Santos boss Kevin Gallagher warns that caving in to green extremists will harm SA growth opportunities

Kevin Gallagher, the head of SA’s biggest company, says demonising fossil fuels and energy producers will drive away investment and derail clean fuel initiatives.

The head of the state’s biggest company, Santos, is warning governments against demonising the fossil fuel industry by caving in to campaigns waged by environmental activists.

In an interview with The Advertiser, Santos managing director Kevin Gallagher said the Adelaide-headquartered oil and gas producer was being demonised because of “mistruths” spread by activists but also by companies with “a lot to gain by interfering in energy markets”.

Mr Gallagher did not single out particular governments but stood by his condemnation last December of federally imposed gas price caps as “Soviet-style policy”, arguing central controls risked scaring off investors and costing jobs.

He said Santos, one of Australia’s top 25 biggest firms, faced a multi-decade challenge to transition to deliver clean fuels and needed governments to encourage, rather than penalise, job-creating investment.

Santos managing director Kevin Gallagher at the Moomba carbon capture storage project site. Pictures: James Elsby

Santos has forged an Energy Solutions arm, charged with developing clean fuels, and is advancing a $220m Moomba carbon capture and storage project expected to start-up in 2024.

“The challenge in the meantime is, I think, governments can help industries like us who really are focused on transition, who are investing in transitional technologies and business opportunities, by not demonising fossil fuel industries,” he said.

“We want to hire the best talent and give them careers and jobs and we need them (governments) to help us transition.

“I think the activists have been very effective at creating a level of discomfort for governments to be seen to be supporting energy companies, by demonising them because they’ve been producing fossil fuels. We’re only producing the fuels everyone needs and everyone uses.”

Mr Gallagher said profits from the current oil and gas businesses needed to be invested in Santos’s new businesses.

Clean energy future

The Moomba CCS project, the world’s second-largest, is expected to safely and permanently store 1.7 million tonnes of carbon dioxide annually – the equivalent of taking about 700,000 vehicles off the road and reducing SA’s annual emissions by about 7 per cent.

“We need the best talent because we have got the balance sheets and we’ve got the history of building these mega projects, which are going to be required to make the transition happen,” he said.

“So, I think it’s really about having clear policy, and incentivising investment, not penalising investment, and encouraging energy companies through policy and just general support to get on with transitioning.”

Speaking during a community tour of Santos’s proposed Narrabri Gas Project, 400km northwest of Sydney, Mr Gallagher said these activist “mistruths” were able to be effectively countered with informed debate.

“People understand pretty quickly that we’re not going to be able to transition overnight. It’s going to take decades, and we need the critical fuels to maintain our living standards and our cost of living that we’re used to for a few more decades yet,” he said.

‘No shortage of gas’

Mr Gallagher recommitted to the Narrabri project, acquired by Santos in 2011, and forecast at least a further 18 months of regulatory approval process and talks with landholders.

“Australia has no shortage of gas, it’s just been very difficult to get out of the ground. It’s like any resource. If you make it rare, you’re gonna go short of it, and the price of is gonna go up,” he said.

“We’ve been drilling for years. Santos spends 300 million US dollars every year, drilling in the Cooper Basin, just to maintain our production. That doesn’t give me any new production.”

The federal government in mid-December imposed a $12 per gigajoule cap on the spot price of gas for a period of 12 months as part of an extraordinary energy market intervention aimed at lowering consumer costs.

Mr Gallagher said this did not affect Santos’s business because the firm’s gas production was contracted at prices below the cap, but questioned whether the government understood the risks involved with spending $US300m ($433m) annually merely to maintain production.

“When central governments or regulators start setting prices, how does an investor or a bank know whether that’s the right price, the wrong price, a good price or a bad price?

“Therefore our backers, who fund us, start to put the foot on the tail and then you find you cannot invest, you cannot develop new supply, so the problem just gets worse and worse and worse.”

Santos managing director Kevin Gallagher. Picture: Simon Cross

University merger

Mr Gallagher said universities were struggling to maintain petroleum degrees, partly because of students being turned off the industry, but appealed for young people to be part of the energy transition.

Asked about the proposed merger between the universities of Adelaide and South Australia to form a supercharged Adelaide University, Mr Gallagher cautioned against this simply to save money but backed the state government-sponsored plan.

“I think it has merit if the two universities merging were going to create a super university or one that’s up there in that top sort of top 20 or 50 in the world, then absolutely, I would say it’d be a great thing to really help put Adelaide on the market at your international university level,” he said.

“If you want to get one of those really top-class universities and compete at that level and bring people from all over the world, then I think it probably does have some merit – to look at, at least.

“Businesses should not be so stuck in their ways that they never look at ways to improve, right?”

Originally published as Santos boss Kevin Gallagher warns that caving in to green extremists will harm SA growth opportunities