Santos halts gas exports from Darwin amid global energy scramble

Oil and gas giant Santos has been forced to suspend shipments from a key Australian gas-export terminal just as the war in the Middle East is driving a global energy crisis and igniting the sharpest price rises in years.

The shutdown comes as Prime Minister Anthony Albanese is seeking to leverage Australia’s role as a huge exporter of coal and gas to make sure the country isn’t left behind in the global oil supply crunch triggered by the war in the Middle East.

Santos on Tuesday confirmed it had temporarily shut down its Darwin gas plant, which processes gas from the newly developed $6 billion Barossa gas field in the Timor Sea and cools it into a liquid that can be shipped overseas.

The shutdown, which arose from the need to replace essential equipment onboard the offshore gas-production vessel, had been advertised to stakeholders in advance, said the nation’s second-largest gas company. It’s unclear how long it will last.

The stoppage comes at an inopportune moment: demand and prices for liquefied natural gas (LNG) have been skyrocketing amid the blockage of a major shipping lane off Iran’s southern coast and attacks on gas sites in neighbouring countries that have knocked out a fifth of the world’s LNG supply.

Countries across Asia are highly reliant on Middle Eastern LNG shipped through the Strait of Hormuz to power their heaters and electric grids, and are now having to pay top dollar to compete for any spare cargoes of the fuel.

Since the outbreak of the war, Asian utilities have increasingly been looking to suppliers in Australia – the third-largest producer of LNG in the world, behind only Qatar and the United States – to make up for the drop-off in shipments and ward off potential shortfalls.

Investors and analysts believe Santos and its larger Australian rival, Woodside Energy, stand to benefit significantly. Since the outbreak of the war on February 28, their share prices have risen 16 per cent and 24 per cent, respectively.

Some one-off LNG cargoes in Asia are said to have sold for more than double the prices they commanded before the conflict, fetching up to $US25 ($35) per million British thermal units in the past few days.

UBS energy analyst Tom Allen said the bank had lifted its forecasts for one-off cargoes of LNG in the North Asian market from $US13 per million British thermal units to $US23.60 for the rest of the year following attacks on Qatar’s Ras Laffan LNG hub. He said two of that plant’s 14 gas-processing trains may take “three to five years” to repair.

A spokesperson for Santos said the Darwin LNG plant was undergoing a temporary shutdown following the replacement of dry gas seals on a number of compressors on the production vessel used at Barossa, the BW Opal.

“We are in the final stages of commissioning for Barossa LNG to flush the system before coming back on and getting back to full rates,” she said.

Last year, Santos had to trim its full-year oil and gas production target due to an unexpected two-week shutdown at Barossa and flooding at its Cooper Basin operations.

News of the latest setback at Barossa makes a downgrade to Santos’ production forecast for 2026 “increasingly likely”, said MST Financial analyst Saul Kavonic. Production volumes equivalent to 5 million barrels of oil were already considered at risk due to a slower-than-expected ramp-up of the Barossa project, he said.

“Santos has never built an offshore project of this size, and that has always posed risks of delays and slower start-up,” Kavonic said.

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