‘We can’t magically make gas appear’: Santos CEO

Emergency measures invoked by Australia’s energy market operator on Wednesday led Queensland’s three LNG exporters, including Santos’ GLNG, to divert around 100 terajoules of gas per day to the domestic market for power generation, a source said.

But the pipelines south of Queensland are now full, and Mr Gallagher said that was not a good solution anyway given the overseas partners who have invested in LNG export businesses to ensure their own safety. energy. This would discourage the major investments needed from Asian investors to build a longer-term hydrogen export industry, he warned.

Santos’ partners in GLNG include Korea Gas Corporation, the world’s largest LNG importer, Malaysia’s Petronas and French energy giant TotalEnergies.

Mr Gallagher said it was “too early to tell” what impact the AEMO-ordered gas diversion would have for Santos and GLNG, but said maintaining it would send a “wrong message” to investors strangers.

“I haven’t had a chance to talk to my joint venture partners yet, and I hope they understand that a short-term solution is needed,” he said. The Australian Financial Review.

“We’ll work together and do what’s right for Australia. In the long term though, if that’s a solution, I don’t think any of the overseas investors who have invested in these LNG projects would think it’s is a good long-term solution… From an energy security point of view, I think that would be the wrong message to send to foreign investors, when we need this investment.

“We will not build a hydrogen export industry without Japanese, Korean and Asian money, I can assure you that just like the LNG industry, we need this investment from these countries, if we want to build that infrastructure, because our own markets will never be big enough to justify that investment on their own.

The AEMO issued a ‘system security threat’ notice to the Victoria market on Wednesday and triggered the gas supply guarantee mechanism for the first time since it was introduced in 2017 due to low oil reserves. electricity in Victoria, South Australia and Tasmania on Thursday. This has forced LNG producers in Queensland to make gas available for power generation to avoid a power shortage, under a voluntary agreement signed with the federal government.

“It’s about supply, there’s no supply. We don’t have gas that we can just light. We don’t have gas in storage: we’ve used up all of that over the past years. It’s about projects like Narrabri,” Gallagher told the Financial analysis just before speaking with Federal Resources Minister Madeleine King, the rapidly evolving crisis.

“The solution here is if you want more gas, you have to…develop more gas. You can’t just magically conjure it up when coal-fired power plants go out and renewables don’t work. not.

As Industry Minister Ed Husic also talks to industrial gas users about their supply needs, Santos presented a proposal for a wider meeting involving government, gas producers and users manufacturers to define options to resolve the crisis, which threatens critical manufacturing.

Mr Gallagher said he spoke to Orica CEO Sanjeev Gandhi on Thursday morning about the issue, driving the message home about the importance of Orica’s operations to the global mining industry.

He said the tight domestic gas market and price shocks in recent weeks had “nothing to do with the behavior of gas producers or exporters, who are doing everything they can to support the market”.

Rather, the root of the problem lies in underinvestment in new supply, under pressure from climate-focused activists and the influence of activists on investors.

“We have on our coast is a great example of what happens if the energy transition is just focused on shutting down new oil and gas projects,” Mr Gallagher said at a Melbourne Mining Club luncheon earlier. .

Long-term contracts

Makers have accused gas producers of taking advantage of high prices, which have been capped by the AEMO in three states over the past few days as prices in Melbourne threatened to soar to an extraordinary $800 a gigajoule, but this was rejected by the head of Santos.

“Santos isn’t making any money from these high prices, I can assure you that all of our gas 99% of our gas is sold on long-term contracts, not on the spot market, and that’s fine, fine in below what you see in the spot market today.

Mr Gallagher said the scarcity of new developments today was “frightening”, with tight supply forecast over the next few years and noted that all production from Narrabri was destined for the domestic gas market.

Santos, which aims to make a final investment decision on the first phase of the Narrabri project in 2023, lost one of its clients for the project last week when Weston Energy of NSW lost its retail license, but he said the company’s demand for gas has increased in recent weeks.

“We could sell the Narrabri gas two or three times over, we have a lot of demand for this gas, I’m sure you can imagine over the last few weeks the demand is building up,” Mr Gallagher said.

“Customers are clamoring for this gas with more demand than we can meet when it comes to the market around 2026. And I’m trying to get Narrabri to market sooner if possible.”

But he said Santos would “need the governments to help us with this” given the processes Santos has yet to complete on his final approvals which are likely to lead to further legal challenges.

Santos has so far spent more than $1.5bn over around 10 years on its Narrabri project, which could supply up to half of NSW’s gas needs, and which has faced numerous legal challenges through its approval process. Whereas the last major legal challenge was resolved earlier this yearit still has secondary approvals to secure as well as appraisal wells to drill before it can greenlight development.

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