Woodside Petroleum Ltd (WPL) Acting CEO, Meg O’Neill

Woodside Petroleum Ltd (WPL) Acting CEO, Meg O’Neill speaks with Tom Piotrowski about the group’s key priorities, in addition the latest quarterly update and the status of its Hydrogen project in Tasmania (H2TAS).  

13 May 2021

 

Transcript

[MUSIC PLAYING] TOM PIOTROWSKI: Thanks for joining us for the executive series. Today, I'm speaking with Meg O'Neill, who is the acting CEO of Woodside Petroleum. Meg, great to talk to you.

MEG O'NEILL: Thank you, Tom. Happy to be here.

TOM PIOTROWSKI: I should congratulate you, because your appointment is still only very new. So congratulations on the role.

MEG O'NEILL: Thank you.

TOM PIOTROWSKI: What are your thoughts in the earliest stages of your tenure.

MEG O'NEILL: So I've been at Woodside for three years now, and I've really been overwhelmed at the response from the organisation. We have a great team, we have wonderful people, and they've been incredibly supportive of my appointment. The business is on a good track. I think we're very well positioned. And the messaging I've been giving the team is we need to just stay focused on our key priorities.

And in many ways it's quite simple. It's in our base business. We need to continue to deliver safe, reliable, cost-efficient operations, so we can provide energy to our customers, both in Australia and abroad.

The Sangomar Project, which we took a final investment decision on last year, we need to keep that project on track to deliver fast production in 2023. We have a big investment opportunity ahead of us with the Scarborough Field. So this is a gas field that we plan to develop by tying back into our existing infrastructure in Australia. It's a tremendous opportunity to really reinvest in the business. And when it's up and running, it's going to generate cash for the back half of the 2020s, all the way through the 2030s, that will really continue to generate value for our shareholders. So that's priority three.

And priority four, of course, is getting momentum in our decarbonization. So we've set goals for our carbon for both the near, medium, and long term. We have a carbon business that's started doing some planting activities and buying some carbon offsets. But we need to build momentum there. And we need to get really focused on what Woodside looks like in a new energy space. Is that going to be hydrogen, is it going to be ammonia-- we've got some ideas for where we want to invest, but that's priority focus area for us number four.

TOM PIOTROWSKI: Meg, I suppose there are so many pictures that need to align at the moment. Historically, Woodside has always considered itself a bridge into a new paradigm of energy with LNG. There's been a lot of disruption in the last 12 months. Has there been any disruption to the thinking along those lines?

MEG O'NEILL: So the climate change debate has gained momentum in the last 12 months. I think COVID has been really interesting in that space. In many ways, we believe that supports our investment opportunities. So much of the gas that we produce as LNG we sell to customers in North Asia.

TOM PIOTROWSKI: Yeah.

MEG O'NEILL: Our customer countries have been making their own commitments about their decarbonization plans. So Japan, Korea, and China have all made commitments to net zero in the 2050 range, and they've indicated aspirations to reduce emissions aggressively between now and then. You look at their energy mix today, and they're still all very heavily dependent on coal.

So LNG, in many ways, is the ideal fuel for this customer nations to help deliver on their decarbonization ambitions. And we've got the advantage of proximity to the market. We're closer than many other suppliers. And we've got a track record as a proven, reliable supplier of this affordable energy. So we feel like we're very well positioned.

TOM PIOTROWSKI: Your latest quarterly is only several weeks old. What stood out was that big jump in revenue, up by 22%. Tell us about that in the relationship between the Asian economy, as you said, that you dialled into most closely.

MEG O'NEILL: So 2020 was really a fascinating year for the product that we sell, LNG. We saw a record low and we saw a record high in the very beginning of 2021. When COVID hit, of course an immediate outcome was primary energy demand went down. And this time last year we saw really record low prices. That said, as we moved into the winter in the Northern Hemisphere-- so December and January-- unprecedented cold temperatures in all of our customer countries. And that drove demand up, and prices went up with it.

And what we're seeing in the very near term, is we're seeing strengthening of prices. As those countries are trying to rebuild their economies coming out of COVID lockdowns, they need energy.

TOM PIOTROWSKI: Yeah.

MEG O'NEILL: So the demand for our product really is very strong. We feel like that's going to sustain this year. And looking at the long-term fundamentals, those countries are going to need LNG to help with their decarbonization and help improve the economies of their people.

