Santos boss Kevin Gallagher has warned that Australian jobs and living standards are at risk from continued climate litigation that is blocking billions of dollars of oil and gas projects from progressing.

Mr Gallagher, the Santos Managing Director, was addressing the WA Energy Club on the day the Federal Court extended until at least January a ban on the company laying a key gas pipeline critical to its $5.6 billion Barossa gas project near the Tiwi Islands.

He said the approvals process overseen by the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) was not working.

“A year ago, when the approval of the Barossa Drilling Environment Plan was set aside by the Federal Court, it was seen by some as a company issue,” he said.

“Today, it is very clear that the regulatory system for offshore projects, administered by NOPSEMA, can no longer be relied upon.

“It is an industry issue. Only five environment plans have been approved this year. One of them has been overturned by the courts.

“Approvals are taking nearly two years, contracted vessels and equipment are on standby at a cost of millions of dollars per day. And the regulator is bogged down in the assessment of more than 40 plans.”

But he said the greater problem was climate activism and litigation that was squarely aimed at finding loopholes in Australia’s legal system.

The litigation had one goal – to stop new oil and gas projects, such Barossa and Scarborough, with committed investments totalling more than $20 billion.

“The litigation against Santos is not funded by Traditional Owners or Indigenous communities, but by the Environmental Defenders Office,” he said.

“As we understand it, the sources of these funds are government grants, non-transparent donations and other opaque arrangements.

“It is time to call this out and for all of us to stand up for the industry before any further damage is done to the thousands of Australian workers whose jobs are uncertain; to our contractors and suppliers; to our investors, who include Australian superannuation funds; to our customers; to Australia’s economy and to its reputation as a safe place to invest.”

He said neighbouring countries were concerned about Australia’s ambivalence to their energy security and its apathy towards the success and growth of the gas industry, despite the clear role that gas would play in the region for decades to come.

“According to Wood Mackenzie, Australia’s gas industry will remain important with gas demand in Asia forecast to grow by around 50 per cent between now and 2050,” he said.

“Countries like Japan, Korea, Malaysia, Indonesia, Singapore, and China simply will not sacrifice the energy security of their people or their economies.

“So, if the gas does not come from Australia, it will come from Russia, the Middle East, Africa or North America.

“And if Australia decides to leave its gas resources in the ground, we will be sacrificing skilled, secure, well-paid jobs for Australian workers, business opportunities for Australian companies, the vitality of regional communities like Karratha, Darwin, Whyalla and Roma, our domestic gas supply which largely depends on export projects, government revenues that fund health and education, and export income.”

He said no amount of climate litigation would make the energy transition faster or stop the oil and gas projects needed to meet the world's energy demand.

Mr Gallagher said that when he last addressed the Energy Club two years ago, he talked about the challenges of the global energy transition and the race to net zero.

“While those challenges are just as important today, they have been joined by new challenges of skyrocketing energy prices and fears of energy insecurity in many countries around the world,” he said.

“Unlike the oil price crises of the late 1970s, the energy price rises of the last couple of years have applied to oil, gas and coal, and therefore they have been felt in almost every area of the global economy.”

He said there was a “stark change in language” from the International Energy Agency when it released its update to the Net Zero Emission by 250 scenario, in September.

“I’m sure you will recall the headlines around the world in 2021 claiming ‘no new oil and gas projects’ would be needed on the path to net zero by 2050,” he said.

“That claim has been repeated by many – including politicians, regulators, investors, bankers and other institutions.

“But it was a claim that was never quite that simple or clear cut. The NZE scenario relied on certain assumptions: Customers changing their consumption behaviours, the renewable rollout accelerating rapidly, and developing technologies, like hydrogen, entering the market at scale.

“As we now know, many of these things are not on track, so a more moderate approach has been taken to the NZE scenario released by the IEA this year.“I welcome the more measured language in the latest NZE report that ‘continued investment is required in existing oil and gas assets and already approved projects’.

“I couldn’t agree more. The report does say that no ‘new long lead time upstream oil and gas projects’ are needed. But that statement comes with a very clear caveat: ‘If demand reduces as per the scenario’. That’s a very big ‘if’.

“The updated NZE scenario remains very ambitious on renewables and hydrogen growth. And it assumes dramatic fossil fuel demand destruction of 25 per cent by 2030 and 80 per cent by 2050.”

He said the world could not “turn off the taps on oil and gas” before replacement technologies were technically feasible, affordable and available.

Fossil fuels still accounted for around 80 per cent of primary energy today – the same as 45 years ago – and peak consumption had not yet occurred.

“The slower than expected pace of the renewables rollout, the need for firming of renewables to deliver 24/7 power – and the lack of demand growth for new fuels, particularly hydrogen – has meant continued strong demand for traditional energy products.

“Despite this, the shrill voices of climate activists – including the politicians who represent the wealthiest voters in Australia – continue to call for no new oil and gas projects.

“They have no regard for the cost-of-living pressures facing ordinary Australians in the outer suburbs of our cities and in rural and regional Australia.

“In fact, they want to make things harder for them by diverting taxpayer money away from essential services like health, into subsidies for uneconomic energy technologies and the Teslas garaged in the wealthiest electorates in the country.

“A transition strategy that is based on rent-seeking and subsidies will not be sustainable. If new energy technologies are not economic, they will not succeed and Australians will be poorer for the experiment.”

The climate enemy was emissions, not fossil fuels, he said. Shutting traditional energy industries would drive energy prices up and energy security down and slow the pace of the energy transition.

The oil and gas companies were the very companies that governments should be engaging to drive the energy transformation.

“Our customers in Asia have increased their energy security through fuel diversity which also reduced their reliance on higher-emissions fuels like coal and diesel,” he said.

“We need to recognise the important role that fossil fuel industries must play in transitioning to a decarbonised world – because it is these industries and companies which have the capability, resources, infrastructure, customers and balance sheets to deliver it.

“We must embrace Australia’s important role as a reliable supplier of LNG to our region and as a potential provider of new, low-carbon fuels and carbon storage services to decarbonise regional economies.

“Carbon storage could be an exciting new industry for Australia in Asia.”

Mr Gallagher acknowledged the bipartisan support for legislation that would pave the way for the cross-border transport of CO2 to enable regional decarbonisation through carbon capture and storage.

“This legislation will open up carbon sources for carbon capture and storage projects in Australia. And importantly, it will enable Santos’s proposed Bayu-Undan CCS project in Timor-Leste to store CO2 from Australia – including from our Barossa Gas Project – making it one of the lowest-carbon intensity LNG projects in the world,” he said.

“People, innovation, technology and science will solve the energy transition problem.

“But there is no single silver bullet.

“It is why I encourage governments not to pick winners and to work with us. We are the companies spending our own capital on decarbonisation projects – and we can help deliver the energy transition in a disciplined and measured way. If governments are truly anti-emissions rather than anti-fossil fuels, they should embrace the ongoing use of abated oil and gas, direct air capture and CCS as well as renewables and new low-carbon fuels.”

Thank you to our event sponsors: SLB, Winnellie Valves and Vertech Group.

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