Nick Toscano – Australian energy giant Santos has signed a deal with Timor-Leste authorities to advance a project designed to bury carbon dioxide beneath ageing gas fields in the Timor Sea.
Santos, which has reached a merger agreement with rival Oil Search to form a $21 billion company, on Tuesday said it would collaborate with the Timor-Leste government to re-purpose the jointly owned Bayu-Undan facilities 500 kilometres north of Darwin for a carbon capture and storage (CCS) project.
Managing director Kevin Gallagher said the reservoir had the potential to bury up to 10 million tonnes of carbon dioxide a year. "We believe the Bayu-Undan reservoir and facilities have the potential to be a world-leading CCS project," Mr Gallagher said.
The Bayu-Undan deal comes as Santos closes in on a final decision on a further-progressed CCS project at South Australia's Moomba gas plant, which could have the capacity to bury 20 million tonnes a year.
CCS – which traps carbon dioxide emissions produced by factories or power plants before they are emitted into the atmosphere and buries them underground – has been a divisive area of climate policy in Australia. Critics say CCS is not economically proven and could prolong the life of fossil fuel assets.
The world's biggest CCS project, Chevron's Gorgon venture in Western Australia, this year failed to meet a crucial target of capturing and burying an average of 80 per cent of the carbon dioxide produced from its gas reservoirs, fuelling even further scepticism about the technology's prospects of successfully functioning at scale.
Supporters of CCS technology, including oil and gas producers and the Morrison government, argue it is a necessary and unavoidable component of the world's decarbonisation goals to avoid the worst and most immediate impacts of global warming.
Mr Gallagher pointed to forecasting from the International Energy Agency (IEA) suggesting it would be "virtually impossible" for the world to achieve the Paris Agreement's 2050 climate targets without CCS because the transition to renewable energy would not cut emissions in time.
Florentino Soares Ferreira, head of Timor-Leste regulator Autoridade Nacional do Petroleo e Minerais, said the nation was one of the lowest-emitting countries in the world but saw the carbon trading market as a potentially significant part of its future economy.
"We don't want to miss this opportunity," he said. "I believe this will become one of the largest CCS projects in the Southern Hemisphere."
Santos is awaiting a decision from Australia's Clean Energy Regulator to finalise the methodology for CCS to qualify for federal carbon credits, which would be needed for its Moomba project to stack up economically.
Macquarie analysts said the regulator had signalled support for the approval, and Bayu-Undan may also qualify for the credits if it ultimately went ahead.
"Whilst public consultation is still underway, accreditation appears likely and Santos would then take [a] final investment decision on Moomba CCS by year-end," Macquarie said.