One of South Korea’s biggest conglomerates is facing a backlash from activist groups after finalising a large Australian liquefied natural gas deal months after promising to end new overseas oil and gas investments.
The scrutiny of SK Group, one of Asia’s top producers of oil, electric vehicle batteries and computer chips, comes as activists turn their attention to overseas oil and gas projects, estimated to be valued at more than $100bn, in the wake of successful campaigns to stop companies and countries from investing in coal.
Environmental groups claimed SK’s decision in March to spend $1.4bn developing the offshore Barossa-Caldita gasfield contradicts a pledge made in November to abandon new fossil fuel investments. The promise by SK, Korea’s third-biggest conglomerate, was part of a pivot to environmental, social and governance investments spearheaded by Chey Tae-won, its chair and biggest shareholder.
“The tremendous amount of greenhouse gas from the Barossa-Caldita project will raise serious doubts on SK Group’s ESG initiative, and more importantly, it will undermine the global efforts to mitigate climate change by reducing greenhouse gas emissions,” said a letter sent to Chey by dozens of South Korean, Australian and other international environmental groups, including Greenpeace.
SK’s energy unit said the development would cut “nearly all” carbon emissions by using carbon capture and storage, a fledgling technology that traps CO2 and pipes it into deep underground reservoirs, as well as through the purchase of carbon credits.
“Our investment was made on the condition that LNG is developed in an eco-friendly, low-carbon way,” said SK E&S.
Chey, who controls group assets of more than $200bn, has been overseeing a multiyear readjustment of SK’s portfolio, including divestments from billions of dollars in oil and gas exploration and retail assets.
Barossa-Caldita, the Timor Sea project being led by Australian producer Santos, is expected to deliver LNG to South Korea for 20 years from 2025. SK argued Barossa-Caldita should not be considered a new development, noting that it has spent $600m on the project since 2012.
Activists described SK’s claims of carbon-free LNG, which is natural gas that has been chilled so it can be transported on ships, as “egregious greenwashing”.
“So-called CO2-free LNG . . . is not only grossly misleading but also lacks economic or technical feasibility . . . any attempt to greenwash fossil fuel development with unverified plans for CCS lacking technological or economic feasibility is unacceptable,” the letter said.
The dispute comes against a backdrop of mounting pressure on the oil and gas sector as governments promise to cut carbon emissions.
The International Energy Agency warned last month that to keep global warming under control, all new oil and gas exploration projects must stop this year and a multitrillion-dollar increase in spending on low carbon technologies is urgently needed.
South Korea was the eighth-biggest carbon emitter last year and derives just 5 per cent of its electricity from renewable sources. The country is struggling to demonstrate how it will achieve a promise by President Moon Jae-in to reach carbon neutrality by 2050.
Many companies and policymakers believe LNG is a crucial transition fuel for economies heavily dependent on coal, such as South Korea.
However, environmentalists said that beyond the carbon emitted from final consumption, LNG also gives off significant amounts of greenhouse gasses during processes such as extraction, processing and transportation.