Santos’ Barossa project to be delayed and cost more after environmentalist challenges

Santos’ Barossa project will produce its first gas months later than scheduled, with the development set to cost $450m more than initially budgeted.

Santos’ Barossa LNG project will produce its first gas three months later than initially scheduled and the development will cost as much as US$300m ($456.3m) more, as the oil and gas company reveals the toll of two legal challenges.

The updated timings and cost is much less than some had feared, and the outlook sent Santos shares up nearly 1 per cent.

Santos chief executive Kevin Gallagher praised the work of his staff in keeping the project on track and as much on budget as possible.

“The team has done a great job in keeping Barossa close to the original schedule and managing the costs of delay,” Mr Gallagher said.

Mr Gallagher revealed drilling and pipeline work was now fully underway as the outlook for the company continues to brighten.

First gas from the project is now expected in the third quarter of 2024.

A Federal Court earlier this month rejected a claim the gas giant’s proposed 262km pipeline would cause irreparable damage to First Nations people and their sites, a ruling which came just weeks after the National Offshore Petroleum Safety and Environmental Management Authority gave the gas giant the green light to resume drilling.

Drilling was delayed more than a year as Santos was forced to consult with enough people, while work on completing a 262KM pipeline was suspended for weeks as the Federal Court mulled the application launched by the Environmental Defenders Office.

Santos will receive damages for the failed application, though it is not clear whether the company will be able to lodge a claim for any losses outside of legal fees.

The victory has been lauded by Australia’s gas industry, which hopes the ruling will deter more legal challenges.

Australia’s LNG industry has been in the crosshairs of environmentalists, which have found success with claims projects have failed to consult sufficient Indigenous people.

Resources Minister Madeleine King this month launched the first step in such efforts to tighten the rules around who is deemed a relevant person to be consulted and considered when new projects seek regulatory approvals.

Australia’s Federal Labor government has quietly briefed the market that it intends to tighten the rules in Autumn, which would be a significant boost to the country’s fossil fuel industry.

Mr Gallagher had earlier this month said Australia was in the midst of an “anti fossil fuels war,” as he urged policymakers to support gas as a transitional fuel.

Australia is moving rapidly to reshape its $2.5tr economy and wean off its fossil fuel dependency, but gas developers fear the fuel source is not valued and it risks regional energy security.

The announcement of a resumption in works on the Barossa project came as Santos reported sales of $US1.5 billion ($2.3bn) in the three months ended December 31, up 3 per cent from the previous quarter.

Full-year sales, however, were down 24 per cent to $US5.89 billion from a year earlier as an easing of the global energy crunch continued to weigh.

Santos said quarterly production totalled 23.4 million barrels of oil equivalent, up 1 per cent as annual production hit 91.7 MMBoe, down 11 per cent.

Mr Gallagher echoed Woodside in also revealing talks between the two were progressing.

Woodside and Santos in December confirmed they were in preliminary talks over a merger, a deal which would propel the combined company into global giant status, rivalling US majors such as Shell, Chevron and ExxonMobil.

Mr Gallagher said due diligence was continuing but there were no guarantees of a deal.

“Santos continues to consider alternative options to accelerate value for shareholders,” he said.