Coronavirus may delay approval for Santos Narrabri project
Santos says the pandemic may hold up approvals for its $3.6bn Narrabri gas project, as it shrugs off the need for an equity raising.
Santos says the coronavirus pandemic may delay the approvals process for its $3.6bn Narrabri gas project and has ruled out considering an equity raising to boost its balance sheet amid volatile oil market conditions.
The South Australian energy producer said an assessment report from the NSW Department of Planning had yet to be handed to the Independent Planning Commission due to the current public health crisis and social distancing requirements.
The process for holding public hearings is also “still being settled”, Santos chairman Keith Spence told the company’s annual general meeting on Friday. Once the report is received, the IPC has 12 weeks to make a determination.
Santos, which hoped to gain long awaited planning approvals for Narrabri by June, said a decision can now “reasonably be expected in 2020” suggesting a delay from the mid-year target.
An environmental-impact statement for Narrabri was first submitted to the NSW Department of Planning in February 2017.
Still, Santos said it expects the project to win approval.
“We’re confident the Narrabri project enjoys strong support in the local Narrabri community,” Mr Spence said. “We’d expect it to proceed.”
Australian energy producers including Santos have been considered candidates for capital raisings with the oil rout raising concerns over balance sheet strength.
However, Santos said it was not looking to tap shareholders, with $US3bn of liquidity available.
“We see at the moment no need for any action in that particular space,” Mr Spence told the AGM. “At the moment quite honestly we are on a steady ship with a business that is running strongly and performing strongly with good cash generation and have no plans in this area.”
Shareholders also recorded a sizeable protest vote on climate issues. The company was asked to set targets for direct and indirect emissions in line with the Paris accord by the Australasian Centre for Corporate Responsibility. A request to change the constitution received only 6.8 per cent support, meaning the resolutions were not formally put to the meeting.
However, the Santos chairman noted proxies had voted 43 per cent and 46 per cent in favour of the two resolutions.
“Although the resolutions would have been rejected if put to the meeting, it’s clear that climate change is a very important issue for our shareholders and it’s something that is personally important to me,” Mr Spence said.
Oil prices also continue to hobble the producer’s growth projects and exploration prospects.
While crude achieved its biggest one-day surge on record overnight with a 21 per cent bounce, oil has still shed 52 per cent of its value so far this year and remains under $US30 a barrel.
The crude crash had turned the year on its head, chief executive Kevin Gallagher said.
“In just one month, a great year behind us has been overshadowed by the collapse of oil prices and global markets and we now face unprecedented headwinds for the remainder of the year,” Mr Gallagher said. “Santos is a much more resilient company today than we were in 2015-16 when we last faced a challenge like this and I am confident that we will climb back again.”
Santos growth projects already delayed include the Barossa gas development, which underpins new supplies for the Darwin LNG plant.
The drilling of two exploration wells in the Northern Territory’s onshore McArthur Basin, originally scheduled last year, will now be delayed beyond 2020, Mr Spence said on Friday.
Origin Energy also delayed its giant Beetaloo Basin gas project in the NT last month.
A discovery at Santos’s Tanumbirini well will also be shut due to the public health crisis and the vulnerability of remote and indigenous communities.
Still, Santos will press ahead with its Dorado oil project in West Australia, with front end engineering and design to start by June and a final investment decision to be weighed once conditions improve.
It’s also proceeding with a proposed carbon capture and storage project in South Australia’s Moomba.
Carbon sequestration at Moomba could ultimately be lowered to $20 a tonne from Santos’s original $30 target compared with the current market price of $16 a tonne, Mr Spence said.
Santos shares closed up 0.5 per cent on Friday at $3.99.
