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O’Neill: Energy crisis could last “decades”

Energy crisis

Meg O’Neill and Kevin Gallagher use the Ukraine disaster as an opportunity to reaffirm the importance of energy security, making a case for long-term expansion of oil and gas supply. 

The Australian Financial Review hosted its flagship 2022 Financial Review Business Summit on 8 and 9 March, where the chief executives of Australia’s two largest oil and gas producers spoke with AFR’s Michael Stutchbury about the state of energy in the midst of a geopolitical disaster. 

Stutchbury was joined by Woodside chief executive Meg O’Neill and Santos executive Kevin Gallagher to discuss the fate of oil and gas in the present geopolitical climate. 

The shift in the world’s energy dynamic triggered by Russia’s invasion has initiated a change that could be “with us for decades”, Woodside boss Meg O’Neill hypothesised. 

Huge spikes in oil and gas prices are an inevitable byproduct of the West’s withdrawal from Russian supply dependency. 

“Being highly dependent on energy from one particular nation, whose values may not be well aligned with yours, was a huge risk,” O’Neill said. 

“And so I think the world is going to have some real sober reflection on the pathway to diversify energy supply, and will look to countries like the US and like Australia, to see how they can support like-minded countries in providing their energy.”

O’Neill previously came under heat last year for sanctioning a new $16.5 billion Scarborough project in Western Australia to secure new gas supply, which is will now be in incredibly high demand. 

Santos is also reaping the benefits of what Gallagher referred to as “unhealthily” high prices, predicting that oil and gas supply provides the only available solution to the current crisis. 

Stutchbury alerted to the fact that Santos and Woodside have increased investments in new discoveries, despite the zeitgeist to purportedly reduce investment in fossil fuels. 

“Both of these companies have now doubled-down on fossil fuels at a time when the overall task is to decarbonise,” said Stutchbury. 

The Ukraine has brought the clean energy transition to something of a standstill, with Gallagher stating that turning off supply to fossil fuels is not going to speed up the shift. 

“That wouldn’t be so much of a transition but a demolition of that sector. There’s got to be multiple decades to transition,” said Gallagher. 

Woodside has completed a $40 million merger with BHP’s petroleum assets and announced huge developments at Scarborough and associated Pluto Train 2. 

Santos similarly has completed a $22 billion merger with Oil Search and has given the go-ahead for the major Barossa field development off the northern coast.  

“The one thing that the crisis in the Ukraine will really cause the world to think very similarly about is the importance of energy security,” said O’Neill. 

O’Neill also stressed that the goal for 2050 is net zero, and not absolute zero, meaning she theorises oil and gas will still be very much in use in 2050, offset by carbon capture and storage and hydrogen. 

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