The South Australian government has awarded Santos Ltd a 10-year contract to supply 200 petajoules of domestic natural gas to the state from 2030.
That finalizes a preliminary agreement signed earlier this year between the Adelaide-based company and the state government for the South Australian Strategic Gas Reserve, according to a statement from Santos.
“This agreement will support the government’s visionary South Australian Strategic Gas Reserve that will help ensure South Australia’s industrial future and energy security, including the planned sale and transformation of the Whyalla Steelworks”, said Santos managing director and chief executive Kevin Gallagher.
Santos gas from the Central Fields in the Cooper Basin near Moomba will help Whyalla “deploy direct reduced iron technology that can process local magnetite ore to produce low-carbon iron”, Gallagher said in a company statement February 20 announcing the preliminary gas supply agreement.
The South Australian government, in the process of selling the plant after placing the owner under administration last year, aims to progressively transform Whyalla into a green plant. Plans include solar and wind power, according to information on the state government’s website.
“The annual contract quantity of 20PJ represents around 30 percent of Santos’ current gas production from the Cooper Basin and is able to be supplied from the Moomba Central Area fields development”, Santos said in the February announcement.
Prepayment from the state government will help fund the Moomba Central Optimization (MCO) project, according to Santos.
On March 9 Santos announced a final investment decision to proceed with the MCO. The project will replace seven aging gas-run compressor stations with one electric compressor station to “debottleneck upstream infrastructure and unlock future production growth” from the Central Fields, Santos said at the time.
“At the Moomba Gas Plant, new inlet compression and additional power generation capacity will be installed to receive gas and power the upstream satellite”, Santos added.
Santos and partner Beach Energy Ltd expect to complete the MCO in 2029. Santos’ investment is AUD 357 million ($247.79 million). Beach said separately its share is around AUD 250 million.
“Santos has fully budgeted this capex and will remain within its AUD 45-50/bbl all-in free cash flow breakeven target”, Santos said.
Santos expects the shift to a more efficient infrastructure to reduce the company’s share of spending by AUD 600 million over the life of the fields. It expects the MCO to cut the unit production cost by up to AUD 3 per barrel of oil equivalent (boe).
The Cooper Basin contributed 12 million boe to Santos’ production last year, according to the company’s annual report.