Santos Limited (ASX: STO) has executed a binding term sheet with the South Australian government to supply 200 petajoules of gas over 10 years, throwing its weight behind one of Australia’s most significant industrial transformation projects.
The agreement will see Santos deliver 20 petajoules of gas per year from 1st March 2030, delivered ex-Moomba from the Cooper Basin. It is designed to power the conversion of the Whyalla Steelworks from coal-fired blast furnace operations to a low-emissions green iron facility using direct reduced iron (DRI) technology.
The deal is subject to a fully formed gas supply agreement being executed by 30th June 2026, along with internal and regulatory approvals.
What the Santos Gas Deal Covers
Key terms of the binding term sheet include:
- A 10-year supply term delivering 20PJ of gas per year
- Gas delivered ex-Moomba, sourced from Santos’ Cooper Basin operations
- Indexed pricing with a prepayment structure consistent with industry norms
- First gas commencing 1st March 2030, coinciding with the expiry of Santos’ existing Horizon contract with the GLNG joint venture
The 20PJ annual contract quantity represents roughly 30 per cent of Santos’ current Cooper Basin gas production and will be supplied from fields within the Moomba Central Area.
Why This Deal Matters for Whyalla
The Whyalla Steelworks has spent the past year under administration after the South Australian government placed OneSteel Manufacturing Pty Ltd into the hands of restructuring firm KordaMentha in February 2025. Since then, the Commonwealth and state governments have committed a combined AUD 2.4 billion to stabilise operations and set the facility on a path toward new ownership.
Whyalla Steelworks
The steelworks employs around 1,100 workers directly and supports more than 2,000 jobs indirectly. It is one of only two steelworks in Australia, produces 75 per cent of the country’s structural steel, and is the nation’s sole domestic producer of long steel products.
The transition to DRI technology would process Whyalla’s local magnetite ore to produce low-carbon iron. Santos says this approach could cut emissions by approximately 50 per cent compared with the former coal-fired operations.
Santos Managing Director and CEO Kevin Gallagher said the agreement has significance well beyond a commercial gas contract.
“This agreement secures jobs here in Adelaide and the Cooper Basin for at least the next 15 years,” Gallagher said.
“Santos gas will be used to enable Whyalla to deploy direct reduced iron technology that can process local magnetite ore to produce low-carbon iron. This will keep jobs in Whyalla and the Cooper Basin, and reduce emissions by approximately 50 per cent compared to the former coal-fired blast furnace operations.”
Cooper Basin Boost and Santos’ Strategic Position
The deal also benefits Santos directly. The prepayment structure will help fund infrastructure and upstream optimisation through the planned Moomba Central Optimisation project, which the company says will deliver lower operating costs and higher productivity from Cooper Basin wells.
Santos Cooper Basin operations
Santos currently employs around 700 people in Adelaide and a further 400 in Port Bonython, Whyalla, and Moomba. Last year, the company spent more than AUD 370 million with South Australian businesses, invested AUD 6 million in state sport and community programmes, and paid approximately AUD 60 million in royalties and taxes to the South Australian government.
The agreement was made possible through a Conditional Ministerial Exemption under the Gas Market Code, which allowed direct negotiations between the parties.
“We’ve been a gas supplier to Whyalla for many years and we are pleased to be working with the South Australian government on its green steel vision for a future made in Australia,” Gallagher said.
Gas as the Bridge to Green Iron
The role of gas in Whyalla’s future has been the subject of significant debate. South Australian Treasurer Tom Koutsantonis has been direct about the state’s near-term energy strategy for the steelworks, declaring earlier this month that “gas is going to be king.”
While green hydrogen remains the longer-term aspiration for the steelworks, it is not commercially viable at scale in Australia just yet. Gas-powered DRI technology is already proven at commercial scale globally, particularly in the Middle East, and offers a practical bridge to lower-emission steelmaking.
The Santos deal gives any future owner of the steelworks a critical piece of the infrastructure puzzle: a long-term, contracted gas supply at defined terms, reducing one of the biggest risks in the facility’s acquisition and transformation.
Earlier works are also underway at the Magnetite Expansion Project (MEP1) in the Middleback Ranges, 56 kilometres from Whyalla. The project could facilitate magnetite production of up to 2.5 million tonnes per year and underpin more than 300 jobs. The Commonwealth and South Australian governments jointly provided an AUD 20 million loan to advance the project.
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The Bigger Picture: Australia’s Green Iron Ambitions
The Australian government has earmarked up to AUD 500 million through its Green Iron Investment Fund to support Whyalla’s longer-term transformation, as part of the broader AUD 1.9 billion co-investment commitment for new ownership and facility upgrades.
Whyalla’s unique position as Australia’s only integrated steel mill, co-located with magnetite mining, a pelletising plant, a slurry pipeline, and deepwater port access, gives it natural advantages for the DRI-electric arc furnace pathway.
The Santos gas supply agreement is a clear signal that the federal and state governments are serious about keeping industrial steelmaking in South Australia. With a contracted energy supply now locked in, the sale of the steelworks becomes a considerably more attractive proposition for potential buyers.
Santos, for its part, adds a long-term contract with a top-tier government counterparty to its gas sales portfolio, diversifying away from oil-linked pricing in other parts of its business. You can read more about Santos’ recent financial strategy and how the company has been managing its balance sheet through major project cycles.
