Santos targets resumption of drilling in the Barossa by year’s end

The energy group says drilling could soon resume at its suspended $5.3bn Barossa gas project in the Timor Sea, if its resubmitted environmental plan is approved.

Santos hopes to resume drilling in the Barossa by the end of 2023 and meet its forecast to deliver first production by early 2025 after the oil and gas giant posted an 18 per cent drop in quarterly sales revenues as the global energy crunch abates.

Work on Santos’ $5.3bn Barossa gas project in the Timor Sea has been suspended since 2022 after the Federal Court found the oil giant failed to consult local Indigenous people adequately on the development.

The company said it has submitted its environmental plan to the regulator, National Offshore Petroleum Safety and Environmental Management Authority, and is hopeful drilling could resume by December 3. Santos said this timeline would allow it to meet its production targets for early 2025.

“The drill rig is on standby off the coast of Darwin as Santos works to secure the requisite approvals to recommence work. Assuming regulatory approval for the (environmental plan) is obtained, there is potential for drilling activities to recommence before the end of the year,” Santos said in the results published to the Australian Securities Exchange on Thursday.

“Assuming that drilling recommences before end 2023 and that the gas export pipeline commences installation in 2023, the Barossa project remains on target to commence production in the first half 2025 and within current cost guidance.”

While tight, Citigroup analyst James Byrne said he believes there is growing confidence within the company that the timetable is attainable.

“Our expectation is an expedited review process will take [approximately] 2 months to complete, inferring a return of confidence in the project by the market around September and adding confidence to Santos expecting to complete the project on schedule,” said Mr Byrne.

If Santos succeeds in bringing the Barossa project online on schedule, it would limit the damage of the court ruling in September 2022.

The case was initiated by Dennis Tipakalippa, a Munupi elder, who challenged a decision by the regulator to allow Santos to drill wells 265 kilometres northwest of Darwin and about 140 kilometres north of the Tiwi Islands.

Santos had said the Tiwi Islanders did not need to be consulted because they did not have an interest in the area. It had engaged with the Tiwi Land Council and the Northern Land Council before drilling, which was accepted as adequate by NOPSEMA, but not by the court.

Santos has earmarked the project as a driver of future growth. In its latest quarterly report, Santos said production rose to the equivalent of 22.8 million barrels of oil in the three months ended June 30, up 3 per cent from 22.2 million in the three months prior.

The group booked sales revenue of $US1.34bn for the three months ended June 30, down from $US1.63bn in the previous quarter, and trimmed its output for the full-year to between 89 million and 93 million barrels. It previously said production could reach 96 million barrels.

Chief executive Kevin Gallagher said he was pleased by the results.

“Our underlying business remains strong and has continued to perform well in a volatile oil price environment. Santos has delivered another solid quarter of production and cash flow generation, demonstrating the strength of our business and the benefits of a diversified portfolio.”

Originally published as Santos targets resumption of drilling in the Barossa by year’s end