Santos Advances Darwin LNG Expansion Plans with Beetaloo Gas Development

Highlights:  

• Santos (ASX:STO) is exploring the expansion of Darwin LNG using gas from the Beetaloo Basin through a non-binding agreement with Tamboran Resources (ASX:TBN). 
• The development aligns with ongoing growth initiatives, including the Barossa gas project and Pikka oil venture, amid production growth expectations. 
• Santos has entered the geothermal energy sector with new exploration licences in the Cooper Basin, expanding its diversification efforts. 

Santos Limited (ASX:STO) is evaluating the expansion of the Darwin LNG facility with a proposed second processing train utilizing gas from the Beetaloo Basin. Tamboran Resources Limited (ASX:TBN) disclosed the agreement with Santos for conducting technical studies, positioning Beetaloo gas as a potential supply source. The expansion initiative comes amid a broader strategic review of Santos' growth options, with a focus on maximizing value and optimizing production capabilities. 

Tamboran Resources has confirmed that it holds a 25 per cent stake in the gas permit, while Santos maintains a controlling 75 per cent interest. The Beetaloo Basin, known for its substantial unconventional gas resources, continues to face opposition from environmental groups and some traditional landowners due to concerns regarding environmental impact and climate change implications. 

Momentum is building behind the Beetaloo gas development, with APA Group (ASX:APA) recently reaching an initial agreement with Tamboran to construct a pipeline connecting Beetaloo to existing infrastructure. This pipeline is expected to link Beetaloo's resources to major international gas markets through Darwin and Gladstone, as well as the east coast domestic market. 

Santos' quarterly report outlined the ongoing progress of various growth projects, including the delayed Dorado oil and gas project in Western Australia. The company expects production to rise in 2025, with projections ranging from 90 million to 97 million barrels of oil equivalent, reflecting an increase from last year's 87.1 million barrels. The boost in production is anticipated to be driven by first output from the Barossa gas project, expected online in the September quarter. 

Financial results for the December quarter indicate Santos achieved revenue of over $US1.4 billion ($2.2 billion), with full-year sales reaching $US5.4 billion. Free cash flow from operations totaled $US1.9 billion, while production for the quarter stood at 21.5 million barrels of oil equivalent. Shares in Santos saw a 1.5 per cent increase, trading at $7.24 in early sessions following the announcement. 

Santos has also expanded into the geothermal energy sector by acquiring three exploration licences in the Cooper Basin from Clean Energy Australasia. The licences, covering approximately 8,760 square kilometres near the Moomba gas processing plant, will be assessed for future power generation activities. The move aligns with a broader industry trend, with major energy companies such as BHP (ASX:BHP), Chevron, and BP investing in geothermal technologies. 

Despite the promising outlook for geothermal energy, previous attempts in the Cooper Basin by smaller companies have encountered technical challenges and high costs, which hindered commercial viability. Santos' entry into the sector reflects a strategic diversification effort aimed at exploring renewable energy opportunities alongside its traditional oil and gas operations. 

The Barossa project, a key growth initiative for Santos, has faced legal challenges that have contributed to cost escalations and delays. However, construction progress has reached 88.3 per cent completion. The project is expected to support the restart of LNG exports from Darwin LNG, which had ceased operations due to the depletion of its original gas source from the Bayu-Undan field. 

In Alaska, Santos is advancing the Pikka oil project, which is 74 per cent complete for its first development phase. The project is expected to commence production in 2026, contributing to the company's long-term growth pipeline. 

Carbon capture and storage (CCS) remains a focal area for Santos, with the Moomba CCS project achieving full operational capacity in October. The project has successfully stored nearly 340,000 tonnes of CO₂ in the December quarter, positioning it as a significant contributor to emissions reduction efforts. The technology's effectiveness has been highlighted by Santos, emphasizing its potential for large-scale, cost-competitive carbon reduction. 

The broader CCS landscape in Australia has faced mixed results, with Chevron's Gorgon project falling short of its expected CO₂ storage targets. Critics argue that CCS serves as a justification for continued fossil fuel production; however, the International Energy Agency underscores its critical role in achieving net-zero emissions by 2050. 

Santos continues to navigate its strategic growth initiatives while balancing shareholder expectations and environmental considerations. With several high-impact projects underway, the company's long-term outlook remains focused on operational efficiency, production expansion, and diversification into renewable energy sectors.