Santos cuts 200 jobs and puts the blame on red tape delaying projects
Santos has laid off 200 employees and contractors primarily in Western Australia, and says it’s because it has been unable to secure approvals for projects.
Santos has laid off 200 employees and contractors, a decision it said was taken following delays in securing approvals.
The cuts, which Santos said would occur primarily in Western Australia, come as the company struggles to placate shareholder frustration amid a stagnant share price – driven in large part by delays in delivering new growth projects.
Santos earlier this year said its signature growth project, the Barossa LNG project in the Timor Sea, would now be completed three months later than initially scheduled and the development would cost as much as $US300m ($456m) after two court cases tied up the oil and gas company. The project would now cost $5.8bn and first gas would be delivered in the third quarter of 2024.
In a bid to curtail costs, Santos said it recently completed a review of its WA, NT Timor Leste business unit and the decision was taken to axe the 200 workers.
“With some late-life assets nearing closure, there is an increasing near-term focus on capital-intensive decommissioning activities. New project approvals are taking longer, meaning work programs are more sequenced than in the past and some growth activities have been delayed,” Santos said in a statement.
“As a result, approximately 200 roles in the business unit are surplus to our business activity plans including contractors.”
The decision to trim the WA workforce underscores Santos’s presence in the state. WA is home to ageing gas fields owned by Santos, in contrast to the Northern Territory, where the Barossa project is at the heart of its growth plans.
But Santos had endured a tough year for the project.
A Federal Court earlier this year rejected a claim that the gas giant’s proposed 262km pipeline would cause irreparable damage to First Nations people and their sites, a ruling that came 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 the gas industry, which hopes the ruling will deter more legal challenges.
The LNG industry has been in the crosshairs of environmentalists, which have found success with claims that projects have failed to consult sufficient Indigenous people.
Santos can ill afford any further delays as it struggles to ignite production growth. In its most recent financial results, Santos reported sales of $US1.5bn in the three months to December 31, up 3 per cent from the previous quarter.
But full-year sales were down 24 per cent at $US5.89bn from a year earlier as an easing of the global energy crunch continued to affect business.
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.
Santos is also mindful of a murky legal landscape, an inflationary environment and labour shortages, which is causing significant pain across the resource industry.
In March, Beach Energy, majority-owned by billionaire Kerry Stokes and a smaller rival to Santos, said it would axe 30 per cent of its workforce, as new chief executive Brett Woods delivers on his promise to drastically cut costs.
About 200 people lost their jobs there too, albeit the departures marked a bid by new management to undertake a corporate turnaround unlike at Santos.
In 2022, Beach Energy slashed the estimated gas reserves at its LNG export basin near Perth by 11 per cent after the Waitsia Stage 2 drilling campaign.
Mr Woods said in February he intended to streamline the business and he would conduct a strategic review – the first element of which was the job losses amid a broad restructure.
Further announcements from the strategic review are expected later this year.
Santos last week said it was “open to all opportunities” to maximise the value of its assets, with more consolidation expected across the world oil and gas sector, according to CEO Kevin Gallagher.
He conceded the company was not happy that its discussions about a possible $80bn merger with gas company Woodside earlier this year had leaked out.
“We didn’t want those conversations to be in the public domain,” he told the Macquarie Australia Conference last week.