Woodside profits increase six-fold as demand for non-Russian gas soars

The surging price of gas triggered a six-fold increase in profit at Australia’s largest producer Woodside Energy Group, which predicted demand would continue to grow as Europe struggles with reducing its dependence on Russian supplies.

Liquefied natural gas represents about 70 per cent of Woodside’s business and the volatility in the market following Russia’s invasion of Ukraine this year has sent the price of the commodity soaring.

“What we’ve seen is unprecedented,” said chief executive Meg O’Neill in an interview with the Financial Times. “Prices at this level are not sustainable in the long run.”

Woodside reported pre-tax profit in the first six months of its financial year grew to $2.9bn from $503mn in the same period a year earlier, as the booming gas price and the benefits of its merger with BHP’s oil and gas business came to the fore. The energy company more than trebled its interim dividend payment to $1.09 from 30 cents.

Woodside said that the realised price more than doubled to $96.4 per barrel of oil equivalent during the six-month period.

O’Neill said that Europe faced a very difficult winter as it tried to supplement gas supplies to offset its former arrangements with Russia. “Europe does seem very committed to moving away from Russian pipeline gas and Russia seems to be encouraging them to do so,” she said.

The EU is considering emergency measures to curb energy prices while the UK is set for a large jump in such costs, after the regulator raised the energy price cap by 80 per cent in response to soaring wholesale prices.

“Europe is having to make some very difficult trade-offs,” O’Neill said of the crisis.

Analysts at ANZ Bank said that the gas price had fallen overnight, on potential measures by the EU to cut electricity usage and after Germany indicated its storage was at 85 per cent of its target. “Nevertheless, Germany remains at risk of not being able to get through the winter, if Russian gas flows remain at current levels,” the bank said.

Europe’s need for non-Russian gas has realigned supply chains as stocks from the US and Qatar are diverted towards Europe and away from regions such as Asia. The high cost of transit means that it is unusual for Australian gas to be sent to Europe, according to O’Neill, but demand from Asia has risen as a result of the global reset.

However, she warned that the long lead time in developing gas supplies meant there was no quick fix to the global supply issue triggered by the Ukraine invasion. She pointed to the company’s huge Scarborough project in Western Australia, which will not come on line until 2026.

Gas has also become a political issue in Australia. The Labor government elected in May was backed by a broad vote against an incumbent Coalition government that had supported the fossil fuel industry.

Prime Minister Anthony Albanese’s government has set climate reduction targets but has also ruled out banning new gas projects as it looks to shore up Australia’s energy supplies after a recent power crisis.

O’Neill said that Albanese’s government had done a “fantastic job” by setting “challenging but achievable” climate goals while being “very clear on the role of gas in that transition”. 

Woodside shares, which are also listed in London, gained 2 per cent to A$36.03 (US$24.83).