Climate threat mounts after Santos’ Barossa blow
Australia is becoming one of the most litigious countries for environmental activism, analysts say, after Santos was forced to halt drilling on its $5.4bn Barossa gas development.
Santos could face a delay hitting its targeted 2025 start-up for the $US3.6bn ($5.4bn) Barossa gas project in the Northern Territory under a worst-case scenario, analysts said, after a court decision forced the energy giant to halt drilling on the development.
Tiwi Island traditional owner Dennis Tipakalippa won a Federal Court case on Wednesday that found Santos failed to consult traditional owners, after he had sued the national environmental watchdog over its approval of the offshore drilling plans.
Santos has suspended drilling activities at the site, 140km north of the Tiwi Islands, pending a favourable appeal or the approval of a fresh environmental plan, and said it was disappointed by the decision.
If Santos loses an appeal, then a fresh environment plan could take between 5 to 18 months, according to Credit Suisse, with the National Offshore Petroleum Safety and Environmental Management Authority needing to review the plan afresh across the entire project.
“This could extend the new environment plan approval process, amid a potentially even more cautious regulator in wake of novel court interpretations regarding consultation and novel emissions reduction target legislation,” Credit Suisse analyst Saul Kavonic said.
That eventuality could “delay Barossa start-up in our view, reducing exposure to a tight LNG price window.”
UBS said both the schedule and $US3.6bn budget may take a hit.
“Santos guides that Barossa is 46 per cent complete and that the project schedule and capital expenditure contingency can still support first gas mid 2025 and absorb added costs from drilling delays,” UBS analyst Tom Allen said.
“However our revised forecast conservatively adds a further $US100m capex to Barossa – now $US3.9bn versus Santos guiding to $US3.6bn – and we push out first gas to the end of 2025, reducing 2025 earnings per share by 4 per cent.”
The Environmental Defenders Office said this week the decision was a huge victory and would have global implications for consultation with First Nations people on resource projects.
The EDO had also brought action against Santos on net zero pathway disclosure and against Woodside’s Scarborough project on emissions grounds, Credit Suisse noted.
“Australia is becoming one of the most litigious countries for environmental activism globally. There is potential for the EDO to pursue further claims against other projects – new and existing – on consultation and other grounds,” Mr Kavonic said. “Indeed, this appears the trend.”
Santos approved Barossa last year, with production ensuring the Darwin LNG plant remains running as supplies from old fields run out. Initial gas has been targeted by the first half of 2025.
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