Lift curbs on carbon dioxide imports or risk our advantage, says Santos

Australia will pass up a potentially lucrative industry to rivals storing captured carbon emissions unless the federal government lifts its restrictions on importation, says Santos.

The new carbon capture and storage plant, at Moomba in South Australia, a joint venture between Santos and Beach Energy. Picture: Brenton Edwards

Australia must lift restrictions on allowing the importation of carbon dioxide or risk being beaten by global competitors wanting to make money from storing hard-to-abate emissions, Santos chief executive Kevin Gallagher says.

A growing number of countries want to monetise storing carbon dioxide, and a rule change would be commercially advantageous for Santos.

But positioning Australia as a destination for internationally produced carbon dioxide would be contentious.

Critics of carbon capture and storage said it extends the use of fossil fuels, that and Australia should not be storing international emissions.

However, proponents insist coal and gas as a fuel source will endure for decades and that other countries do not have the geology to store carbon dioxide.

Mr Gallagher insisted a wave of countries was moving to capture the market and if Australia were to lift the ban, Santos could expand its Moomba carbon capture and storage facility without taxpayer support.

From left: Santos boss Kevin Gallagher, South Australian Premier Peter Malinauskas, Trade Minister Senator Don Farrell and Beach chief executive Brett Woods. Picture: Brenton Edwards

“It is a race. Malaysia, Indonesia and other countries in the region that have alternative opportunities are competing with us,” Mr Gallagher said.

“We believe the opportunity is real and we can make it economic; it won’t require subsidies and it helps decarbonise the region. Here in Australia, we just want the permission to do it.”

If federal legislation were changed, countries would be able to ship the carbon dioxide emissions to Australia. It would then be imported through a newly built import facility and piped to the outback Moomba in South Australia’s far north.

The infrastructure would likely be funded through long-term offtake agreements similar to gas supply agreements that companies such as Santos strike with major Asian buyers.

Mr Gallagher said Moomba was the lowest-cost carbon capture and storage facility in the world and, as a result, there had been a surge in international interest.

In October, Santos signed an early stage agreement with Japanese utility Chubu Electric Power to assess the feasibility of transporting CO2 from the proposed Nagoya CO2 aggregation hub to Moomba for permanent storage as part of a future expansion project.

But with federal Labor split on the role of gas, there is scepticism about the near-term prospect of a rule change by the government.

Mr Gallagher said the facility would soon capture and store about 500,000 tonnes of emissions.

Even if the facility is not expanded for international customers, it is increasingly profitable for Santos.

Santos chief Kevin Gallagher, right, explains operations to South Australia Premier Peter Malinauskas. Picture: Brenton Edwards

By injecting the captured CO2 into the ground, the joint partners will be able to abate all emissions from the Moomba gas plant that would have otherwise been released – and Santos is effectively able to meet its 2030 emission reduction targets.

By storing it underground, Beach and Santos will earn carbon credits, which both can then use to meet their own emissions-reduction targets or sell into the open market. Both are likely to hold on to the contracts for the foreseeable future as there is widespread expectation that the price of carbon credits will soar.

Australian Carbon Credit Units are increasingly in demand as the federal government’s centrepiece policy to reduce emissions begins to bite.

The Safeguard Mechanism requires Australia’s 215 largest emitters to reduce their emissions by about 5 per cent each year. Initially this requirement is being met by the purchases of ACCUs. As the price of these instruments increases, companies are expected to invest in new technologies.

Santos last week said it expected production next year to jump nearly 8 per cent as a key growth project comes online.

The South Australian oil and gas company said it would explore growth opportunities such as expanding its Northern Territory LNG facility and storing imported carbon dioxide.

Pipework on the Santos carbon capture and storage plant at the Moomba gas fields in SA’s far north. Picture: Brenton Edwards

Santos said it expected to produce 90 million to 97 million barrels of oil equivalent during 2025 – which is up from the 84-90MMBoe it expects to report at its annual results next month.

Much of the increase will come from Santos’ $5.4bn Barossa development in the Timor Sea north of Australia from which the first gas will be produced in the third quarter of 2025.

Santos said the project was almost 90 per cent complete and was being advanced to its final stages. It will subsequently bring online its Alaskan oil project, known as Pikka, which it said was nearly 75 per cent complete.

The two developments are the centrepiece of Santos’ growth strategy, and it has indicated it will begin to slow capital expenditure afterwards in order to increase returns to shareholders.

Santos plans to return at least 60 per cent of free cashflow to investors from 2026 – up from 40 per cent.

The reporter travelled to Moomba as a guest of Santos

Originally published as Lift curbs on carbon dioxide imports or risk our advantage, says Santos