Santos Barossa project gets NOPSEMA drilling go-ahead
Energy giant Woodside’s $80bn merger target, Santos has notched a key regulatory win for its $5.8bn Timor Sea project, but court battles are already threatening production timelines.
Oil and gas producer Santos has the green light from federal offshore regulator the National Offshore Petroleum Safety and Environmental Management Authority to proceed with a revised plan for drilling at its $5.8bn Barossa gas project in the Timor Sea.
But separate court battles are already threatening its production timeline of 2025 in the midst of discussions with bigger peer Woodside for an $80bn merger.
It comes after a Federal Court last month ruled Santos could not fully lay undersea pipes at the project, which includes South Korea’s SK E&S and Japan’s JERA as partners, at least until January, following a challenge by Tiwi Islands traditional owner Simon Munkara in October.
Mr Munkara had sought a temporary injunction to stop work on the 262km pipeline off the Tiwi Islands, insisting it would cause irreparable harm to traditional owners’ connection to sea. If Mr Munkara is ultimately successful, Santos could be forced to develop a new environment plan for the project.
Work on Santos’s Barossa gas facility, about 265km north of Darwin, was suspended in September last year over inadequate consultation with local Indigenous people.
The decision by NOPSEMA comes after Santos chief executive Kevin Gallagher last month warned that Australia’s regulatory environment was “killing” the multibillion-dollar industry.
Santos has previously said it would need to start drilling this month to meet its production target for first gas by early 2025.
NOPSEMA’s approval shows it accepted a revised plan by Santos on Friday.
Six subsea production wells are planned to be drilled and completed around the future locations of three subsea production manifolds, with two wellheads adjacent to each manifold. If required, up to two contingency production wells could be drilled.
It will be done using a semi-submersible Mobile Offshore Drilling Unit and light well intervention vessel amid the ongoing management of the complete wells until future commissioning and production phases.
The project, when completed, will supply replacement gas for the Darwin LNG export plant.
Since the September 2022 suspension, Santos had conducted further extensive consultation with Tiwi Island people and other relevant people, it said in a statement on Monday.
“Santos is proceeding with applications for all remaining approvals for the Barossa gas project,” it said.
Citi played down the likelihood of an appeal, but said there were still issues for Santos with the broader project.
“There is a 30-day appeals process through the courts which activist groups may target; however, we believe the regulator heavily scrutinised Santos’s submission to reduce legal risks,” Citi analysts said. “It’s unclear whether Santos will wait until mid-January to drill again (further utilising a scarce contingency budget), with the risk being an injunction against drilling is granted during the appeals process. A ruling on whether the pipeline environmental permit needs to be redone is also due about January 15; we think a decision against Santos could set the project back over a year.”
Mr Gallagher revealed last week that Woodside Energy had approached the company “a number of times” over the past year or so about a merger, while analysts said the deal was unlikely to proceed without a steep takeover premium being offered.
In his end of year message to staff, Mr Gallagher reiterated that Santos had a strong business on a stand-alone basis.
Santos shares fell 12c to $7.63.
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