Woodside's $12.5-billion Scarborough gas project in Western Australia has all primary environmental approvals in place, the firm said on Monday, after a green group agreed to dismiss its challenge in a federal court.

Shares of the energy company gained as much as 1.3% to A$26.45 during the day against a 0.3% slip in the broader energy index.

The Australian Conservation Foundation had in June, 2022 asked the country's Federal Court to stop Woodside from working on the Scarborough gas project until an assessment is made about its potential impact on the Great Barrier Reef.

The ACF said in a statement on Monday it would not proceed with the legal case against the project any more as it became apparent that it was "unlikely to succeed."

"The reality is that Australia’s laws work in favour of fossil fuel interests. There is still no explicit requirement for climate damage to be considered under our key national nature law, the Environment Protection and Biodiversity Conservation Act," the green group said.

Woodside said the parties had agreed to seek order from the Federal Court to dismiss the proceedings against the company.

The Australian Conservation Foundation (ACF) had earlier argued that the Scarborough project should be evaluated under that law because it will have a significant impact on the Great Barrier Reef, as the exported gas burned in other countries will worsen global warming.

"The Scarborough reservoir contains less than 0.1% carbon dioxide and combined with processing design efficiencies will be one of the lowest carbon intensity sources of LNG delivered into north Asian markets," Woodside CEO Meg O’Neill said on Monday.

Analysts have flagged that Scarborough's commissioning is a key growth catalyst for Woodside after it has been targeted by numerous climate activists amid the world's shift to cleaner forms of energy.

The ACF is also currently embroiled in a similar legal case with coal miner Whitehaven, which is set for hearing in 2025.