Australian independent Santos expects to take a final investment decision on its Moomba carbon, capture and storage (CCS) project by the end of third quarter as part of its pathway to net zero emissions by 2040.

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Speaking at the company’s annual general meeting on Thursday, chairman Keith Spence told shareholders the US$155 million project was ready for a final investment decision, but the company was waiting on new legislation from the federal government.

“The 1.7 million tonne per annum project is waiting on a methodology to be approved under the Clean Energy Regulator’s framework so that CCS projects can generate Australian Carbon Credit Units (ACCUs),” he said.

“We anticipate this will be in place by September this year," Spence said.

Government assurance

Spence said the establishment of the ACCUs was “a very important element” of the Moomba CCS project, while noting that Santos had received assurances they would be put in place this year.

“We’ve spoken to the government … I understand that legislation is being drafted and that’s the thing that takes time. This needs to be right,” he said.

“The assurance that we have is that this will be in place by September this year.”

Santos chief executive Kevin Gallagher added that an approved methodology for CCS projects to generate ACCUs was essential to ensuring the economics of the project stacked up, noting that the cost of abatement was still estimated at A$20 to A$30 (US$15.43 to US$23.15) per tonne.

Competitive advantage

Gallagher added that he believed the company had a “unique competitive advantage for CCS in the Cooper basin”, which he said set Santos apart from its peers.

“We already have a relatively pure CO2 stream at Moomba, meaning much of our carbon is already separated and doesn't require the technology that is needed for post-combustion capture,” he explained.

“We have a strong infrastructure footprint in the Cooper on which we can build and leverage our low-cost operating model, and we have depleted reservoirs which have a demonstrated ability to safely store hydrocarbons for tens of millions of years.”

Gallagher also claims that Santos could deliver blue hydrogen at a cost of about A$2 per kilogram, which would place it well ahead of the Australian government’s target of reaching that milestone by 2030.

Despite this, Santos is still not committed to any hydrogen projects, with Gallagher stating: “We won’t set the timeframe for hydrogen – that will be set by our customers.”

Pathway to blue hydrogen production

It was only last year that Santos announced it had hired technical professional services player GHD to carry out a blue hydrogen concept study to complement its Moomba CCS project.

According to the company’s current roadmap, it envisages the Moomba CCS project being operational by 2025, with the company targeting to use CCS technology to accelerate the economic feasibility of clean hydrogen by 2030.

While stating that Santos had not completely ruled out exploring green hydrogen in the future, Spence made it clear the company’s focus was currently on blue hydrogen.

“The current cost for example of producing hydrogen in the way we talk about … is 4.5 times cheaper than the way you would do it from electrolysis,” he explained.

“Due to a unique set of circumstances, in terms of why is Santos going the way we are going, we happen to have a basin which has all the attributes we need to produce hydrogen in the cheapest and also the most efficient route in order to get to a hydrogen economy.”

Centralising Cooper basin electrification

Before it gets to a point of producing hydrogen, Santos intends to centralise the electrification of its Cooper basin assets, which currently use gas for power generation and are spread over an area about the size of Western Europe.

It believes centralising the power over the large area will result in efficiencies and enable a higher penetration of renewable energy by consolidating demand and enabling heat recovery.

“Having centralised [the electrification] we can use the assets we have in the Cooper basin, which is the underground storage for carbon, the water that is produced there and the hydrocarbons — the gas — to produce zero emissions hydrogen, which can then run our power generation in the Cooper and ultimately be exported into domestic gas and potentially overseas,” Spence said.

The Moomba CCS project will involve separating CO2 from production at Santos' Moomba gas plant and re-injecting it back into the same geological formations from which it is produced.

While the project will initially be developed with the capacity to store up to 1.7 million tpa of carbon dioxide, Santos says the Cooper basin has the capacity to store 20 million tonnes of CO2 per annum.

Once the initial phase of the project starts up, Santos claims it will be the second largest CCS project with dedicated geological storage. However, the latest data from the Global CCS Institute would currently place it third behind Chevron's Gorgon CCS project, with 4 million tpa storage capacity, and Qatar LNG CCS, with 2.1 million tpa of storage capacity.