Santos strikes deals to bury carbon dioxide under the Timor Sea

Australian energy giant Santos has signed non-binding deals with four other gas producers to take their emissions and stash them in depleted gas reservoirs beneath the Timor Sea at its proposed Bayu-Undan carbon capture and storage project.

Santos,one of the nation’s largest oil and gas companies,is developing its first carbon capture project at South Australia’s Moomba gas plant,and on Wednesday it said it was nearing completion on the initial engineering works for Bayu-Undan.

Santos says four non-binding deals will underpin its Bayu-Undan carbon capture and storage project

Santos says four non-binding deals will underpin its Bayu-Undan carbon capture and storage projectSupplied

Adelaide-based Santos said it had executed memoranda of understanding with operators of gas and liquefied natural gas projects in Darwin and off the coast of the Northern Territory,and with an energy and industrial conglomerate in Korea,which indicate demand for carbon dioxide storage could exceed 10 million tonnes a year.

Santos managing director Kevin Gallagher said increasing deployment of carbon capture and storage would be critical to achieving global climate goals.

“Executing these memoranda of understanding demonstrates the strong underlying demand for carbon capture and storage and the broad acceptance of carbon capture and storage as a decarbonisation strategy,” Gallagher said.

Carbon capture and storage – which traps carbon dioxide emissions produced by gas-processing plants,factories or power stations before they are emitted into the atmosphere and injects them underground – has been a divisive area of climate policy.

Supporters argue it is a necessary and unavoidable component of the world’s decarbonisation goals to avoid the worst and most immediate impacts of global warming. “As the head of the International Energy Agency has said,reaching net-zero goals without CCS will be almost impossible,” Gallagher told an investor meeting last month.

However,the technology is strongly opposed by the Greens and many climate advocates,who argue it diverts focus from shifting the economy to cleaner energy,and fear it could be used to prolong the consumption of harmful fossil fuels.

Questions also remain about the technology functioning at scale,givenChevron’s Gorgon carbon capture and storage plant in Western Australia is still operating at just one-third capacity after six years.

Santos’Bayu-Undan carbon capture and storage project is considered critical to lowering the carbon footprint of its proposed $5.8 billion Barossa gas project off the coast of northern Australia,which contains high levels of carbon dioxide. The company is targeting a final investment decision for Bayu-Undan by 2025.

Evans&Partners oil and gas analyst Adam Martin noted on Wednesday that investors were increasingly frustrated at Santos’ underperformance compared with its industry peers over the past 18 months,and were questioning whether the company may be a takeover target.

Martin attributed Santos’ underperformance to issues including the Darwin LNG plant’s quicker-than-expected production decline rates,a decision to proceed on an Alaskan oil project at high equity ownership,and uncertainty surrounding the Barossa project’s approvals.

He said investors were questioning whether the company’s growth projects would be completed.

“Regulatory uncertainty may mean not all of Santos’ growth projects are completed on schedule,” he said. “There is also a possibility some projects are abandoned completely.”

Martin said international energy majors such as BP,Total and ConocoPhillips may be examining Santos as a possible takeover target.

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Nick Toscano is a business reporter for The Age and Sydney Morning Herald.

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