Santos Puts A$700 Million Moomba Carbon Storage Project on Hold

By Angela Macdonald-Smith

March 3 (Bloomberg) -- Santos Ltd., Australia’s third- biggest oil and gas producer, has put its Moomba carbon storage project on hold after a drop in crude-oil prices and lack of government support.

Indicative prices for carbon credits in Australia also aren’t sufficient to underpin the project in central Australia’s Cooper Basin, Matthew Doman, a spokesman at Adelaide-based Santos said today. Santos has previously estimated the project would cost more than A$700 million ($450 million).

Santos said in June 2007 it submitted a proposal to the federal government for a carbon storage project at the Moomba gas fields that would be used by major emitters in the eastern states. Carbon permits have been trading at as much as A$23 ($14.78) a metric ton in Australia’s over-the-counter market, while carbon-capture projects become viable at $50 a ton, London School of Economics professor Nicholas Stern said in January.

“The economic and financial factors are not in place at the moment to justify the heavy investment that it would require,” Doman said by telephone. “We’re going to focus on what we do best and that’s supply gas and particularly look to increase the provision of gas for power generation. That would be the most immediate contribution we can make to lightening the carbon footprint.”

The decision makes Santos’s Moomba project the latest low- emissions energy or carbon storage project to be delayed or scrapped even as Resources Minister Martin Ferguson promotes their development to cut greenhouse pollution. Royal Dutch Shell Plc and Anglo American Plc in December said they delayed plans to develop a A$5 billion project in Australia to convert coal into clean fuels, citing higher costs.

Santos and General Electric Co. in 2007 canceled a low- emissions venture in Queensland, while BP Plc and Rio Tinto Group in May dropped a plan to build a carbon capture power plant.

Santos has been talking to governments in Australia about the Moomba project “for some time, and whilst we have received strong interest, we haven’t had strong or direct support for it,” Doman said.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net