Own Woodside (ASX:WPL) shares? Why this expert is watching LNG demand in Asia

LNG prices have soared amid resurgent energy demand and limited new supply coming online in 2021.

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The Woodside Petroleum Limited (ASX: WPL) share price is in the green this afternoon even as the S&P/ASX 200 Index (ASX: XJO) is dipping lower.

At time of writing, Woodside shares are up 1.03%, trading at $21.56, while the ASX 200 is down 0.07%.

Why Woodside shares are in the spotlight

Woodside shares have been in the spotlight in recent weeks as the energy giant fights off a last-ditch legal challenge to its $16.5 billion Western Australian Pluto LNG project.

The company forecasts the massive project will provide some 30 years of LNG exports. It expects to complete the development in 2026. Provided, of course, the legal challenge isn’t upheld by the Supreme Court of Western Australia.

Although Woodside has already received the official go-ahead from Western Australian regulators, the Conservation Council of Western Australia (CCW) announced last week it would challenge the works approval for the Pluto Train 2 project.

CCW, represented by the Environmental Defenders Office, believes WA authorities erred in granting permission for the development. Among other things, they say the lifetime greenhouse gas emission – and the impact on national treasures like the Great Barrier Reef – were not properly taken into account.

Why this expert is eyeing LNG demand in Asia

New fossil fuel developments are facing an uphill battle across Australia and much of the developed world.

With nations pledging to reduce their emissions, environmental groups are hoping that if the Pluto 2 Train project does go ahead, it will be the last major project Down Under to do so in Australia. A development that would likely pose significant headwinds for Woodside shares.

However, Curtin University energy economist Roberto F Aguilera, isn’t so sure.

According to Aguilera (quoted by ABC News):

The development of this very large project will secure their ability to provide LNG for decades to come… These are very capital intensive projects so they’re not overly influenced by current events.

[The] long-term strategy will be asking, ‘Will there be long-term demand for LNG, particularly in Asia?’

So can Woodside shareholders expect the company to ditch its LNG plans?

“It’s probably wishful thinking to get out of natural gas because they’ve invested so many billions in this very capital-intensive, long-life infrastructure,” Aguilera said.

More likely, we’ll see Woodside continue to work to reduce the carbon footprint of its LNG operations to address some of the concerns against its current and future developments.

According to Aguilera:

The company will have to make the case that gas and LNG is compatible with a low-carbon future. By using renewables like solar to power the gas developments, like the liquefaction, for example, which is energy intensive … all of this will help them to obtain that social licence to be able to proceed with future gas or LNG projects…

He added:

Maybe two to three years ago gas became deeply unpopular. But longer term, I think it will be realised that achieving climate goals is very, very difficult in the absence of using gas as a transition fuel.

How have Woodside shares been performing?

Woodside shares have slipped 7% so far in 2021, while the ASX 200 is up 8% in that same time.

Over the past month, the Woodside share price is down that same 7%.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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