Legal challenges still loom over Santos' $2.4bn Narrabri CBM project [Gas in Transition]

Santos’ A$3.6bn ($2.4bn) Narrabri coalbed methane (CBM) project in New South Wales has hit fresh legal challenges, raising the risk of the project getting further delayed. The full federal court in Australia on March 6 allowed the indigenous Gomeroi people to appeal against a decision by the National Native Title Tribunal, which had approved the project.  

Australia’s National Native Title Tribunal in December 2022 allowed Santos to move ahead with the Narrabri project, with the condition that additional cultural heritage research is done before the project's second phase. 

The tribunal said that the project would provide a public benefit, "significantly outweighing" the Gomeroi applicant’s concerns that it would damage their culture, land and waters and contribute to climate change.

The federal court said the Gomeroi appeal would be allowed as the tribunal had erred by declining to look at evidence on climate impacts tendered on behalf of the traditional owners. Santos said it noted the court decision and that court orders regarding next steps are yet to be made.

“The court has determined the National Native Title Tribunal erred at law by declining to have regard to evidence on climate impacts that was tendered on behalf of the Gomeroi applicant,” Santos said in a statement on March 6. 

“The court did not make any findings in relation to Santos’ conduct. Santos has at all times negotiated with the Gomeroi people in good faith,” it added. 

Santos said it will continue to engage with the Gomeroi people and work closely with them to ensure their heritage is protected and they benefit from the project development, including through training and employment, and involvement in all aspects of cultural heritage protection and management.

The Adelaide-based company said it will also continue to work through land access, native title, pipeline licensing and remaining environmental approvals processes to get Narrabri and the Hunter Gas Pipeline ready for a final investment decision.

The Narrabri project is 100% committed to the domestic market. According to Santos, the project has the potential to supply enough gas to meet up to half of New South Wales’ demand. The Narrabri project got state government approval in June 2020 and the federal government green-light in November of the same year.

The project has been mired in controversy as many activists say it poses a risk to the local environment. Santos has always denied these claims.

The New South Wales Land and Environment Court had in 2021 rejected an appeal into the approval of the Narrabri project. The legal challenge was launched by a group of local farmers known as the Mullaley Gas and Pipeline Accord. 

The fresh legal challenge a setback 

The latest federal court decision returns the project to the uncertainty of a legal dispute. Krishan Pal Birda, senior analyst, Rystad Energy, said that the court’s decision is another setback for a project critical to domestic energy security.

“There aren’t many viable options to pick from when it comes to developing new gas supplies for the east coast domestic market. But there still appears to be a chance to turn things around for Narrabri,” Birda said. 

Both parties have some time to work together and agree on orders, failing which, they’ll have to make submissions which will be dealt with by the court.

“If this case drags on, combined with any hiccups in land access or environmental approvals, which cannot be disregarded given the recent developments, the project could potentially get delayed again,” he added.

Santos recently said it aimed for the project to be ready for a final investment decision (FID) by 2025 subject to the Native Title decision. The company did not respond to NGW’s questions about whether the appeal decision would impact the FID date. 

Santos’ Barossa projects clears legal hurdle

The fresh challenge to the Narrabri project comes weeks after Santos won a court battle allowing it to resume pipeline construction at its $4.3bn Barossa gas project offshore Northern Territory.

Santos can now proceed with construction of an undersea pipeline which will connect the Barossa gas field to a processing plant in the northern Australian city of Darwin. In November 2023, the Federal Court of Australia had permitted Santos to begin laying gas pipes on an 86-km section of pipeline for the Barossa gas export pipeline (GEP), but it has been barred from starting work on the southern section of the pipeline pending a final ruling.

The decision was in connection with an application by an indigenous group seeking an order that Santos revise and resubmit the environment plan that was accepted by the regulator, National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA), in March 2020. The Environmental Defenders Office (EDO), a non-profit organisation representing the indigenous group, alleged that the pipeline will have significant environmental impacts and risks, in particular to submerged Tiwi cultural heritage.

In December, Santos’ revised drilling plan for its Barossa gas project received approval from the NOPSEMA. 

The Barossa gas project, operated by Santos, is a significant offshore gas and condensate initiative designed to provide a fresh source of gas to the existing 3.7mn tonnes/year Darwin LNG facility in the Northern Territory. The $3.6bn investment programme got underway with the project's final investment decision last March 2021, with the first gas due in 2025. 

With the approval of the revised plan, Santos is now able to proceed with the drilling component of the project. Drilling at the project had been suspended since September 2022 after a judge set aside the acceptance by NOPSEMA of the original environment plan covering the drilling activities.

Barossa partners to invest up to A$10mn in aboriginal communities

Santos, along with its joint venture partners in the Barossa gas project, in February announced an investment of up to A$10mn ($6.52mn) in Northern Territory coastal aboriginal communities and homelands. The investment aims to enhance community infrastructure, services, and cultural practices, fostering pathways to skilled jobs and business opportunities.

The funding, to be allocated as the Barossa gas project advances, will focus on improving the overall well-being of Aboriginal people in the region. It includes initiatives such as community and homeland infrastructure development, cultural programs, health and education services improvement, housing, and economic outcomes for the Northern Territory's Aboriginal population.

The partners have expressed their support for establishing a long-term fund, commencing at the project's production stage targeted for 2025. This fund would persist throughout the project's life, sharing the benefits with Northern Territory coastal Aboriginal communities. It is envisioned to contribute to community resilience, economic development, and capacity-building, emphasising the preservation of cultural practices.

Santos-Woodside call off merger plans 

Woodside and Santos in December confirmed speculation they were in preliminary discussions to create a joint entity that would have oil and natural gas assets stretching from Australia to Alaska, the Gulf of Mexico, Papua New Guinea, Senegal and Trinidad and Tobago.

The companies on February 7 confirmed they had ceased discussions regarding a potential merger. Santos said that following an initial exchange of information, sufficient combination benefits were not identified to support a merger that would be in the best interests of its shareholders.

“While the discussions with Santos did not result in a transaction, Woodside considers that the global LNG sector provides significant potential for value creation,” Woodside CEO Meg O’Neill said.