Santos Ltd and Italy’s Eni will consider developing gas fields off northwest Australia, expanding gas exports from Darwin, and using a depleted gas field in the Timor Sea to capture and store carbon, the companies said on Monday.
The move comes after Eni called off the sale of its Australian gas assets earlier this year, as it failed to attract strong bids.
Eni and Santos are partners in the Bayu Undan gas field in the Timor Sea, which feeds their Darwin LNG (liquefied natural gas) plant. Tax revenue from the field has been the main source of income for East Timor since 2004.
Bayu Undan is set to dry up in 2023, which means the impoverished Southeast Asian country will have to find new sources of income as its sovereign wealth fund, which had $17.7 billion by the end-2019, runs down.
The companies are considering converting the Bayu Undan facilities for carbon capture and storage (CCS), which could take emissions from the industry in the Northern Territory and provide a new source of revenue for East Timor, Santos said.
“CCS opportunities at Bayu-Undan are extremely exciting for Santos and Eni and today we are saying we would like to be open for business to take your CO2,” Santos Chief Executive Kevin Gallagher said in a statement.
Santos did not provide details on the costs of converting the facilities for CCS, including a 502 kilometre (312-mile) pipeline from Darwin.
It is too early to tell whether CCS or gas field developments and an LNG expansion outlined in Santos and Eni’s memorandum of understanding could be profitable, Credit Suisse analyst Saul Kavonic said.
“I wouldn’t give much credence to an MoU to explore a bunch of things that are all quite hard,” Kavonic said.
However, talks on a CCS project could help the companies put off billions of dollars in decommissioning costs for their offshore facilities, he said.
Eni said working with Santos was “an important step in the pathway to decarbonising upstream activity in Australia”, in line with its strategy to be carbon neutral by 2050.
Santos aims to be carbon neutral by 2040.
East Timor’s petroleum minister did not respond to an emailed request for comment.
Source: Reuters.com