Unhappy anniversary for Santos’ stalled Barossa gas project

25 09 2023 | 12:41Kevin Morrison / IEEFA

No end in sight to costly delays and complications for A$5.6b development mired in legal and environmental challenges

One year after the Federal Court halted development on Santos’ A$5.6 billion Barossa gas project offshore the Northern Territory, the company is sticking resolutely to production targets that look increasingly unrealistic by the day, according to a report  released today.

On 21 September 2022, the Federal Court overturned approvals for the Barossa Gas Project’s Drilling Environment Plan, after finding that Tiwi islanders were not consulted properly. The ruling brought drilling to a halt, leaving the project 46% complete, and a subsequent appeal by Santos was dismissed on 2 December 2022, said the report’s author Kevin Morrison, IEEFA energy finance analyst LNG/gas.

Santos has been ordered to hold further consultations with Indigenous groups and undertake an extensive study of cultural and heritage sites on the seafloor along the route of its proposed new pipeline linking to project to Darwin, also halted since the court ruling.

“Despite these delays, as of 20 September 2023, Santos was maintaining its original timing guidance for first Barossa gas delivery, targeting the first half of 2025,” Mr Morrison says. “It is still hopeful it can start drilling by the end of 2023.”

This looks increasingly unlikely as it has emerged that the contract on the drill rig Santos hired for the project, sitting idle at an estimated cost of A$1 million per day, is due to expire next month, and the rig has now been booked elsewhere.

“Santos faces possible delays on three fronts on the Barossa project: the drilling, pipelaying and having a drilling rig contracted at the time it is approved to restart work again on the most carbon dioxide-laden gas field that will be used as a feedstock for LNG production in Australia,” Mr Morrison says.

It is not known how long the new approvals process will take – if and when the additional conditions have been met by Santos. Nonetheless, the company still expects to complete the four-year construction of the project within three years … and the clock is ticking.

“Santos is not permitted to transport this infrastructure to the project site, install it, or operate it,” Mr Morrison says.  “The company currently has no approvals to conduct drilling, and cannot proceed with pipelaying activities until the heritage assessment of the pipeline route is completed. The impact that this assessment will have on pipeline activities is unclear.”

Barossa is Santos’ biggest new project, representing 13% of the company’s market capitalisation. Santos is obliged to disclose information to investors that would have a material impact on the value of its shares listed on the Australian Securities Exchange (ASX), as are all companies listed on the ASX under its rules of continuous disclosure.

“If Santos does not know the timelines for the relevant approvals, it should update the market,” Mr Morrison says.


Read the reporthttps://ieefa.org/resources/crunch-time-stalled-barossa-gas-project Barossa gas project: Santos sticks to ambitious production target after costly year of delays and mounting regulatory challenges