Santos hits pause on massive Australian oil and gas project, shifts attention to US

Plans for one of the largest new oil developments in Australia have been shelved by Santos, prompting a sharp drop in the share price of the project’s minority partner. 

Carnarvon Petroleum told investors on Tuesday that Santos would not proceed with plans to buy an oil production vessel for the $3 billion-plus Dorado project in Western Australia and decided against starting engineering and design work.

As a result, the previous target for a final investment decision in 2025 has been deferred and the joint venture is reviewing its project timeline.

It was planning to drill further exploration wells in 2026 in accordance with tenure commitments, Carnarvon said.

Carnarvon chief executive Philip Huizenga said that given the quality of the project, the company was “disappointed by this latest deferral”.

“Carnarvon is fully supportive of the Joint Venture’s desires to realise value for the asset and will support any initiatives for drilling as soon as possible,” he said. 

Carnarvon and Taiwan’s CPC Corporation each own 10 per cent of Dorado, while  Santos owns 80 per cent.

Dorado, found in 2018, was the largest oil discovery on WA’s North West Shelf in decades.

Carnarvon estimates it contains 162 million barrels of light oil and condensate, as well as a large volume of natural gas.

A Santos spokesperson said it had recommended to the joint venture that Dorado’s development concept be “revisited after further evaluation”, and the company was this year focusing on delivering the  Barossa gas project in the Timor Sea and the Pikka oil project in Alaska.

“Santos continues to have confidence in the Dorado and Bedout Basin assets and is committed to extracting maximum value from them for our shareholders and joint venture partners,” the spokesperson said.

Santos signalled in 2024 that it would prioritise shareholders’ returns over growth.

Carnarvon was trading at 12 cents on Wednesday, down 24.5 per cent over the last five days.

Santos was trading at $7.08, down 1.6 per cent over the same period.

Carnarvon said it maintained a strong financial position with more than $180 million cash in the bank, a US$90 million development cost carry and low-cost corporate and overhead structure.

Source: AAP