Carbon capture and storage is the only technology that can deliver large-scale, permanent carbon sequestration to offset the emissions from oil and gas production and hydrogen made from natural gas, Santos chief executive Kevin Gallagher told the Energy Club WA last month.

Mr Gallagher said that in two years since he last addressed an Energy Club dinner the issue that had changed the most, despite the economic shock of the COVID-19 pandemic, was “the pace of the global energy transformation, and the race to net zero emissions”.

“This is the single biggest challenge and opportunity facing our industry over the coming decade,” Mr Gallagher said.

“Our growth projects are now not only in oil and gas, but in carbon capture and storage, and new fuels such as hydrogen.”

He said two years ago he talked about Santos’ aspiration of being net-zero by 2050, which was then an industry-leading position.

“Today our target is net-zero by 2040 and again it is an industry-leading position,” he said.

“Just a few years ago net-zero by 2050 was the gold standard throughout the world. Today, the world is demanding an even faster transformation.

“While many share such an aspiration, few countries and few companies have a credible plan to get there.

“What makes Santos an industry leader is that we have outlined a credible, and very importantly a fundable, emissions reduction roadmap to get to net-zero by 2040. It is a roadmap based on increasing the use of renewables in our operations, increasing our energy efficiency, developing nature-based offset projects, and of course very significant investments in large-scale carbon capture and storage projects.”

The first of those projects is the 1.7 million tonnes per annum Moomba CCS project in South Australia. Santos is close to making a final investment decision on the project. That decision is likely to follow Federal legislation that will enable Santos to obtain carbon capture credits from the project.

The company has plans for another two CCS projects, one in Timor Leste and the in WA.

“The International Energy Agency's sustainable development scenario requires 15 per cent of the world's emissions reduction to be achieved using CCS,” Mr Gallagher said.

“This need for CCS identified by the IEA translates to a 1000-fold increase in CCS capacity between now and 2050. To get there, the Global Carbon Capture and Storage Institute estimates capital investment required at between $US655 billion to $US1.3 trillion.

“Investment must come from the private sector because this level of capital far exceeds what governments can or will spend.

“There's no sector better placed to invest and deliver CCS projects than our sector. We have a competitive advantage in understanding the geology, engineering, technical risks and costs of CCS. In many cases we have access to the existing infrastructure and very importantly depleted reservoirs that have held oil and gas in place for tens of millions of years.”

Existing CCS projects globally had demonstrated that where there was a reliable revenue stream and business case the private sector would invest in CCS.

It is why it is important to develop CCS methods to enable CCS projects to generate revenue for Australian carbon credits.

Mr Gallagher said there was much work to be done to produce policy and reduce revenue risks to accelerate CCS.

“Lost-cost financing through export credit agencies, multilateral agencies such as the World Bank, or specialist financers such as the Northern Australian Infrastructure Facility or even the Clean Energy Finance Corporation is absolutely essential,” he said.

“Support from these specialist financiers would allow the participation of commercial lenders in CCS projects, reducing risks that may otherwise prevent their participation in what is a sunrise industry.

“There is already enormous interest in CCS and hydrogen investments in Australia from countries such as Japan and Korea, which have long been our trade and investment partners.

“As our customers in these countries transition to a net zero future, no-one is better placed than Australia to provide clean fuels and the energy products and safe, permanent carbon storage to help them meet their emissions reduction targets.

“I see enormous opportunities for Santos, and more broadly for our industry and for the nation through a new large-scale CCS industry producing high quality carbon credits underpinned by the integrity of a world class clean energy regulator.

“Natural gas combined with CCS is also the lowest cost pathway to a zero-emissions hydrogen economy today.

“Our gas and LNG customers of today will be the hydrogen customers of tomorrow. They will set the timeframe for commercial use of hydrogen, not the producers.

“My job is therefore to be in position to meet the market demand for hydrogen as it evolves over time.

“On every energy scenario, natural gas and CCS remain critical in the energy and emissions reduction mix for decades to come.

“To fund our energy transition, and to make investments in what I believe will be our new carbon storage industry in Australia, strong cash generation and our base business is absolutely vital.

“Therefore, Santos will continue to invest in domestic gas and LNG projects to support our customers and to drive those strong cash flows.

“In Western Australia Santos supplies room 45 per cent of the State's domestic demand. And we're committed to continuing to meet the needs of Western Australian businesses and households.”

Speaking at the Energy Club dinner a day before the Santos and Oil Search merger was finalised to create a $21 billion company, Mr Gallagher said the deal would deliver a merged entity that would “provide the platform for us to self-fund growth and deliver strong shareholder return well into the next decade”.

“The size and the scale that comes from this merger, and the cash generative nature of our base of business is what will help us fund the transition to net-zero emissions.”

Thank you to the September Networking Dinner Sponsors; Deloitte, Vertech Group, Wood, HMA Instrumentation and Silverhorse Technology.  See event photo's here.

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