PERTH (miningweekly.com) – Energy major Santos has announced a corporate restructure, reflecting its newly announced purpose and strategy.
At an investor briefing day in Adelaide, Santos MD and CEO Kevin Gallagher announced Santo’s new purpose was to provide cleaner energy that is both affordable and sustainable to help create a better world.
“The energy transition journey that we have been on will only accelerate from here. We are building on our pioneering past to achieve our aim of creating a better world for everyone, through providing cleaner energy,” Gallagher said.
“The successful execution of our Transform - Build - Grow strategy since 2016 has the company positioned for disciplined growth and sustainable shareholder returns. The business is performing well, with strong free cash flow generation of $2.7-billion this year to the end of September.
“But we will continue to evolve to meet the challenges of the transition to cleaner energy and a net-zero future. Today we have unveiled our new strategy of Backfill and Sustain - Decarbonisation - Clean fuels.”
Gallagher told attendees that energy security is a top priority for countries in the region, and given the strong customer demand for Santos’ product now and into the future, the company will seek to backfill and sustain its core assets to deliver the critical fuels the world needs into the 2040s.
“But we will also decarbonise these critical fuels, in line with our target of net-zero emissions (Scopes 1 and 2, equity share) by 2040, and produce clean fuels as customer demand evolves,” Gallagher said.
“This will provide a low carbon intensity base business that will provide a strong foundation to provide sustainable shareholder returns and fund the energy transition.
“To deliver the transition and our new purpose, we have restructured the business into two divisions of Upstream Gas and Liquids and Santos Energy Solutions. In 2017, Santos set up an Energy Solutions team and today’s announcement is the next step in our plans to build our transition business, including our decarbonisation and carbon management services business, on our path to a cleaner energy future.
“We have a strong balance sheet supportive of disciplined growth and a business model to generate strong shareholder returns through the transition,” he added.
The Upstream Gas and Liquids division will include Santos’ liquefied natural gas (LNG) business, including the Gladstone, Papua New Guinea (PNG), and Bayu-Undan and Barossa to Darwin LNG assets, as well as the domestic gas business.
The Energy Solutions division would include the low carbon processing of Santos and third-party gas and liquids, decarbonistion and carbon management services, including the company’s carbon capture and storage (CCS) plans, as well as clean fuels production, which will include carbon neutral gas, hydrogen and renewable synthetic fuels.
The company is developing three CCS hubs with more than 30-million tonnes a year gross carbon dioxide storage capacity, including the Moomba CCS project which is on track for first injection in 2024.
Santos has meanwhile maintained its production guidance for 2022 at between 103-million and 106-million barrels of oil equivalent, and its sustaining capital expenditure guidance at $1.1-billion. The company is also expected to spend $1.2-billion on major projects during 2022, which was the mid-point of the previous guidance range.
For 2022, unit production costs are expected to be at the lower end of the $7.90/bl of oil equivalent to 8.30/bl of oil equivalent guidance range.
Production in 2023 is expected to be in the range of 91-million to 98-million barrels of oil equivalent, influenced by the end of field life at Bayu-Undan, timing of completion of the expected sell-down of a 5% stake in PNG LNG and lower Western Australia domestic gas production.
Sustaining capital expenditure in 2023 is expected to be approximately $1.2-billion and major projects capital expenditure is expected to be approximately $1.835-billion, including the Barossa, Pikka Phase 1, Papua and Moomba CCS projects.