TOM PIOTROWSKI: Indeed. So one of the things that we've seen in recent times, we've seen cost pressures start to emerge on any number of fronts when it comes to different industries. What's your line of sight at the moment when it comes to that subject?

MEG O'NEILL: Yeah, it's a great question. So we're seeing, immediately in the Australian market with all of the government stimulus and in many ways with the strength of iron ore, a bit of pressure in the WA market. That said, we've got a very steady workforce. We've got an employee-oriented workforce. So we feel like we're well positioned to manage some of those pressures.

Now, as we think about our future investment and the developments that we're going to be building, we're seeing two things in the marketplace. We're seeing a bit of pressure in steel prices, as you might expect with iron ore running up. We're also seeing suppliers that are very hungry for work.

So the contractors that we routinely use, their activity was suppressed last year. They were counting on projects to move forward last year that haven't happened. So we're seeing a lot of appetite from those contractors to find new ways of working and to offer us really competitive pricing. So we're seeing a bit of push and pull in the contractor space.

TOM PIOTROWSKI: So when you're thinking about a final investment decision, how does that cost setup feed into that?

MEG O'NEILL: So we're going through a process right now with all of our key contractors for the Scarborough development, where they are working on the final bids that they're going to offer us. We've got a number of big contractors, some of them we've already locked in the pricing. Two of the biggest contractors are going through that repricing exercise. So we'll know more in the next six weeks as to where those prices land. But the messages that we've been sending to our contractors is, "Look, we know there's some pressures on this side, but there's some opportunity on this side, and we're expecting you to keep things pretty flat for us."

TOM PIOTROWSKI: Something else that's been grabbing headlines from a Woodside perspective is the Hydrogen Project in Tasmania. Tell us about that.

MEG O'NEILL: Yeah, so the project that we're working on in Tasmania it's called H2TAS. Obviously, Hydrogen, Tasmania. We see an opportunity in Tasmania that's really unique. So one of the key building blocks to a hydrogen project is a source of renewable energy. But if you think about how solar works, if you put in solar panels, that'll only feed the electrolyzer-- so that kind of piece of kit that makes the hydrogen-- for say six hours a day.

TOM PIOTROWSKI: Yeah.

MEG O'NEILL: The advantage that Tasmania has with hydro-power is you can run that equipment for 24 hours a day. So it's far more efficient use of capital. So that's why we see Tasmania as really a great place to start a hydrogen business, because we'll get that experience in a way that's a really efficient use of our capital.

Now, the challenge that we're working through in the hydrogen investment space is bringing our customers along with us. So there's a lot of work in hydrogen. We understand the technology, we understand what we need to do to make it cost competitive, but customers are going to have to make investments as well. And that's what we're working on with the Tasmanian government.

We're looking at opportunities to put that hydrogen into the gas network in Tasmania. We're looking at opportunities to do things like convert the buses to be hydrogen fueled, which I think it'd be really exciting. So more to come in that space, but we feel pretty good about it.

TOM PIOTROWSKI: Well, the scale of Tasmania suggests that you're using as a test bed to perhaps?

MEG O'NEILL: Yeah, absolutely. So the first phase of the project would be a pilot scale. So relatively small, very much focused on those domestic customers. But it'll give us that knowledge, and it'll be the foundation that will then give us the ability to go talk to our customers in Japan and Korea, who are also trying to figure out how they can get hydrogen into their economies.

So we've got partnerships actually in both of those countries, with customers who are trying to figure out how they can use hydrogen for transportation in Korea and then in power generation in Japan. So we're very cautious-- well, we're optimistic that we'll be able to unlock those markets.

TOM PIOTROWSKI: From an ESG perspective, how has this resonated with investors, that conversation?

MEG O'NEILL: Look, investors are viewing it really positively. Most of our investors understand that as the world decarbonize, LNG is going to be part of the solution. But it's not going to be part of the solution forever. So Scarborough will serve us well for the 2020s and 2030s, and it'll put us in a position where we can then start to really ramp up investment in these zero emissions technologies.

So it is resonating with investors. I think they'd probably like to see things move a little bit faster, but the reality is our customers need to move along with us. And so that's the journey we're on. We're holding hands and going down the path together.

TOM PIOTROWSKI: A lovely image to finish the conversation on, holding hands. So again, congratulations on being appointed to the new position, Meg, and I look forward to many conversations in the future.

MEG O'NEILL: Thank you, Tom.

TOM PIOTROWSKI: And thanks for joining us for the Executive Series.


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