Why energy shares Woodside (ASX:WPL) and Santos (ASX:STO) plan to go green with gas

Solar and wind power continue to gain traction. But Woodside and Santos plan to go green with Australian gas.
The post Why energy shares Woodside (ASX:WPL) and Santos (ASX:STO) plan to go green with gas appeared first on The Motley Fool Australia. –

gas, resources

editorSolar and wind power continue to gain in popularity. And for good reason.

The technology in solar panels and wind turbines is progressing. While battery technology – needed to store renewable power for when the sun isn’t shining and the wind isn’t blowing – is leaping ahead.

That means the cost of renewable energy is coming down, even as much of the world is working to reduce carbon emissions.

In Europe, this has seen energy giants like Royal Dutch Shell Plc (LON: RDSA), traditionally known for its fossil fuel production, increasingly turning to renewables.

Australia’s own energy giants, like Woodside Petroleum Limited (ASX: WPL) and Santos Ltd (ASX: STO) – both part of the S&P/ASX 200 Index (ASX: XJO) – are taking a different tack. One they believe is more suited to their successful business model. And more likely to benefit their shareholders.

ASX 200 energy shares go green with gas

Santos CEO Kevin Gallagher explains his company’s rationale for focusing on LNG, including the fact that he believes the majority of global energy demand won’t be met via electrification in the foreseeable future.

Gallagher said (quoted by the Australian Financial Review):

Electricity today is 20 per cent of all energy consumed, most of the other 80 per cent is fuels. Electrification will grow, it may grow to 35 per cent but it ain’t going to go to 50 or 70 or 80 per cent. The world is going to need fuels for a very, very long time…

We are a fuels company, we are not an electricity company, so we are not going to make a big announcement about going into renewables Why? Because I don’t see much money in it, number one, and number two it is already a very, very crowded space.

Our transition will be one of going from fuels that we believe are essential today and make up the vast majority of energy consumed worldwide … to cleaner fuels.

Woodside’s CEO Peter Coleman is also adamant that natural gas will play a key role in the world’s transition to cleaner energy, and in his company’s future:

We’re all about developing a robust and resilient hydrocarbon business for the years and decades ahead, as we navigate our way through our climate change commitments.

For us, our view, and it’s a very strong view, … is that LNG is a fundamental element of decarbonising the world.

Woodside and Santos share price snapshot

When the global pandemic put a halt to cruise ships, airlines, and even most private vehicle transport, the resulting collapse in oil and gas prices was swift and severe. As was the share price drop for the energy companies pumping oil and gas.

Woodside’s share price plummeted 58% from early January through to 23 March.

Santos’ share price fell even harder, dropping 69% by 19 March.

From those lows, both companies have rebounded strongly along with rising oil and gas prices.

Woodside’s share price is up 53% from 23 March, leaving shares down 33% year-to-date.

The Santos share price is up 138% from its 19 March through, leaving shares down 20% year-to-date.

How the companies’ plans to push ahead with LNG to help de-carbonise Earth will impact their share prices in the year ahead remains to be seen.

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Motley Fool contributor Bernd Struben 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.

The post Why energy shares Woodside (ASX:WPL) and Santos (ASX:STO) plan to go green with gas appeared first on The Motley Fool Australia.

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