Santos faces rig expiry and regulatory hurdles on stalled Barossa gas project

Santos has maintained its first-half 2025 production target for the Barossa gas project despite a Federal Court ruling that halted drilling in September 2022 and a subsequent failed appeal in December 2022. The company's contract for its contracted drilling rig is due to expire in October 2023, and the equipment has reportedly been booked by other operators, adding further uncertainty to an already delayed timeline.

The Federal Court overturned approvals for Barossa's Drilling Environment Plan on 21 September 2022 after finding that Tiwi Islanders had not been properly consulted, stopping the project at 46% completion. Santos lost its appeal on 2 December 2022. In January 2023, the National Offshore Petroleum Safety and Environmental Management Authority directed Santos to assess Indigenous traditional, spiritual and cultural connections to underwater heritage sites along the proposed pipeline route in the Bonaparte Basin offshore the Northern Territory. No drilling or pipelaying may proceed until these processes are completed.

Despite the court rulings and regulatory directions, Santos has not revised its guidance for first gas in the first half of 2025, implying the company expects to complete a four-year construction programme in approximately three years from the restart of work. Barossa is Santos's largest project under development, representing 13% of the company's market capitalisation and carrying significance for the Darwin LNG facility it will supply. Analysts and investor advocates argue that the gap between stated production timelines and the regulatory reality creates material disclosure obligations under the Australian Securities Exchange's continuous disclosure rules.

The drilling rig contracted for Barossa has an option for extension beyond October 2023, but Santos has not publicly disclosed the terms of that contract, leaving investors without clarity on whether the equipment will be available when approvals are eventually granted. The pipeline infrastructure also cannot be transported to the project site, installed or operated until the heritage assessment is resolved. IEEFA urges Santos to update the market if the company is unable to confirm timelines for the relevant regulatory approvals, arguing that unresolved material uncertainty about the project's schedule warrants transparent and timely disclosure.

Key figure — A$5.6 billion — total investment in Santos's Barossa gas project, representing 13% of the company's market capitalisation