New Ammonia, Louisiana LNG. There are things that we can do after we've designed out as many emissions as we can to operate as efficiently as possible. And one of the key levers we have actually in our emissions management tool is improved reliability. So, particularly at an LNG plant, for example, if you have an unreliability event, that's the sort of thing that can trigger the potential need to flare a bit more gas. So focus on reliability, focus on energy efficiency. Those of you who follow us know that we've been working for a number of years on a project to bring solar power directly into the Pluto plants, continue to pursue that objective because I think once we get the power in, it will unlock the ability to continue to expand that solar grid and bring even more low emissions power into the plant. So those are the sorts of things that we're able to do today within that $80 a ton range. As noted on the slide, the next step of decarbonization starts to get really complicated. Decarbonizing existing infrastructures, existing facilities that were designed perhaps in the 1990s or early 2000s gets harder. But we have teams working on it. We've been working with key partners, companies like Baker Hughes on technologies that may allow us to cost effectively decarbonize some of those heavy equipments that we have at our LNG facilities. And then as we illustrate on the graph, there are some hard-to-abate emissions. And these come from things like mature life assets where, again it's -- it would not be a good use of shareholder dollars to try to decarbonize an asset that's going to be offline in less than 10 years' time. There are some emissions that are almost impossible to eliminate, and we will have to continue to use offsets for those. And that's why offsets have been a part of our business for many years. But we continue to do work to ensure a couple of things. One is to ensure the quality of the offsets to make sure that we actually are taking CO2 out of the atmosphere or greenhouse gas out of the atmosphere with the offsets that we're using. And we do that through self-origination with our planting projects as well as with the offsets that we acquire on market, making sure that they meet a high international standard. And we're also investing in technologies, the carbon products business, which we've talked about in the past, which has the potential to take CO2 or methane greenhouse gases and convert them to things that might be useful. And some of our tech partnerships are very much focused on this outcome. So those are the sorts of things that we're doing in this space.

Many thanks, Meg. We are almost at time. I think we have time for one more question in the room. Do we have any questions?

I had a question on the First Nations element. Specifically, it would be good to understand how the organization sort of practically measures compliance with the FPIC policy. And I think also why that's not reflected in the reconciliation action plan and kind of key priority areas at the moment?

Look, let me start by saying we consult extensively. Let me invite Sharon actually to speak to it because Sharon is deep in this subject.

Morning and thanks. I think at a very practical level, the free prior and informed consent principles are captured or embodied in our reconciliation plan through the indigenous voices and ensuring that we actually engage and afford the opportunity to invite and listen to the voices of First Nations people. So it might not necessarily be as overt as free prior and informed consent within our reconciliation action plan, but that's certainly how it's captured and intended in practice for us. The way that we apply it at the most practical level and through both our activities on the ground and regulatory approvals, is to, first of all, identify who the First Nations communities are, where we have an interest and activities occurring over certain parts of either land or sea country. And then engaging through authorized representative entities. So we appreciate that there are diverse views across a broad range of individuals. But from a United Nations declaration of the rights of indigenous peoples and through the native title process, First Nations rights are fundamentally community -- communal rights. And so we make sure that we engage through those proper community bodies. And in terms of, again, how that works in practice, if we just reflect on our last year's activities alone, Woodside had engaged with over 33 First Nations representative bodies about our activities. We have had over 7,500 engagements either through written or face-to-face meeting engagements. And then we capture all of that information and make sure that, that's then reflected in our activity plans and that there's a clear demonstration that we both understand the issues or concerns that are held with the First Nations groups but then more importantly, how we're able to then respond and either remove those concerns or at least minimize them to the most possible. So that's how we applied in practice.

Yes. Many thanks, Sharon. Meg, do you want to say some closing remarks or should I wrap up?

All right. Well, look, let me just thank everyone for your interest in Woodside and your interest in our sustainability performance. As I said, this is fundamental to how we do our business. And I hope between the videos and the various speakers you heard from today, you were able to develop a more well-rounded view of how we think about sustainability. Climate change, obviously, is an important and a material sustainability focus for us, and it's fully embedded in our business strategy of thriving through the energy transition. But it's not the only sustainability dimension that is important to Woodside. And again, I hope that from the other speakers today, you got a bit of a flavor of how this permeates everything we do. So thank you for your interest in Woodside, and I'll let Marcela wrap up.

Thank you very much, everyone, for joining us today. Yes, I do hope you enjoyed and learned more about how we are meeting energy demand sustainably. I personally, and we all do really appreciate the opportunity to connect with our shareholders and have this dialogue and get your questions and address the topics. I am very excited that we had a breadth of sustainability topics today as well and really welcoming the questions across all themes. And I guess we see each other through the next roadshows and on the 8th of May on our AGM as well. Thank you very much.