Safeguard Mechanism: Production Variables Update

Please direct all responses/queries to:
Peter Metcalfe Woodside Energy Group Ltd
Vice President Climate and Sustainability ACN 004 898 962

Mia Yellagonga
Our reference: 2HXTJN84BF72-882259280-25577 11 Mount Street
Perth WA 6000
Australia
T: +61 8 9348 4000
www.woodside.com

11 August 2023

FOR PUBLICATION
Safeguard Mechanism Reform
Department of Climate Change, Energy, the Environment and Water (DCCEEW)
King Edward Terrace
Parkes
ACT 2601

By email: Safeguard.Mechanism@dcceew.gov.au

Dear Safeguard Mechanism Reform Team

RE: SAFEGUARD MECHANISM CONSULATION: INTERNATIONAL BEST PRACTICE
BENCHMARKS & PRODUCTION VARIABLES UPDATE:

Woodside welcomes the opportunity to comment on the Safeguard Mechanism
(Mechanism) international best practice benchmarks consultation and production variables update consultation, which are occurring in parallel. Given the linkages, and for simplicity, we have combined our response to both consultation processes.

In addition to our submission, we support the broad direction of the submissions made by the Australian Petroleum Production & Exploration Association (APPEA).

As we have outlined previously, a fair, robust and transparent Mechanism can lead to a reduction in Australia’s emissions, including by encouraging businesses to invest, innovate and adopt new practices and technologies. However, it is important that this goal be pursued in a manner that supports Australia’s competitiveness in a decarbonising global economy.
It is within this frame that we have made our submission.

Our full submission to the consultation is attached as Appendix 1, but in summary, we:

International best practice benchmarks consultation:

 Recommend the identification of best practice facilities be broadened to top quartile
(or similar) facility level performance to ensure representative facilities are used to
support detailed production variable calculations.

 Recommend that the process for setting production variable benchmarks should
include a review of the overall baseline for new facilities to ensure it is representative
of current international best practice facilities and conditions.

Page 1 of 8
 Support the principle to set minimum datasets as well as the principle to adjust this
criterion based on Australian production output and number of facilities. The
methodology proposed is insufficient to align with one of DCCEEW’s objective to
‘maintain Australia’s competitiveness in a decarbonising global economy’. It also risks
international best practice settings being impacted by outlier data points that are not
representative of global performance.

Production variables update consultation:

 Acknowledge the draft default emissions intensity of 0.928 t CO2-e per tonne of
reservoir carbon dioxide.

We appreciate the opportunity to provide our views on these critically important matters and remain available to meet with DCCEEW to discuss our feedback.

Yours faithfully

Tony Cudmore
Executive Vice President Strategy and Climate

Page 2 of 8
Appendix 1: Woodside response

SETTING INTERNATIONAL BEST PRACTICE BENCHMARKS: CONSULTATION PAPER

Consultation topic Details in Consultation Paper Woodside response
International best practice benchmarks
Identifying the best practice The best practice benchmark will be based on Woodside recommends that the identification of best
facilities and data suitability. the facilities that have the lowest emissions practice facilities be calculated more broadly by
intensity of production, located anywhere in the considering top quartile (or similar) facility level
world, for which data can be sourced that is performance. This will ensure representative facilities
appropriate of setting the benchmark. are used to support detailed production variable
calculations.

Woodside notes that setting best practice
benchmarks, without consideration of broader
industry trends, increases the risk that policy settings
will be influenced by outlier facilities where low
emissions intensity performance is unrelated to
technology selection or design options available in
Australia.

For example, there are circumstances where the
lowest emissions intensity oil and gas facilities are not
representative of Australian conditions or global
industry performance. Wood Mackenzie emission
benchmarking data highlights that North Sea oil and
gas facilities that benefit from hydroelectric power
from the shoreline are the lowest global emissions
intensity facilities. The top two or three facilities in this
data set have emissions intensities multiple times
lower than the performance of the next top 20
facilities globally. Setting an international best
practice benchmark based on the top two or three

Page 3 of 8
Consultation topic Details in Consultation Paper Woodside response
outlier facilities would result in policy settings based
on technologies that are not replicable at scale in our
areas of operation and not representative of global oil
and gas industry performance.

Woodside supports using emissions data that is
consistent with the relevant international reporting
standards and acknowledge that the guideline will
factor the differentiation in Australian and international
reporting.

Woodside recommends that production variable level
intensities should be calculated considering the
facility’s performance holistically and not by
combining the lowest emissions intensity production
variables from other facilities.

Woodside notes that correctly apportioning production
variable emissions at a sub-facility level, based on
globally available data, will be complex and
consideration should be given to apportioning these
emissions consistently and transparently.

Woodside recognises that access and availability to
reliable data across facilities will be challenging.
Woodside suggests that a focus on selecting
representative facilities where data is available,
considering top quartile (or similar) facility level
performance, will lead to better policy outcomes.

Woodside supports the Department’s proposal to
exclude pilot, non-commercial, highly subsidised and
under-construction facilities.

