An expensive drilling rig has sat idle off Darwin since October after the Federal Court ruled Santos had not properly consulted Tiwi Islanders about its plans to develop the gas field.
Prices for Australian cargoes of LNG in Asia have fallen from record levels after a relatively warm northern winter.AP
In January it suffered another setback when offshore environment regulator NOPSEMA stopped installation of a 262-kilometre pipeline because of concerns the to Indigenous people.
Santos said production could still start as planned in the first half of 2025. However,this would require installation of the pipeline and drilling to recommence this year.
Santos cannot start laying the pipeline until independent experts assess whether important Indigenous sites are located along the route. Installation was expected to take up to nine months in a plan submitted to the environment regulator in 2020.
Drilling cannot recommence until consultation with Tiwi Islanders is completed and a detailed plan is updated and then assessed and approved by NOPSEMA – a regulatory process that normally takes many months.
Santos,one of the largest Australian oil and gas companies,reported a 13 per cent fall in first-quarter sales revenue amid a slowdown in production and softening of fossil fuel prices from last year’s record highs,driven by a historic global energy crisis.
Adelaide-based Santos said it had earned sales revenue of $US1.6 billion ($2.4 billion) for the three months to March 31 while production volumes slipped to 22.2 million barrels of oil equivalent.
The production result was slightly lower than most analysts’ expectations,but revenue was in line with forecasts.
Santos managing director Kevin Gallagher said the company had continued to perform strongly in the face of mounting “regulatory and economic uncertainty”. Santos and other east-coast gas producers are under mounting pressure from a range of government measures to tame soaring energy costs,including regulations capping domestic gas sales at $12 a gigajoule for 12 months,and reforms that give the government the more regular ability to divert exports to the domestic market to head off potential shortages.
Warning of gas shortages this winter under extreme weather conditions.
Earlier this week,the Albanese government said it was through reforms to the $2 billion-a-year petroleum resources rent tax.
“The disciplined operating model we have in place positions us to deliver on our strategy,” Gallagher said.
The nation’s $91 billion liquefied natural gas industry has enjoyed record profits over the past year as Russia’s invasion of Ukraine roiled global energy markets,intensified competition for spare cargoes of oil and natural gas,and ignited prices.
Prices of LNG shipped from Western Australia and Queensland reached previously unseen highs in the past two years,but they are now declining because of healthy stockpiles and milder weather in the northern hemisphere that has reduced the need for households to turn up their heaters.
Santos’ average LNG price slid from $US16.92 per million British thermal units in the final three months of 2022 to $US14.46 in the March quarter. Its average crude oil price fell from $US94.71 a barrel to $US87.59.
Reductions to LNG and oil prices have prompted investment houses to slash earnings forecasts for some of Australia’s largest energy producers. Royal Bank of Canada analyst Gordon Ramsay has identified Woodside as the most leveraged producer to the pricing changes because of its strong spot LNG exposure,followed by Santos.
The Business Briefing newsletter delivers major stories,exclusive coverage and expert opinion..