Santos trying to get Narrabri Gas Project ready for sale

Given the amount of money the development has lost, it is more likely Santos is trying to get the project ready for sale, Institute for Energy Economics and Financial Analysis (IEEFA) analyst Bruce Robertson said.

“The lodgement of an EIS and the pipeline agreement with APA is a last-ditch attempt to sell the Narrabri project and retrieve some value from what is clearly a deeply troubled project,” Mr Robertson said.

According to the latest available data from the Australian Energy Market Operator (AEMO), Narrabri would be the third most expensive in terms of production costs in the whole of the east coast gas market.

“From an Australian consumer perspective, the high cost of extraction would do nothing to cut the price of gas,” Mr Robertson said.

“The gas industry is committing highway robbery on the consumer on a daily basis.

“The industry is aiming to free up the cheaper supply available in Australia to sell into the international market, whilst fobbing off high-cost CSG onto Australian households and businesses.

“The gas from Narrabri is right at the top of the cost curve and would do absolutely nothing to reduce prices.”

Santos purchased the Narrabri project for $924m in July 2011 from Eastern Star Gas. In February 2016, its partner, TRUenergy, took the decision to write off its entire investment of $248m citing a drop in reserves.  

“The project has been a massive loss-making investment for both Santos and its original partner TRUenergy,” Mr Robertson.

“After losing $1.6 billion and pledging no further capital investment, Santos has hived off Narrabri into a separate company with the express purpose of finding a buyer.” 

Santos was approached for comment.