Jobs Events Advertise

Santos reveals extent of costs from Barossa court delay

Jacob Shteyman -

Santos has unveiled the extent of a cost blowout at its landmark liquid natural gas project after lengthy court delays, but an expert warns the risk of further overruns remain.

The Adelaide-based fossil fuel producer on Thursday announced its Barossa gas project in the Timor Sea would incur an extra $US200-300 million ($A304-456 million) in capital expenditure costs.

Santos began laying pipe and resumed drilling at the 3.7 million tonnes per annum gas field in December after extensive delays.

Tiwi Island traditional owner Simon Munkara in 2023 lodged civil enforcement proceedings against Santos in the Federal Court, claiming construction of its gas export pipeline would put at risk his cultural heritage.

Justice Natalie Charlesworth granted an emergency interim injunction stopping work from beginning on the pipeline hours before it was due to start in early November, but in December dismissed the Tiwi Islanders' case and awarded costs to Santos.

A few days later, the National Offshore Petroleum Safety and Environmental Management Authority accepted Santos's updated drilling proposal.

In its December quarter results update, the company advised the project was expected to begin producing first gas in the third quarter of 2025, a delay of about three months.

The total cost of the project is now expected to come in at $US4.5-4.6 billion.

MST Financial energy analyst Saul Kavonic said the five per cent cost blowout came just weeks after Santos said the project was on budget and schedule.

"It would be my view that there is still a very acute risk of further cost blowouts and further delays beyond what was announced today," Mr Kavonic told AAP.

Santos chief executive Kevin Gallagher also provided an update on merger talks with Australia's largest oil and gas company, Woodside, saying discussions are in an early stage.

"The parties have agreed to exchange information to assess the benefits for our shareholders," he said.

"Santos continues to consider alternative options to accelerate value for shareholders.

"There is no certainty that any transaction will eventuate from these discussions."

Woodside CEO Meg O'Neill on Wednesday said the company will be disciplined, conduct due diligence and only pursue the deal if it added value to shareholders.

If the merger does not come to fruition, Santos's share price would be at real risk of degradation, Mr Kavonic said.

"Woodside doesn't need to do a deal but Santos has to do something in the wake of a lagging share price and mounting investor frustrations," he said.

Santos recorded $US1.5 billion in sales for the three months to the end of December, while production was slightly higher than the previous quarter at 23.4 million barrels of oil equivalent.

Alex Hillman, lead analyst of the Australasian Centre for Corporate Responsibility, said it was high time that Santos came clean on cost overruns that were due to its "own inability to comply with regulatory requirements deemed workable by the full Federal Court".

"This project was going to have cost and schedule overruns regardless of the Munkara decision," he said.

"Kevin Gallagher remains under significant pressure to pull a rabbit out of a hat over Santos' poor share price performance, whilst acknowledging that there is 'no certainty' that the merger talks with Woodside will progress to a transaction."

Santos shares were 0.8 per cent higher at $7.67 shortly before Thursday market close.

Jacob Shteyman - AAP


Ipswich State High rugby league girls excel in empowering event with Iron Traks
On Thursday, Year 11 and 12 Rugby League girls from Ipswich State High participated in a collaborative event by Iron Traks, Wome...
Joseph Guenzler 23 Feb 2024
Directions hearings continue ahead of inquest into 2021 death in custody of young mum
The latest directions hearings concerning a 30-year-old Yamatji, Noongar, Wongi and Pitjantjatjara woman who died in custody at...
Jarred Cross 23 Feb 2024
In a heartbeat: smart watches helping to close the gap
When Aunty Mary Waites joined a research trial aimed at helping to reduce the risk of stroke and cardiovascular disease in Abori...
Rudi Maxwell 23 Feb 2024
Groote Eylandt residents call for land council probe
Hundreds on a remote Northern Territory Island have called on the federal government to investigate "potential gross misconduct"...
Neve Brissenden 23 Feb 2024

   Jacob Shteyman   

Partner sues prisons over Indigenous inmate's death
A woman is suing the NSW prison system and inmate healthcare service over the death in custody of her partner after a coroner fo...
Duncan Murray 15 Feb 2024
Uluru resort could hit the market as owners mull sale
The Indigenous Land and Sea Corporation is exploring options for the Ayers Rock Resort, the only place for tourists to stay when...
Rudi Maxwell 15 Feb 2024
Darlington set for National Indigenous Cricket Championships return
Australian international Hannah Darlington is set to return to the National Indigenous Cricket Championships after being selecte...
Callan Morse 15 Feb 2024
Tasmania to field youthful men’s squad at National Indigenous Cricket Championships
Tasmania has announced a youthful men’s squad for this year’s National Indigenous Cricket Championships, the tournament set to t...
Callan Morse 15 Feb 2024