This week, at the same time as reporting a huge profit windfall, Australian gas giant Santos gave the final investment green light to its $US2.6 billion ($A3.7 billion) Pikka oil venture off the coast of Alaska, citing a need to boost global energy supplies amid the fallout from Russia’s invasion of Ukraine.
The project is expected to produce 80,000 barrels of crude oil per day from 2026, but Santos chief Kevin Gallagher has made the extraordinary claim that the whole venture will be carbon neutral.
“Santos has emission reduction plans to achieve scope 1 and 2 net zero emissions by 2040 and in line with that commitment, Pikka will be a net-zero project,” said Gallagher in an announcement on Wednesday.
But against a backdrop of the ongoing global and domestic energy crisis, the promise of more conflict-driven fossil fuel super profits, and the rapidly escalating climate crisis, it’s a tough claim to swallow.
Tim Buckley, director of Climate Energy Finance, says the comments are just more evidence of greenwashing from global fossil fuel majors.
“This is total, total greenwash,” Buckley told RenewEconomy this week. “There is no such thing as a net-zero fossil fuel project of this sort of nature and scale.”
Santos has a long history of openly ignoring the actual emissions output of its projects. By acknowledging only the scope 1 and 2 emissions associated with its ventures (that is, emissions associated with the operation of specific projects – like the running of machinery, or on-site electricity usage), Santos is failing to account for the majority of emissions for which it is actually responsible.
“When Santos hypes this [as] a net-zero project, they are deliberately forgetting to mention that more than 90 per cent of the project emissions come from third party use of their product … They are ignoring Scope 3 emissions entirely,” says Buckley.
Scope 3 emissions are those produced by the burning of oil and gas which is sold by Santos to its customers. These emissions account for 80-90 per cent of the company’s total carbon footprint.
Analysis from shareholder activist group Market Forces estimates that the total Scope 3 emissions output from the Pikka project would roughly match the annual output of the entire Australian electricity sector, emitting approximately 190 MtCO2-e.
Greenwashing backlash grows
It is not the first time – even this week – that Santos has been accused of greenwashing its way through a new fossil fuel development.
On Monday, the Australian Financial Review reported that Market Forces had lodged a formal complaint to ASIC over statements made by Gallagher and Santos chairman Keith Spence about the company’s ESG responsibilities.
The group expressed concern over Santos’ justification of new oil and gas developments – including the Pikka project – amid the watchdog’s recent push to address greenwashing in the corporate sector.
Santos also faced legal action in August 2021, after the Australasian Centre for Corporate Responsibility (ACCR) alleged that the company had breached corporate and consumer protection laws by claiming gas was a type of “clean energy”.
The murky world of carbon offsets
Santos says it is “committed to delivering a net-zero project” and will draw on carbon offset arrangements with Alaska Native Corporations to address its operational emissions (scope 1 and 2).
BP has made similar deals with Native corporations in recent years, which include paying landowners to tend to forests and avoid logging.
But Climate Energy Finance’s Tim Buckley says a reliance on carbon offsets to deal with the emissions output of the project is fundamentally flawed.
“As ANU’s Professor Andrew Macintosh has clearly shown, the idea of carbon offsets is fraught with credibility, delivery, and permanence risks, opaque in nature, and particularly unsatisfactory when lacking credible third party endorsement,” he said.
“That Santos is proposing carbon offsets to counter a massive new multi-decade fossil fuel project is entirely lacking in substance or credibility.”
“I doubt global financial institutions who have all signed the [Glasgow Financial Alliance for Net Zero] pledge to invest in alignment with the SBTi and a 1.5 degree trajectory will fall for this greenwash.”
Indeed, Santos’ approval of the project came after the company failed to find potential buyers for part of its 51 per cent stake in the venture.
It also comes as Santos manages ongoing shareholder resistance to its climate action plan, which recorded a substantial 36.9 per cent vote against it at the company’s May AGM.
“Pure spin”: No new fossil fuel projects to reach net-zero
Santos calls the Pikka development a “low-carbon oil project” which will consolidate global energy security amid broader geopolitical pressures.
But analysis from the International Energy Agency shows that new fossil fuel developments are incompatible with limiting global warming to 1.5 to 2 degrees.
“At the end of the day, we’re in the middle of a climate emergency,” says Buckley.
“The pretense that more fossil fuels is in any way going to help the situation is pure spin to get their approvals through government whilst they still can.”
Santos not the only offender
Santos is not the only fossil fuel company using dodgy accounting tricks to feign climate action. A new study shows that several oil majors’ climate scenarios fail to meet the goals outlined in the Paris Agreement.
Researchers say these models are central to “forecasting the future of the energy sector” and inform the decisions of investors and policymakers on key decarbonisation measures.
But the study found that BP, Shell, and Equinor’s decarbonisation scenarios overshoot the Paris Agreement’s 1.5 degree limit by a “significant margin,” and provide an “inaccurate picture” about future pathways for decarbonising countries.
Only the International Energy Agency’s Net Zero by 2050 modelling for future energy use was aligned with the Paris goals.
