The Barossa Project and Santos: A Long Awaited Green Light was Lit!

Ujjwal Maheshwari Ujjwal Maheshwari, January 19, 2024

The Barossa Project and Santos (ASX: STO) have both suffered from the long legal battle over the NT gas project. However a big win in court came earlier this week, and it’s great news for Santos shares. The Federal Court has given the green light to their Barossa gas project in the Northern Territory, saying it won’t harm Indigenous cultural heritage sites. This decision is a game-changer for Santos, clearing up doubts that have been hanging around since 2022 and now setting the stage for the project to move forward.


The Barossa Project and Santos: A Controversial Undertaking by the oil and gas giant

The Barossa gas project, with its hefty $5.7 billion price tag, has stirred up quite a bit of debate, especially among Traditional Indigenous Owners. It’s been at the centre of a legal tussle, spotlighting the crucial issue of protecting Indigenous cultural heritage. But it’s not all rough seas for this Santos project. The Northern Territory government is all in, seeing it as a major move after the successful INPEX Ichthys project. And now, with Justice Natalie Charlesworth’s ruling in their favour, the government’s support for Barossa just got a solid thumbs up.


The Cultural Context

The Barossa project is not just another business deal; it’s right at the heart of important cultural and environmental talks. Set offshore in the Northern Territory, it’s been under the close watch of investors and market watchers. This attention spiked in late 2023 when Santos was called out for not properly consulting with Indigenous landowners. The Tiwi Islanders, hailing from Australia’s own Tiwi Islands, have raised serious concerns, fearing the project could harm their cherished oceanic country, a key part of their cultural heritage.


The Role of Environmental Defenders’ Office (EDO)

The lawsuit against Santos was led by the Environmental Defenders’ Office (EDO), shining a light on how environmental advocacy is becoming more influential in Australian business. This legal battle really puts the spotlight on how energy companies are increasingly being watched over how they work with Indigenous communities and take care of the environment.


Better Late Than Never!

Taking a closer look at the Barossa project, it’s a big deal for the Northern Territory’s gas scene. Originally targeting to start in 2023, it’s hit some snags along the way but is gearing up to make a major splash. The plan includes drilling up to eight subsea wells and running for about 25 years. This means Barossa isn’t just a drop in the ocean – it’s set to be a major player in boosting the region’s LNG production for years to come. But how much?


Positive LNG Forecasts

Experts at Jarden Energy have their eyes on the future of gas. They say that even though gas production could dip a bit because of older equipment, there’s a bright spot: LNG production is on the rise. They’re predicting it’ll ramp up to a whopping 23 million tonnes by 2028. This forecast is pretty big news, especially with how the world’s energy needs are changing and the LNG market is growing.


How Did Santos Pull this Victory?

The Barossa project is more than just drilling for gas; it’s a multifaceted operation with deep environmental and cultural layers. The Australian Financial Review brought to light the Tiwi Islanders’ worries about how the project might affect precious Indigenous cultural sites, like burial grounds and animal homes. But Santos had a different story to tell, showing evidence that there aren’t any known cultural sites under the sea where they plan to lay their pipeline. This clash of viewpoints turned out to be key in swaying the court’s final decision.



Santos Post-Ruling

Santos’s big win in court has really given their shares a slight boost, with a jump of over 3% right after the news broke. This increase in their share price is a clear thumbs-up from the market, celebrating the court’s decision in favour of the Barossa project. The Federal Court not only sided with the company but also removed the roadblock on their pipeline work. This is huge for Santos, as it means they can get back to laying down the pipes for Barossa, a key step in moving the project forward.


Moving Towards LNG

After clinching a win in court, Santos is probably going to zero in on pushing the Barossa project forward, but with a careful eye on the environmental and cultural issues that come with it. This project isn’t just another task; it’s key to beefing up the Darwin LNG facility and a big deal for Santos’s growth in the LNG game. How they handle the many layers of the Barossa project will be crucial in keeping their stock looking good and their investors happy.


Background: A Merger on the Horizon

In the midst of all this, there’s talk of a big merger on the horizon with Woodside (ASX: WDS). Experts, like those at Citi, are hinting that this deal might be a bigger win for Santos’s shareholders than for Woodside’s. But it’s not a done deal yet and actually unlikely to happen in our view. This potential merger follows Woodside’s recent union with BHP’s oil business and signals a growing trend of big mergers and acquisitions in the energy sector. But it is very rare to see competition regulators approve mergers between the top 2 companies in any sector, especially oligopoly-dominated sectors like the oil and gas sector. In our view, this week’s news may have actually made the prospect of a merger less likely.


What Does it Mean For Santos?

Whether or not the proposed deal happens, Santos can now forge ahead ahead with the Barossa project. The trick for this oil and gas giant will be to smoothly ride the waves of change in the industry, fluctuating oil and gas prices and other concerns while making the most of what Barossa has to offer, keeping their success story going strong. Many will be watching with interest, ourselves included.



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