In an effort to secure a long-term gas supply deal and convert the Whyalla Steelworks into a low-emission green iron facility, Santos, one of Australia’s largest energy firm, announced that it had signed a legally binding term sheet with the South Australian Government.
The 10-year duration of the proposed Santos gas supply deal covers 20PJ of gas annually, delivered ex-Moomba, under indexed pricing with a prepayment mechanism that complies with industry standards. On March 1, 2030, the first batch of the supply is scheduled for delivery.
Santos’ chief executive officer and managing director, Kevin Gallagher, thinks the deal will support employment in the Cooper Basin and Adelaide for at least the next 15 years. Gallagher added that South Australia would benefit from the gas supply agreement.
He also believes South Australia and Upper Spencer Gulf will benefit, as businesses such as Whyalla Steelworks depend on decarbonization and reasonably priced energy to thrive. In order to sustain local communities for a long time to come, the agreement will seek to maintain employment, skills, and economic opportunities in the area.
Negotiations under the Conditional Ministerial Exemption of the Gas Market Code made the agreement possible. In addition to diversifying its gas sales portfolio, Santos has established a natural hedge against oil-linked pricing elsewhere by entering into a long-term contract with a top-tier counterparty and using fixed price indexation. The annual contract quantity of 20PJ represents around 30 per cent of Santos’ current gas production from the Cooper Basin and is able to be supplied from the Moomba Central Area fields development. Additionally, the Moomba Central Optimisation project in the Cooper Basin, which aims to provide operational savings, higher productivity wells, and much lower operating costs, will benefit from the prepayment mode by supporting infrastructure investment and upstream optimisation.
With about 700 employees in Adelaide and 400 more spread between Port Bonython, Whyalla, and Moomba, Santos has a sizeable labor presence in the state. The business has made a number of financial investments in South Australia throughout the last 12 months. It paid over A$60 million in state royalties and taxes, funded A$6 million in South Australian sport and community projects, and spent over A$370 million with South Australian companies.
The Santos gas supply deal supports the role of gas supply in facilitating industrial transformation and decarbonization programs, and also improves the long-term prognosis for the Moomba Central Area, which is under Santos’ control in South Australia’s Cooper Basin.
