Santos’ loss forces them back to the drawing board on unapproved Barossa gas project

Within hours of losing in the Federal Court on 2 December 2022, gas giant Santos has announced it will once again ‘proceed with applications for all remaining approvals’ to continue with its Barossa gas development off the Tiwi Islands in Australia, presumably consulting properly this time.

Dennis Tipakalippa’s win, upheld by the Full Federal Court of Australia, confirmed that Santos had failed to adequately consult with Traditional Owners in establishing the Barossa gas project. The Federal Court victory upheld the Tiwi plaintiff’s earlier win against Santos' right to drill in their sea country without consulting them.

The court overturned approvals for Santos’ $4.7 billion Barossa offshore gas project. In doing so, it set aside the National Offshore Petroleum Safety and Environmental Management Authority’s (NOPSEMA) approval of the Barossa Gas Project’s Drilling Environment Plan.

The project is now without approval and, in terms of scope, has been for some time.

Credit Suisse has emphasised that delays from the verdict could take up a lot of Santos’ time as a fresh environment plan could take between five and 18 months and would need to be reviewed afresh across the entire project.

IEEFA submits that Santos and its proponents are utilising the recently added
Bayu-Undan Carbon Capture and Storage (CCS) part of the plan as justification for an unapproved and unjustifiable project, and that the Barossa project is not viable.

The high-emissions Barossa gas project is unviable, economically and environmentally.

Any pursuit of further approvals by Santos must now happen before further project implementation continues. There needs to be full approval of the project, including for CCS, before the commencement of the gas project operations. This is not an unreasonable demand in a nation and world increasingly affected by and concerned about the impacts of climate change.

There are three key reasons why this new gas export project should not proceed.

1. Public announcements show Santos was already building a gas development without approval

The project which Santos management has promoted and continued to build is not the same project that NOPSEMA approved in March 2018. That project was ConocoPhillips’ interest in the Barossa gas field, which Santos bought in 2019, banking on the approvals that were a part of that deal.

2. CCS is unlikely to reduce Santos’ very high CO2 emissions from Barossa

Barossa gas is the dirtiest gas used to make LNG in Australia, in terms of its 18 volume percent carbon dioxide content. It is three times higher than the nearly depleted Bayu-Undan gas (in the Timor Sea) that the Darwin liquefied natural gas (LNG) plant currently processes. Barossa’s CO2 content is six times higher than in the gas processed in the NWS LNG plant in WA.

Consequently, on completion of its Barossa gas to Darwin LNG ‘backfill’ development, as described initially and approved, the Barossa LNG project would have produced LNG with an emissions intensity of 1.5 tonnes of CO2 per tonne of LNG, which is twice the current average for the Australian LNG industry.

Santos has proposed using CCS to sequester a portion of the emissions to counter the criticism that it is building ‘a CO2 factory with an LNG by-product’. However, this would leave even more emissions – from combustion to power the LNG process and piping CO2 for 800km around the Timor Sea. 

As originally approved, the total CO2 emissions for the project were estimated at about 5.4 million tonnes per year (more than 1% of Australia’s total). The 3.7 million tonnes of LNG per year produced from Barossa gas at the Darwin LNG plant would emit about 16 million tonnes of CO2 per year when shipped to North Asia and burnt for power generation and other uses.

Adding CCS may not result in any reduction because as the amount stored increases, the volume of extra dirty gas used to separate and move the CO2 to storage will also increase. This needs to be calculated and declared for assessment and submitted for consultation and approval.

3. Santos already announced the Bayu-Undan CCS project, despite lacking approval

Santos announced in August 2022 that the Barossa project was 43% complete and scheduled production for the first half of 2025. It also announced that the Bayu-Undan CCS project could store up to 10 million tonnes of CO2 per year. However, the Northern Territory government is yet to approve this aspect of the project.

Going forward, Santos must now run the approvals process for the complete project with CCS aspects and submit an environmental impact statement (EIS) for its Bayu-Undan CCS at the same time if it is to be seen as acting in good faith.

Santos must reveal how CCS would affect the emissions and have it approved by NOPSEMA, the Northern Territory Environmental Protection Authority, the Tiwi people and the Timor-Leste government before it proceeds with construction.