Santos Limited (ASX: STO) has locked in another major potential buyer for its long-delayed Narrabri Gas Project, inking a non-binding memorandum of understanding with explosives maker Orica Limited (ASX: ORI). The pact could have Santos pumping up to 15 petajoules of gas a year for the next decade from the hotly debated New South Wales site.
This follows a similar setup announced in August with French energy heavyweight ENGIE for up to 20 petajoules each year. Put together, these deals add up to 35 petajoules a year – a hefty slice of demand for a project that’s copped flak from the get-go.
Growing Market Interest Despite Ongoing Delays
Santos boss Kevin Gallagher couldn’t hide his excitement about the huge appetite for Narrabri gas right here at home. “There’s overwhelming demand for Narrabri gas and Santos is looking to execute foundation contracts as soon as possible,” he said after the Orica news dropped.
Narrabi Gas Project Area Map
The Santos Orica Narrabri gas deal 2025 marks another push to bag long-term customers before pulling the trigger on the big spend. The pair will also team up on green initiatives via Santos’ carbon management arm for outsiders.
Still, the Narrabri gas project supply agreement hinges on a few make-or-break hurdles:
- Santos making a final investment decision on the project
- Successful negotiation of binding supply contracts
- Obtaining necessary internal and regulatory approvals
- Resolution of ongoing Native Title Tribunal processes
Australia’s Gas Supply Challenges Create Urgency
These pacts are landing right as Australia’s gas picture turns grim. Fresh numbers from the Australian Competition and Consumer Commission paint a worrying scene for the east coast gas scene, with shortages looming big-time over winter peaks.
The ACCC reckons Queensland’s LNG outfits are the linchpin for covering local needs, but the market is wrestling with baked-in supply woes. They’re eyeing potential gaps from 2027 if fresh gas sources don’t fire up soon.
Gas prices have eased off 2022’s crazy highs, but they’re still well above the old normal. Spot offers for 2025 deliveries clocked in at $13.34 per gigajoule from June to December 2024 – down about 10% from prior runs.
Gas Demand and Supply Trend 2025
Narrabri Project: Promise and Controversy
The Narrabri Gas Project hunkers down in the Pilliga Forest, some 500 kilometres northwest of Sydney. Santos reckons it could cover half of New South Wales’ gas bills and crank out up to 150 terajoules a day when firing on all cylinders.
Even after snagging state and federal green lights back in 2020, the project’s been slammed by green groups and the local Gomeroi folks. The Santos Narrabri final investment decision keeps getting kicked down the road thanks to stuff like:
- Environmental and climate change concerns
- Indigenous land rights disputes
- Legal challenges and appeals
- Complex pipeline approval processes
- Native Title Tribunal negotiations
In May 2025, the National Native Title Tribunal gave it the nod, putting home energy needs ahead of green and cultural worries. But Santos still needs the go-ahead on pipelines to get the gas flowing to buyers.
Market Context and Company Performance
Share prices for Santos and Orica have been riding the market waves this year. Santos is hovering around $7.66 a share, with a market cap of about $25.2 billion. The energy outfit’s notched over 20% gains year-to-date, thanks to a ripper run in the ASX resources pack.
Orica’s sitting at roughly $21.88 a share, market cap near $10.4 billion, and it’s held tough amid bumps in its explosives core. Serving mines above and below ground worldwide, the firm sees steady gas deals as a smart play for its Aussie factories.
Environmental and Social Opposition Continues
Green campaigners aren’t backing down on Narrabri. The Nature Conservation Council of NSW says it endangers water sources, rare critters, and locks in years of emissions when we need to slash them most.
The big worries boil down to:
- Potential groundwater contamination from coal seam gas extraction
- Impact on the Pilliga Forest ecosystem
- Fugitive methane emissions contributing to climate change
- Risks to the Great Artesian Basin water resources
The Environmental Defenders Office flags dangers like drained aquifers over time, polluted surface water, and wandering gas leaks. These outfits push the ‘better safe than sorry’ rule, arguing science gaps mean no go.
Strategic Importance for Energy Security
Santos has pledged every bit of Narrabri gas for Aussie homes, easing fears that export chasers are starving locals. That lines up with government pushes for rock-solid energy and plenty of home-grown gas.
The site’s right next to current pipelines, which could shave costs and speed once the red tape clears. Santos has sunk over $1.5 billion into it since snapping it up in 2011.
For Orica, a locked-in gas stream means no sweat for its Aussie plants. Reliable, fair-priced fuel keeps its explosives humming to stay ahead in the global mining game.
Investment Decision Timeline Remains Uncertain
Santos keeps stacking buyer backing with these deals, but when they’ll green-light the spend on Narrabri is anyone’s guess. Execs say they’re primed to roll once the reg hurdles and Native Title chats wrap up nicely.
Snagging the Hunter Gas Pipeline in 2022 showed Santos’ drive to pipe Narrabri juice to Newcastle markets. But route nods and build schedules throw curveballs into the works.
Pundits figure gas could start gushing by 2028-2029 if things click along. That bets on sorting legal and approval snags in the next year or so.
Watchers say the buzz from buyers like ENGIE and Orica proves the project’s got legs commercially, controversies be damned. These foundation deals give it solid economic bones.
As Australia wrestles gas squeezes and the shift to cleaner energy, Narrabri’s a double-edged sword – a shot at steady home supply, but stirring up green and community storms that keep fuelling the big chat on our energy path ahead.