Page 4 of 8
Consultation topic Details in Consultation Paper Woodside response
Data should be appropriate for the The best practice benchmarks will use the As stated above, best practice should be considered
Safeguard context. production variables already defined for the at a facility level and not at an individual production
industry average emissions intensities, which variable level. Choosing the best performing
are used for setting the baseline for existing production variables from different facilities risks
facilities. setting intensities that are not representative of actual
global performance, and by extension risks Australia’s
competitiveness.

Woodside supports the proposal of aligning to
emissions accounting methodologies as well as
aligning to the Mechanism production variable
definitions (e.g. electricity is based on generation
within industrial facilities rather than grid connected
power).

Woodside supports the concept of adjustment for
methane intensity. However, when undertaking this
adjustment, we encourage consideration of global
target intensities and how this interacts with proposed
decline rates.
Time period for selecting data. Use two recent years data for each best Selection of at least two or three facilities (or 10% of
practice facility. Australian production) and two years of data is
Number of facilities to use in the Use a minimum of two facilities, and more if insufficient and risks selecting outlier facilities, or
benchmark calculation. their combined annual production is less than annual emissions that are not representative of global
10 per cent of the annual production of performance.
Safeguard facilities. If there are at least five Please see the above example of how the top two or
facilities in Australia that engage in production, three facilities may be outliers of global performance.
a minimum of three facilities would be used.
Adjusting for Australian Adjust for geology and climate, but not the Woodside supports the approach of recognising
conditions. availability of skills or technology. Review if the Australian conditions, including geology and climate,
facility is still best practice after adjustment. and encourages consideration of other aspects such
as the significant distances to infrastructure/shore for
prospective Australian oil and gas developments.

Page 5 of 8
Consultation topic Details in Consultation Paper Woodside response

Rather than adjusting to Australian conditions,
Woodside suggests an alternative method that
includes selecting facilities that are representative of
both Australian conditions and top quartile (or similar)
international performance.
Best practice benchmarks cannot It is proposed that best practice benchmarks Woodside supports the principle of ensuring
be higher than domestic best cannot be less stringent than domestic best consistency between international best practice
practice. practice. This further ensures that benchmarks benchmark settings and top performing Australian
reflect Australian conditions and helps to facilities.
manage issues with data availability.
Woodside suggests this principle could be honoured
by selecting facilities that are representative of both
Australian conditions and top quartile (or similar)
international performance.
The Department will calculate the The Department will compare the domestic top Woodside encourages a review of the top performing
domestic top 10 per cent best 10 per cent best practice emissions intensity to Australian facilities emissions intensities to prevent
practice emissions intensity. the best practice benchmarks worked out by non-representative or outlier facilities influencing
the consultant and select the lowest value. policy settings. The risk of this is exacerbated with the
use of top 10%, as proposed in draft guideline, as this
may result in a very small number of facilities (or a
single facility) being used to define best practice.

For example, Woodside’s not-normally manned Pluto
A Platform was designed with limited offshore
processing facilities installed resulting in emissions
intensity performance significantly lower than the
Australian industry average, represented by the
default production variable for oil and gas extraction.

If this facility was selected to represent domestic top
10 per cent best practice emissions intensity for oil
and gas extraction, it is unlikely that this would be

Page 6 of 8
Consultation topic Details in Consultation Paper Woodside response
representative of the technology and design options
available for future offshore development activities
and risks setting onerous emission intensities based
on an outlier facility.
Timing - For priority production The Department anticipates that priority Priority production variables should be expanded to
variables, likely to be needed to production variables will include coal, include extracted oil and gas, stabilised crude oil or
calculate 2023-24 baselines the electricity, lithium hydroxide, iron ore, run-of- condensate, and hydrogen to allow progression of
Government will aim to legislate best mine metal ore, steel, processed natural gas, significant Australian investment decisions that are
practice benchmarks by end 2023. reservoir carbon dioxide from existing gas under consideration.
Further benchmarks will be fields, and bulk freight road transport.
developed in 2024 for new or
amended production variables as
needed.

Page 7 of 8
PRODUCTION VARIABLES UPDATE: CONSULTATION PAPER

Consultation topic Details Woodside response
Reservoir Carbon Dioxide Industry Default Production Variable
Reservoir carbon dioxide from The default emissions intensity is 0.928 t CO2-e Woodside acknowledges the draft default emissions
existing gas fields. per tonne of reservoir carbon dioxide. intensity of 0.928 t CO2-e per tonne of reservoir
carbon dioxide.

However, in acknowledging this metric, we note that
the default emissions intensity has been calculated
based on a limited set of Australian facilities. It is also
our understanding that applying a consistent
methodology used to set other default emissions
intensities against the full Australian reservoir CO2
dataset, would result in a default intensity very close
to 1.0.

In setting the default emissions intensity we note that
production variables should be defined in a way that
is equitable and consistent across facilities and
sectors, and not be artificially or unfairly calculated.

Page 8 of 8