Carbon capture and storage

Santos Poised To Enter CO2 Market After Booking 100 Million Tons in Storage Capacity

The company believes its booking represents the industry's first to be made under SPE's CO2 Storage Resource Management System.

jpt_2022_santos_ccs_2020.jpg
A CO2 injection well test in the Cooper Basin in 2020.
Source: Santos.

Santos announced last week what might be a historic step in the future of carbon markets. Australia’s second-largest gas producer said in its annual reserves statement that it “booked” 100 million metric tons of CO2 storage capacity in the Cooper Basin in South Australia.

Santos understands this to be the first booking ever made using standards as outlined in the SPE CO2 Storage Resource Management System (SRMS). The SRMS was developed by SPE’s Carbon Dioxide Capture, Utilization, and Storage (CCUS) Technical Section committee and formally approved by the SPE Board in 2017.”

The prospective storage capacity involves the $165-million Moomba carbon capture and storage (CCS) that Santos issued a final investment decision on in November.

A joint venture project with Beach Energy, the Moomba CCS facility could be completed as soon as 2024 and represents the cornerstone of the Santo’s goal to drive its Scope 1 and 2 emissions to net zero by 2040.

The subsurface site selected encompasses spent natural gas reservoirs and was tested in 2020 with an injection of about 100 tons of CO2. However, Santos is designing the facility to handle many times that—around 1.7 mtpa. This implies that the project could last for around 58 years.

What's It Worth?

Kevin Gallagher, managing director and CEO of Santos, described the volume of the booking in a statement as "globally significant" and added that “we only have to look at current carbon prices to see how valuable 100 million tons of storage is.”

In doing that, it could be figured that current market value of the newly certified storage capacity might range anywhere between $1.2 billion on the low end and nearly $6 billion on the high side.

In Australia, every metric ton of sequestered CO2 equals one government-backed carbon credit. The credits can either be sold back to the government which removes them from further trading, or CCS companies can take advantage of the arbitrage that exists on the open carbon market.

The Australian government will pay companies $12 per credit, but if they go to the private marketplace they may find someone willing to pay nearly $60 per credit.

This comes after the price for Australian carbon credits on the private exchanges more than doubled over the past year as more companies around the world joined the effort to offset their emissions.

Santos has previously said the Moomba project will cost under $24 per ton of CO2 injected.

Also highlighted in Santo’s annual reserves report is that proved, plus probable (2P) reserves jumped by 80% to more than 1.67 million BOE. The big increase was the result of a merger with Papua New Guinea-based Oil Search and the final investment decision in the offshore gas Barossa project.